Archive for August, 2008

Do You Feel Well Advised on Credit, Debt, Finance?

August 28, 2008

In a modern world these matters are crucial. Half a century ago in England and Wales and indeed in most of the world the mantra that was just starting to go out was: “Neither a borrower nor a lender be”.

But today the oil of society has become credit—and its siamese twin partner, debt. And most of us are borrowers who hold the debt.

Realisation has grown of this. In the past few years there has been a flow of legislation and regulatory duty to help the ordinary consumer. You and me. I was considering this when I came across the Financial Services Authority (FSA) consultation paper review, put out in April this year.

In its retail distribution review the FSA goes for a simplified structure where there would be independent advisers on financial matters, sales persons and organisations would not be advisers as well and a third arm would be the Money Guidance set up which I have this page on https://debtcontrolman.wordpress.com/money-guidance-developments/.

While I think this may at root be a good idea, I wonder how independent advisers will make their income without charging us. And wit the Money Guidance free advice service and such excellent charities as the Citizen’s Advice Bureaux and National Debtline.

Of course if advice and sales are mixed the inevitable leading will happen. Unless the agent has deals with all suppliers—quite a task.

But by splitting the tasks it may simply put an extra cost on the consumer. Presumably these qualified commercial advice specialists will have legal liability for their advice. That might be a good thing. But how many people will be attracted to advice with the costs and trouble of the qualification, the cost of legal insurance and the problems of attracting custom?

There is plenty of meat in the report, and I may return to it after the final report comes out in October. I just wonder how many people would seek advice from an independent advisor before making a purchasing decision.

Joseph Harris
Debt Control Man

Your Debt Crisis, Making Notes

August 26, 2008

I don’t know anybody that really enjoys the nature and the discipline of making notes. And I most certainly include myself. But, in my view, notes you must make.

Unless you manage to come to a very quick agreement the debt negotiation can take months. I have four accounts entering their sixteenth month, and set fair for a few more. Don’t worry if they take time.

What is important is to realise that you cannot commit all that is happening to memory. Your memory is probably better than mine, but can you remember a phone call you made six months ago? Unless you are a rare person with a photographic memory I doubt it.

In negotiating for a settlement to your debt you will be approached by phone and by letter. Each time a record of some sort is placed on your computer file.

But will it be the same as what you believe took place? You won’t know; no-one is going to tell you. But your creditor will use that record to judge you, the debt, and how he wants to pressure.

So you must make a full note of the conversation. You can have pen and paper ready by the phone. Or ask the caller to wait while you get them, or get the file you have on that particular creditor.

And what should the note say? First the name of the caller, the company, and if it is not the original creditor the the name of that one. The date is vital, and the time of the call is important.

It is also a good idea to ask where the caller is based. The conversation will go differently if you are being called from a call centre in Bangalore, than if you are being called from one near your home.

You can interrupt the conversation to make a full note if you feel you need to. Sometimes a statement by an agent is so outrageous you want to make sure that it is recorded in full. The agent at the other end is making notes, and the conversation is also being recorded that end.

You are fully entitled to have the time to make your own notes, even to make your own recording if you have the equipment and the know-how.

If the creditor’s agent does make an outrageous statement you need to follow up with a complaint to a superior. This is best done in writing, since it makes a record that must be responded to. And it is available for the FOS or other third party to read and understand the failings of the creditor.

Recently, in a debt case before the FOS, I had a creditor pass the debt to a debt collector. I phoned the creditor and first received a helpful response and a promise of a return call. The young lady who returned the call refused to contact the FOS to confirm that the case was before them.

I now have a rather apologetic letter from the office of the Chief Executive Officer of that organisation. And I wrote to both the FOS and the Office of Fair Trading informing them of this failure.

How do you think the FOS will view that creditor when dealing with my debt case? And how will the organisation be viewed with other cases that go before it? And how will that look on the file of the Credit licence of that organisation at the OFT?

You have power to defend your position. Use it.

Joseph Harris
Debt Control Man

Posting Your Debt Letters

August 22, 2008

I am very keen on writing letters. I think it is much easier to make your points clearly and get them across. Also it is by far the best record you can make of your debt experience, and how your creditor is behaving.

But it has just been brought home to me that delivery of those letters is equally important. And this is because of an experience I am in the middle of.

