Archive for November, 2008

Card Firms Giveth, Card Firms Taketh Away

November 28, 2008
How is it, that when I saw Peter Mandelson was involved, I started looking for the catch?
Our Business Secretary with Gareth Thomas, Consumer Affairs Minister, held a meeting with credit card companies [not sure who came, but I’m looking!] to get more time for debtors to organise their affairs. The target was described as ‘breathing space’. http://uk.reuters.com/article/personalFinanceNews
Now I am not even sure how that fits with the information that the reason for the meeting was to express concerns to the representatives about the high level of interest rates charged on credit and store cards.

And a joint statement declares: ‘…the … industry would report back in two weeks’ time [sic – note superfluous “…’ time…”] on a set of fair principles to help card borrowers to manage their debts… [my italics and my disgust!].

I’m not asking you to share my despairing feelings about the poor grammar from senior members of the government, but I am asking you to note how debtors will be hurt, not helped, by all this.

Bear in mind the Consumer Credit Licence, the Consumer Protection Regulations 2008 and the Banking Code all give much better protection than a set time. Not to mention the directives of the European Union Commission – of which Lord Mandelson was, until recently, a Commissioner. Is he with the people or with business?

AND let us be quite clear, this is an attempt to steal the right to represent oneself. An attempt to breach ancient British law.

The new dictatorial requirement will be that ‘…customers in difficulty would now get 30 days grace … IF [my emphasis] a debt advice agency was [not “is”, note] helping … a repayment plan…’. Further in this from this arrogant group ‘… could be [my emphasis] extended for a further 30 days subject to demonstratable progress being made…’.

My own experience is that I have negotiated for myself with 11 companies, and none of these negotiations were completed inside the incredibly restrictive 60 days of this great gift from the keen brain of the Lord Mandelson. In fact I have four negotiations which are taking over 18 months.

Who is to judge, in the terms of this carve-up, what is demonstrable progress. In negotiation one is in a starting position of disagreement, and the idea that one side or the other may be an arbitrator is nonsensical and dictatorial.

And, by the way, what about the role of the Financial Ombudsman Service which this undercuts in the most destructive way – certainly from a debtors’ point of view.

And the industry has ‘…agreed to look at [my italics] its practice of risk-based re-pricing…’. Readers of this blog will know I wrote a series of articles many weeks back on the disgusting level of interest rates. That the government has only just paid attention to we ordinary people who are truly hurting shows how little regard it has for us.

A government spokesman is reported to have said the government is ‘unhappy’ about ‘increases of up to 10 per cent OR MORE [my emphasis]’.

Well, I don’t know about you, but I want a government that is raging angry about such profiteering and instead of inviting the sector to make the debtor’s position worse is prepared to actually make them obey the existing regulations.

That the negotiations appear to be set on limiting our options, and not improving them is worrying to say the least.

Are we truly in the middle of the new Feudalism, my fellow serfs?

Joseph Harris

Debt Control Man

debtcontrolman.wordpress.com

 

 

 

 

 

20 thoughts – Correction

November 26, 2008

In the previous blog I somehow left note of who David Gaffney is out of the piece.  He was a debt counsellor for 12 years in Manchester and Birmingham. That is why I thought his observatins are of interest.

 

Joseph Harris

Debt Control Man

Twenty Thoughts for Debtors

November 23, 2008

In an entertaining but astute article in , The Financial Times Weekend Magazine, David Gaffney offers a trawl through some dos and don’ts and a couple of misconceptions.

He has written a novel Never Never based on this, and as you would therefore expect, he has a keen ‘eye’.

First he cautions against the ‘all the eggs in one basket’ approach to controlling spiralling debt. And warns not to borrow one’s way out of trouble. Perhaps he should have a word with Dear Gordon?

When you owe a lot, some arrangements can involve very tiny paybacks, and ‘geological’ payback periods. Gaffney says the first time he explained this to a client it was not well received! His bedside manner has improved.

Bailiffs seem a tricky area, but the main rule is not to let them in! Though of course the court-appointed bailiff is a different matter. Once in they are entitled to take inventory and return for collection of those goods.

He points out that creditors are keen to move as much of your money to them as they can possibly argue you should, while your task must be to hold on to all the money you need to live decently. And that – as a debt counsellor – he had no principles about his attitude to them. they will survive, and so must you, the debtor!

While he has some understanding of borrowing from one card to pay off others he says it is hard work and maybe it is a lot easier to stop. Strangely he found most multiple debtors were jolly, not my understanding at all. While bankruptcy costs.

He has several warnings about ways to avoid debt, such as being careful who you buy Christmas hampers from and ways of saving money on electricity.

