A rather alarming story appeared in the Mail on Sunday today regarding Consumer Credit Counselling Service (CCCS) in the UK and its position on Individual Voluntary Arrangements.

The online article stated “But Financial Mail has learned that CCCS might not be as independent as it boasts and could be obtaining revenue from possibly ' inappropriate' advice given to debt-ridden clients.” This is in reference to concerns raised in the article that consumers were not told about an IVA and instead directed towards a Debt Management Plan (DMP).

DMPs are organized in one of two fashions. The American model is to use the monthly repayment formulas as dictated by the credit card companies and for CCCS to be compensated based on the amount of money they collect from consumers. Effectively, this is a pay for performance debt collection activity.

In the United States the IRS, the charitable tax authority, has found this to be a commercial service and has adjusted its tax code accordingly to remove or restrict income and/or tax benefits from charities providing this service.

We’ll have to watch and see if Inland Revenue in the U.K. begins to look at this relationship by charities in the U.K. that offer a commercial debt collection activity and are paid based on how much they collect, as a commercial activity and income gained from such activities to be taxed moving forward.

As far as I’m aware, CCCS in the U.K. is the only charity that operates in this fashion in England.

In the American model, which CCCS adopted and followed, monthly payments to creditors are not based on a fair and equal pro-rata percentage of debt owed, as the court and most other debt advice companies follow.

Recently a CCCS spokesperson Frances Walker appeared on the BBC to say that they disburse payments via a pro-rata system but when I emailed Francis and Malcolm Hurlston for clarification, neither got back to me.

Maybe that pro-rata comment by Ms. Walker of the CCCS media department that is contracted from, Malcolm Hurlston’s for-profit company, on the BBC television appearance was a slip of the tongue or a lack of knowledge about the way CCCS has disbursed payments. Without the courtesy of a response to my emails asking for clarification, we’ll just have to guess.

The other form of DMPs is for a debt advice group to charge a monthly fee but to disburse, or send out, the client’s monthly payment to creditors based on a fair pro-rata approach. This is the approach that most debt advice organizations take.

This year CCCS made boasts that since they had opened a for-profit subsidiary company to handle IVAs that they were going to see a substantial increase in the number of IVAs delivered.

The article in the Financial Mail quoted James Ketchell of CCCS as saying that “As IVAs are now a product that we offer, our counsellors will be willing to put more people into them.” Ouch. Does that mean that CCCS was not suggesting the more appropriate IVA to consumers that came to them for advice because they did not offer the product directly?

Wally Stone of Debt Advisers noticed this fact also and is quoted in the article titled “Charity boss reaps profits from debt misery” as saying: “If an IVA is right this year, then why wasn't it right last year?” An excellent question.

The Sunday article also said, “CCCS said the shift in advice reflected greater knowledge of IVAs among its counsellors now that they are a part of the charity's product range.” I hope that is not true since that could only mean that CCCS counsellors were not properly trained to give good advice in the past. An IVA is a major debt solution available to consumers. That might leave people wondering if they were put into a DMP with CCCS if they were mis-sold a DMP because the counsellors were not familiar or properly trained about the the IVA solution.

It’s not like the IVA is an arcane or little known debt tool that is used to help people in debt. In fact the IVA numbers are huge and have been growing over recent years according to data from the Insolvency Service.

If IVAs was so little understood by CCCS why did they invest in and open a subsidiary company and launch a nationwide search for an Insolvency Practitioner to run it and grow it?

Another explanation offered in the article for this sudden discovery of IVAs and now determining that an IVA is an appropriate solution is explained away in the article, “Hurlston argued that the charity plans to advise on more IVAs as an increasing number of indebted clients are getting in touch on the internet and they tend to be seeking help at an earlier stage, have less debt, and are more suited to IVAs than those who resort to phone advice.”

I think that all debt solution experts can say to that is, “Really?” I find that astoundingly hard to believe since at Myvesta UK we provide both phone and internet advice and it would be incredibly hard to make that determination. “CCCS said the shift in advice reflected greater knowledge of IVAs among its counsellors now that they are a part of the charity's product range.” Really, really?

Unless I’m reading the article wrong, CCCS is admitting that its counsellors are now being better trained about a major debt solution because it is now part of the CCCS product range? Surely I must have read that wrong?

What I still find perplexing as well was why the charity CCCS was so incredibly silent this year when the battle over the consumer exclusion from the IVA was raging. What possible motive could a charitable consumer group have for remaining silent about this?

In 2007, creditors like HSBC, HBOS, RBS, Marks & Spencer Money and Northern Rock made purposeful decisions to block consumers from access to an IVA and instead drove debtors to CCCS DMPs or encouraged bankruptcy.

HSBC and its subsidiary lenders were specifically recommending to consumers that they go to CCCS for advice and in light of revelations in this article you have to wonder if HSBC was purposefully driving consumers towards a CCCS DMP because it was an advantage for HSBC in some way and not because it was the best advice for people in debt.

I wonder if groups, like the BBC and consumer advocate Martin Lewis, that publicly recommend CCCS to consumers as an independent debt advice charity, will now be concerned about their liability of their relationship in light of the facts presented in this article?

Forget about giving the damn Blue Peter cat the wrong name, how about sending people for the wrong life and debt advice from counsellors that had not been properly trained in IVA advice because the IVA solution was not previously part of the product line?