In the afternoon of August 12 I sent important papers related to a debt by Recorded Signed For from our local sub-Post Office. I was assured that this would go with the Royal Mail collection man who was bustling around at the time.

It is some time since I used recorded delivery—as it used to be known—and then it cost 88p and I was able to track the course of its progress online, and it was delivered by the third day.

This time I paid £1.50 and online only reveals when it has been delivered and signed for. I am still getting “Come Back Later”, and today is August 22. As a comfy ride for Royal Mail you cannot query its delivery until 20 working days have passed—which in this case means September 1.

Normally, for cost reasons if nothing else, I sent letters—debt or otherwise—by straight first or second class, according to my sense of urgency. I cannot think of one that has not been reliably delivered, and usually within one, two or three days.

I am quite convinced now that this is lost. And, one other sign of Royal Mail’s self love and contempt for its customers; you cannot contact a live human being in the operation. Usually when something like this happens I write to the Chief Executive Officer and complain to the Office of Fair Trading.

But I will have to wait a bit longer before anyone will listen to me. Lucky it wasn’t done because of time constraint. But when the importance is to be sure it arrives this kind of service seems to me the very worst of what British is all about.

So, while I might have recommended using this signed for system for really important papers, I cannot recommend it any longer. Especially not when some aspect of your debt negotiations has serious time constraints.

Within a realistic price structure I do not know of any alternative way to be secure in the knowledge of delivery. I would say it is worth checking with the recipient.

But then again the big creditors have two problems for debtors. First I have found that the internal distribution service can hold mail up for a week. Second it is not easy to know where the letter has gone to unless you have addressed it to a named individual.

So I can now say with some certainty that I will in future be sending my mail by ordinary post, and my best suggestion to you is that you do the same.

Joseph Harris
Debt Control Man

Olympic Cheer

August 20, 2008

Normally my nearest brush with sports and athletics is that I know the cricket season has started, and wonder why the Kent team is always so near and yet so far.

Yet even I have been diverted from debt considerations by Team GB (who on earth thought up that name!) not only getting among the gold medals, but being currently third in the table of golds—and I think fifth if all medals are tabulated.

Heady heights for the nation, heady heights.

Of course it is very difficult for Brits to deal with success and winning. We are quite brilliant at explaining the game’s the thing, or what special factor caused us to lose.

And indeed when the Olympics was still an amateur event the game was more the thing than national pride. But it is some decades since the event became one with professional sportsmen.

Still, I look with some relief at the remnant of the true Brit in the nation that nearly all the television commentators immediately said the equivalent of ‘Ah, yes, but look at the cost per medal’!

Huh!?

As I understand it we are already showing better results than for 80 years or for a whole century. It shows you actually do have to put some money into winning in professional area [even and amateur one if truth be told].

But that discussion hides the triumphs of the individuals and the team. Many people provide the important backup, support and training for today’s athlete and we should not forget the role of any of them.

In the end though it comes down to the athletes themselves and how motivated they are to go through all that it demands to become the best at anything.

So congratulations to all those athletes that are coming home with medals, those that have proved good enough to take part and to the whole operation which has created Team GB.

Maybe, just maybe, we’ll have everything ready for 2012.

Joseph Harris
[doffing his Debt Control Man hat to them all]

Is Bankruptcy a Good Option?

August 18, 2008

It’s certainly tempting.

The idea of being able to hide behind a wall erected against creditors can seem great in moments of panic and feelings of being very oppressed by heavy debts.

But obviously I have cautions for you!

Let me be clear first that what I write here certainly applies to debt in England and Wales, and though there are similarities to other places you do need to check. In the US for example there have been some changes in the bankruptcy laws which are rather nasty to debtors.

When I first realised my debt position my first thought was to go bankrupt. I was in a state of panic and to some extent my mind switched off. Maybe you have done the same, maybe you have not really had that experience.

Fortunately I calmed, and even when an advisor with one of the charity debt specialists told me I was ‘the best candidate for bankruptcy’ he had come across I spent my time considering his advice.

Very roughly going bankrupt puts all your financial affairs in the hands of the Official Receiver; he or she, not you, decide where your money goes and what creditors can expect, and what you, the debtor, need to live on. All your assets go into the pot.