Let me say he is a very witty writer and his explanation of the way judge’s are sympathetic to debtors is a good example, including that it might not be a good idea to wear clothes which are part of the original debts before the court.

He points out that credit companies want you to owe them money, which is their business after all. It is the paying back bit that can get complicated. And hire purchase goods cannot be taken back! Let me add that it is not a good idea to do this deliberately.

Among his clients have obviously been some ‘professional debtors’ since he suggests never being available to creditors or their agents since if they are unable to contact you for six years the debt lapses. Though the rule is not absolute, and would apply only to non-priority debts. (there are very few priority debts which include revenue taxes, council tax, rent, mortgage and utility services payments, and not much else)

But if you own your house his no 16 is ‘You can lose your house if you don’t pay’. Be warned! As I always emphasise being honest is the best approach.

One thing is very important. One that I have seen rarely mentioned. ‘Beware,’ he says clearly, ‘those creditors who sent measured and polite threats.’ Because they probably mean it.

It is possible to end up with someone else’s debts, so don’t accept delivery of something you don’t know about. It may carry a big burden of someone else’s unpaid debts.

He ends on a note of grim faced humour…

’20 Life is beyond some people’s means

‘A debtor is someone who hasn’t got enough money for the lifestyle he or she chooses. Most frequently this is a lifestyle most people call normal life – like having a phone, a telly, some clothes, heating the house and running the water. What should we do, kill them all?’

Joseph Harris
Debt Control Man

Whither The Battered Economy

November 17, 2008

Because I have some financial and business background in my early life I have been increasingly astonished, not to say angered, by all the devices that are being uncovered in what has been a casino [still is, I fear]called the financial sector.

The various government supports in response to that industry’s yells of ‘Feed Me!’ have shown the truth of the old saying ‘Owe a million and get an honour, owe a thousand and get put in prison.’ Except these days no respectable honoree owes less than a billion!

You know the film, don’t you? ‘Feed Me!’ gets fed by all those who owe it nothing, and it gradually takes over and destroys everything. This seems a good analogy for the financial sector – certainly since the early 1980s.

Now it seems, through government action, we, our children, our granchildren and on are going to be paying off the gambling debts. Indeed that sector appears fully in the tradition of the rake who, on inheriting the family fortune proceeds to gamble it away, as well as the lands, the building and possibly his own grandmother.

I am not encouraged either by the G20 meeting or its statement. In brief it seemed to say ‘our answer is more of the same even though we know it isn’t working… …And we are putting off the hard decisions until another generation of politicians comes along’.

And no, I do not think President-Elect Barak Obama is that new generation in this sense. If you look at his advisors who have been drawing up his plans you will see how heavily finance and business oriented they are.

By ‘new generation’ I think I mean of economic thinkers. My personal view is very revolutionary – and for someone who tends to be small ‘c’ conservative that is saying something!

I believe the fault lies with the structure of the company. It lies far outside democratic process, yet it is so easy for the larger ones and the corporations to affect our lives in the most personal ways. Our jobs, our communities, our very environment and our world. Oh yes, and our finances.

Plan as we might, understand the dangers to the future of mankind as much as we will, all protest is frustrated by the big business power to buy influence and to drown out protest. It is not the format of George Orwell’s 1984 but it is most certainly his concept of Big Brother!

Can you go anywhere without being on CCTV? As things are shaping even your iris will be on a database – ready to be accidentally ‘lost’ and for sale. Or even accessible to so many that it can be easily hacked.

The foundation of the company lies 400 years ago, with the first Queen Elizabeth. Four worlds ago and for a completely different purpose.

Do we, this time, just want to patch things up again for a third Depression in 80 years time?

Joseph Harris

Debt Control Man

When to Go Bankrupt

November 15, 2008

Since contemplating bankruptcy for myself I have generally advised against it. At the same time every person’s situation is different.

So noting the new figures for bankruptcy and the chilling of the financial ‘institutions’ to their customers I revisit the matter.

According to This is Money personal bankruptcies rose seven per cent in the third quarter, against a year before.

The number of families whose lives were turned upside down in the three months July, August and September is 13,653. Bearing in mind that bankruptcy lasts a minimum of a year, and that maybe it takes another five to recover, that suggests the number of families affected now are around 200,000 – and rising.

That will soon be one household in ten; an epidemic!

Apparently financial institutions are forcing these bankruptcies, just at a time when their own debt is being ‘socialised’ and they are walking away from their mistakes with their yachts intact.