Although this state usually lasts for just a year it can involve the loss of your home, even if the debt is nothing to do with your mortgage, or if you own your home outright. Other assets get included: car, holiday home, valuable record collection for example. And all this is likely to be examined, looked through and valued by a bailiff.

When you have debts you cannot pay, whatever approach you take, it is likely that any valuables will be considered as available for part of the debt repayment in some way.

It is unlikely that the bailiff or any other representative of the creditor or of the Official Receiver will know how to get the best value for these things.

Indeed you might have noticed that where debt leads to repossession of a house and home it is often the case that the repossessed house is sold at auction, often for a ridiculously low price. Less indeed that if the creditor treats the debtor with some civility and reaches an alternative deal for renting with an option to restart the mortgage at some future point.

Anyway that is another discussion, and mortgages are not something I offer expertise about, though many of my suggestions would be applicable for mortgage debtors as for others.

But if you do have a collection and you know that you do not have the income to meet your debts my advice would be to sell it yourself. That money must still go into the pot, so don’t try to hide it. This way it will at least show that you have tried to make the best restitution possible, and that will be a positive factor in your dealings.

There is an initial cost to bankruptcy. I think it has risen to just over £500. There is a small variation depending on whether the hearings are at a county court—not all handle bankruptcy—or at the High Court in central London, which acts for the Greater London area.

Where the applicant debtor is in a state of privation, or otherwise in severe financial difficulty, the court and the Receiver have the right to refund the charges. But those charges do have to be made up front.

Dealing with the Official Receiver is said to be a relatively friendly experience and is conducted across a table rather than in a formal courtroom. The job of this official is to help you to create a new beginning, though you will undoubtedly be put through a very fine mill of questioning and examination of your financial affairs.

These days there is a queue, and there will be some delay though I have no detail as to how long.

It includes the fact of being persona non grata for new debt for six years, even though you may become a discharged bankrupt within one.

There are some situations in which you may still be chased for some debts, but I think this is rare. Still you should make sure that you have any risk that way covered, and plenty research is in order as well as a discussion on the point with the Official Receiver should you take, or be forced into, this path.

You name will appear in the local newspaper as a bankrupt and it is possible everyone you know, and all your family, will hear about it and point fingers. They may be sympathetic—I believe that is far and away the more likely response.

But it can affect a lot of your relationships, possibly including your work. And you will be permitted to have only a basic bank account; that might badly affect any self-employed person, and cause problems for almost anyone.I think most advisors, most creditors and perhaps most debtors see bankruptcy as a last resort, that final step when all other ways of resolving the situation have failed.

I do agree with that. So if you are tempted down that path make sure you have thought through every other possibility, and understand the effects of this one on your life, well into the future.

Joseph Harris
Debt Control Man

Filling in Income and Expenditure Statements

August 15, 2008

When you hit a problem with repaying debts it is almost certain that, soon after contacting your creditor, you will be asked to fill in an income and expenditure statement. After all you owe and the creditor wants the money back somehow. And the creditor wants to get the best deal it can.

But so do you.

Which is the basis of all negotiation.

In theory there is a common financial statement agreed within the financial and financial advice community. But all those I have seen differ from one another. On the other hand you, the debtor, are expected to offer the same information to all your creditors; hence a common income and expenditure statement makes sense.

My experience is also that the prepared statements are strong on declaring income and weak on room for expenditures.

You do need time to think through how the change you are experiencing is going to affect you and how you live in the future—a new future for you.

This is why I recommend two initial letters to creditors. The first revealing the fact of a debt problem. This allows time to consider what your debt is and means to your life, what your needed expenditures are and what the future expectations are, and similarly what your income is and will be, and how much flexibility uncertainty about the economy needs to be built into the agreement which this is only the start of negotiating.

That second letter can then explain your situation in more detail and offer a proposal to deal with your debt. It will be soundly based and you will be confident that you can maintain whatever debt repayment schedule you are offering the creditor.

Different creditors have different attitudes to handling debt—some are obviously good at customer relations, others seem to lack any sense of how to negotiate the new debt situation. So on the phone you may well be pressured to a deal quite at variance with what you have worked out. Never agree anything on the phone. Ask them to put their proposal in writing.

And always take time to think through what your debt position is, what any proposal means to you, and how much you need to spend weekly to maintain a reasonable life.