However let me steer myself away from the politics of this…

While there may be cases where the banks will recover more in this way, than from an intelligent approach, my own experience tells me some of the banks are incapable of understanding the difference between different situations.

On the whole they will have less to gain from forcing bankruptcy, than from an intelligent agreement.

I always say it is better to talk to the creditor, persistently, than to just assume there is only one way to go… downhill!

When you do talk, or write, remember that one operative may have a quite different way of dealing with customers than the one sitting next to her.

You may have to contact a different department; or the Chief Executive Officer of the creditor. Don’t be afraid to. He uses the smallest room just like you do.

If you are in a position where you obviously cannot pay what is the point of wasting company resources chasing you? It is poor decision making on the part of the creditor.

And if you have assets what is the point of forcing a sale of them at a time when the cash gained will be minimal.

And if you are in a position to offer something, what is the point in saying ‘no’ if the offer presented to the creditor is reasonable in your personal circumstances.

It is surely all good accounting, and straight common sense.

Although knowing what I do about derivatives, toxic debt, dark pools and the other arcane forms of gambling in the financial casino I don’t think anyone can accuse the financial ‘institutions’ of being blessed with common sense.

Joseph Harris

Debt Control Man

Can Debt Really be a Way of Life?

November 13, 2008
Life has a habit of knocking us off our perches, does it not?
Anyway I’m back with the blog and thought a quick review of the national and international scene might be worth the time.

I can actually remember when most people would at least be aware of the saying ‘neither a lender nor a borrower be’. And then, right at the beginning of the ’60s, came to our shores the first hire purchase company [Union Discount if I have the name right – started by the man who later created the Bank of Wales].

Hire purchase (h.p.) was quickly dubbed ‘the never-never’. I am still not sure if this meant you never finished paying, or if it meant that you never fully paid.

The first implied that the company had you in its grasp, the second that one paid in such small amounts over such a long time that you never really paid its value. When inflation was serious (remember it has reached 15 per cent a year within the past 40 years) of course the value of the cash used to pay was indeed well below the worth at the time the contract was signed.

It may have been at first that the loan was secured against the item, but later the loan became separate. In a way credit cards work on a similar basis except that the loan is never tied to any goods specifically.

Over the years the idea of credit grew and caught on. After all kings had always borrowed money – to fight wars if nothing else – and the Government of England had found itself with a debt in the seventeenth century.

That debt led to the creation of the Bank of England – a private joint stock company, empowered by parliament to handle the national debt!

The entrepreneur who had seen the opportunity later went on to bankrupt Scotland and force the union of the two countries. But that, as you can imagine, is a quite different story!

By about twenty years ago the idea of credit, that old frowned on idea of ‘buying on tick’, was accepted. Governments had early learnt how easy it was to run deficits on the nations’ dealings internationally – the balance of payments – and on the annual budget.

And we did not resist the idea of having more goods than we had earnt!

And companies, who always had been dealing with uncertainty, found debt a very good way of dealing with the lags between orders and delivery and distribution and sale. And then came the more relaxed control of the financial sector.

And the development of ‘derivatives’, and sub-prime mortgages. I don’t have to tell you much about those now, as they have been well discussed in the press, on radio and on television.

And in blogs…

I have seen all that well described as MLMs and Ponzi schemes, and the whole sector as a casino. And when those bastions of sobriety, the banks, joined in I am afraid there was nowhere else to go but down.

‘Down the rabbit hole,’ as Lewis Carroll put it so well, and in to Wonderland. Well a land in which the great and the good certainly seem to have well-developed senses of self-delusion.

And you spotted how our very own Gordon has taken centre stage, as though born to acting.

But then aren’t all politicians? [Paulson on his knees to Pelosi – I ask you!]

Meanwhile the massive $707bn that Paulson and Bernanke twisted arms to get the US Congress to approve to buy ‘toxic’ [don’t you love that term? It means poisonous!] debts from the banks is now not going to be for that.

Whatever; its purpose appears to be to pay the gambling debts of those big businesses, rather than to spur the US economy, which has a really big hangover from the ‘credit economy’.

Not incidentally that the $707bn tag is even very relevant to the new debt we are all going to have to pay off some time – through taxes – which as already reached about $2trn [that’s $2,000,000,000,000]. Maybe it needs some more noughts. It is big for sure.

It is about $300,000 for every man, woman and child on the planet – assuming a population around 6.7bn. In English say £200,000. But the possible real amount of toxic debt – silly me, I mean derivatives including sub-primes that have gone sour [not all have] – is about five times that.

So you owe a million; so do I. that puts our personal problems in perspective, huh?

Joseph Harris

Debt Control Man