Joseph Harris
Debt Control Man

The Interest Rate Puzzle

August 13, 2008

The indication by the Bank of England, that Bank Rate will be unchanged tomorrow, could be good, bad or unimportant to you. Which way it should go is a matter of opinion. I believe the threat of inflation has been completely underestimated and the depth of sickness of the economy not understood.

Perhaps you need a long memory to even fear big trouble, or perhaps pessimism informs me more than facts. My underlying advice is, however, hold on to your hat; there are strong winds coming.

Because of this I think it vitally important to understand what is happening in interest rates and to make the appropriate protest—I have already written five posts on that and gathered them into a page on this blog.

But if Bank rate has not moved for some weeks why are Credit Card companies in particular pushing rates up, even for their best customers? Might it be to get customers to pay for the banks own mistakes in gambling on investments?

Just opportunism, perhaps? Or perhaps the old yachts are worn out…

But enough of my sarcasm…

What I am really concerned about is the difference between Bank Rate and the interest rate charged on credit cards. Even if we add the inflation that affects banks, ‘headline’ inflation now around four per cent, that still doesn’t make 10% and hasn’t for a long time.

Apart from the few cards that add only five or six per cent, and they do have costs and need to make some profit, the general view has seemed to be that an addon around 10% is a generous minimum. Perhaps with the odd low rate for some part of the loan or a nought per cent transfer period that can be justified. Perhaps.

But what of the card that shot its rate from around 19% to around 30%? Had headline inflation moved 10%—or the Bank Rate?

Of course not. But losses had started appearing; strains of various types. You may have noticed your card(s) taken over by a bank, or taking over another card. That has been going on for about three years, and now with increasing frenzy as one wonders how many card funders there will be in a couple of years.

Like every other finance area the rules for lending became sloppy, the assumption of ever increasing growth a mantra. And why not? Didn’t Gordon—our very own Prudence—have everything under control. [At this time there are no prizes for the answer. Hands up those who realised in 1997, when he destroyed the regulatory framework, what must happen!]

The interest rate movements are by no means limited to credit cards, and there has been movement that it would be hard to justify in many other areas. The mail order catalogues have long made me wonder. Not so many years ago most did not charge interest to customers at all.

Those that did had an incredible rate of 29.9%, and that appeared to follow the earlier consumer credit system of hire purchase. Now hardly a catalogue has not made the main company a credit company with rates of 29.9%; one charged an absolutely horrendous 39.9%.

Now I see another, that long offered 29.9%, has joined these Olympian heights with a rate of just below 40%.

And that has a great deal to do with debt experience; 29.9% is like adding one third to the bill, depending on what type of loan we are referring to. Which means more of your hard earned money goes to the company and getting out of debt and avoiding default become harder and harder.

If you are subjected to an increase in your rate which you do not think is justified please contact the company and ask for the rate to be reduced, or to explain to you in writing, with justification, what the increase represents.

You might be pleasantly surprised.

Joseph Harris
Debt Control Man

Dealing With Creditors

August 12, 2008

Normally dealing with a debt is straightforward. You borrow money, agree a payback schedule and keep to that schedule. Everybody is happy and normally—if your creditor is one of the banks or credit card suppliers—you get phoned from time to time with offers of more money at special terms, including periods at 0% credit.

Who can resist—and don’t they love you when you say ‘yes’!

But when you tell them there is a problem or miss a payment or two how that changes. Suddenly you are besieged with hostility and suspicion. Your character credit becomes zero, never mind about your credit rating.

Not all companies are like that. Some show the greatest sympathy and helpfulness; others take a bit of pushing to meet you where you are now, rather than where you were.

But far too many decide it is open season on debtors and you are subjected to all sorts of threats, phone calls and horribly officious-looking letters. And whatever you say or write seems to be brushed aside.

And when you phone, or are phoned, you rarely speak to the same person, and sometimes not even with the same call centre. Every time you are invited to repeat all your submission to them and each time there is a promise to put it on the computer.

You have no idea what they might put on the computer, of course.

So, if you follow my advice, you write letters. And then, often as not, any reply ignores most of what you have written. You do have to persevere.

There are rules that the creditors must follow. And they are a lot more in your favour than creditors would like you to know. The rules are contained in law, regulation, licence and code.

Remember this next time there is one of those phone calls or letters.

Joseph Harris
Debt Control Man

Interest Rate Action – And Don’t Forget Your MP

August 5, 2008

The Legislators And Others

To really get some action on all this and to start a real scrutiny of the behaviour of the credit industry we need to stir a lot of people up. This includes the people we elect to parliament, the bodies active in the field of relations between companies and customers, such as Citizens’ Advice, and special interest groups such as Age Concern, Mind and those other countless organisations that do so much to help people at a disadvantage. The regulators I have dealt with in the previous Interest Rate Action articles.

Most of these will be those that you think can make a difference, or already have contact with, or have long thought you ought to have contact with. And they will want to have a fairly clear idea of the nature of the problem and how it affects you and what you think it affects many others. In other words why they should spend some of their hard-pressed time on it.

In this group I think you are best placed to work our how and who to contact and to sort out their address.

I will here only offer a few words of advice about contacting your Member of Parliament. Now although we like to be rude about them and may have views about some activities, I believe it is true to say that practically all MPs are conscientious and concerned to help constituents.

But they are busy people and concerned with the whole gamut of legislation. So it is important to offer as much clarity as possible in writing to them.

It is also true that most of the legislation they are involved in passing has large elements of rubber stamping EU directives. Whatever your opinion here it happens that the EU is a motor for more fair legislation and regulation. So in our matter of over-high interest rates this works for us!

Just now of course there is high activity and diversion for MPs in England and Wales as the Labour MPs wonder is they can hold on to their seats, and Tory MPs joust for potential office; LibDems have equally busy calculations and preparations to make and worries of being squeezed.

All good grist to our mills as they will be concerned to gather in votes with popular and not politically contentious activity.

Address them by name if you know it, or

To the MP for …….. Constituency
House of Commons
London SW1

And if you don’t know your constituency contact the council or the local paper.

If my chief purpose was this campaign I could go on with address after address to contact to make this matter high on the public agenda.

But I am interested in helping people already facing debt disaster. In this particular matter of suddenly higher interest rate charges and unmerited fines and penalties, my concern is to stop people being pushed into disaster by unfair, unreasonable and immoral behaviour.

Joseph Harris
Debt Control Man

Interest Rate Action 3 of 3 – Complain

August 3, 2008

Financial Services Authority (FSA)

The FSA has considerable powers in the financial world, and as the eight recent arrests to do with insider information trading shows does bite as well as bark. While for immediate consumer/company relationships the OFT is the main regulator, the FSA is more concerned with the policies and how the policies are employed.

In my opinion if the FSA is made aware of the imposition of vastly increased interest rates on customers who have done nothing to merit any change at all it will examine the companies acting in this way in fairly minute detail; my euphemism for possibly threatening them with major legal action. My opinion let me make clear.

To bring that about the FSA must receive a lot of letters complaining about the practice so it both knows it is widespread and can see which companies are engaged in this unfair practice.

So why should this body help our cause in getting sensible interest rate limits set? Well, in its High Level Standards, the FSA has some clear pointers as to the attitudes a company should have.

For example no.6 says ‘A firm must pay due regard to the interests of its customers and
treat them fairly.’ No equivocation. Notice again that word fairly.

Seven talks of communication and that it must do this and in a way that is ‘clear, fair and not misleading.’ The next standard tells the company to ‘manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.’ No excuse for not being aware of the effects of an action in its customers!

No.9 is very interesting. Although it may be mostly aimed at the investment arms of banks it nonetheless is a clear message for all the activities of these institutions. Here is the whole sentence: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

There is also the FSA’s Statements of Principle and Code of Practice for Approved Persons. Just glance at some of the expectations in the seven statements of principle.

‘An approved person must act with’
-integrity;
-due skill, care and diligence;
-take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function is organised so that it can be controlled effectively; and
-must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the relevant requirements and standards of the regulatory system.

So the letter needs to be very similar to the one to the OFT, but this time we are challenging the way in which the business is run in relation to the duties in forming and carrying out policies. Once again the question of fairness plays a big part, but here we can also ask if due care is being exercised, if the interests of customers are being fairly assessed and acted upon and if the decisions that have brought this about are within the expectations for an approved person.

You should write to them at:

Financial Services Authority
25 The North Colonnade,
Canary Wharf,
London E14 5HS

Joseph Harris
Debt Control Man