Archive for the ‘debt’ Category

Two Worlds, Bankers and Services

December 9, 2009

The impression of a yawning gulf between two worlds was hammered home today.

On the one side we have reckless gamblers, known as bankers, again raking in cash and handsomely rewarding themselves, on the other there is a threat of extremely severe cuts in local services.

Add that to the high levels of unemployment and the collapsing infrastructure of the nation and I can only repeat again that we are in serious danger of becoming the new serfs to the new feudal lords.

This morning’s Financial Times carries a long report (Do-it-yourself warning as state cuts back) of forecasts by the most senior Local Authority professionals. So serious is the matter that we have a joint report from the Society of Local Authority Chief Executives, and the Chartered Institute for Public Finance and Accounting.

 They expect a cut in local services by one third over the three years 2011, 12 and 13. With Alistair Darling forecasting government cuts of over an eighth one might wonder how George Osborne is going to ensure ‘we are all in this together’! If he becomes Chancellor…

 The idea of bankers paying their fair share – any share – of the ‘fine mess they’ve gotten us into’ recedes more every day. They complain that they would not be able to hold onto the best staff otherwise. To which the question must be ‘Best for what?’.

 “But there is undoubtedly going to be a need for individuals and families and communities to do more for themselves, along with the voluntary sector, rather than looking to the state as the provider of first resort,” comment our doughty professionals.

 Bankers, of course, faced no such restrictions to save their bonuses. And, to make that possible,  we are seeing the price we will have to pay for a very long time. Who says ‘the prices is worth it?’ Not those doing the paying.

 For me this raises a very important question. Who is all this for?

 We are dazzled with figures about how we must trade, we must find the cheapest labour, we must become efficient. But must we?

 It certainly makes company balance sheets look better. But who is that for? Not for you and me. Does it matter how cheaply goods are imported if we are out of work and unable to buy them? If just having our refuse collected costs an arm and a leg – or if it is not going to be collected at all?

 It raises many questions about how we organise our world; and many questions about what is important to us as people. Over the coming years those questions will be major discussion points.

 We are offered figures which show green shoots of hope. Today’s double whammy from national and local government leave me feeling distinctly in depression.

Joseph Harris – Debt Control Man
 http://controlyourdebtcrisis.co.uk
 Control Your Debt Crisis on Your Own Terms

New Lending Code 13 – Micro Finance

November 25, 2009

It is perhaps ungrateful of me to start with a gripe. But I do not like the idea of major lenders being involved with micro-finance. Somehow it seems to deny the very purpose of the idea.  But  perhaps I am more minded of the origins of micro-finance, in developing countries, to aid those needing small sums to start a truly small business.

However the code has the BBA Statement of Principles as Annex B. It is a pity, that the British BBA, quotes figures in Euros and not good British pounds in this.

First the principles make clear that the bank has an obligation to ensure clarity for the borrower, and that it should advise the customer to seek advice on the bank’s proposal. Certainly a desirable approach.

The obvious exchanges of information through the finance period are set out, and this makes for clarity. There may also be independent reviews of the micro-business – though without clarity about how the reviewer will be chosen.

While it can be painful where it happens the principles wisely state that any harsh realities need to be faced and acted upon. this can, of course, include closing the business. Facing it when the signs are clear will be better for the micro-finance borrower, I agree.

As a sort of mixed ‘we are on your side’ message there is also the statement promising no legal action if… essentially closing the business when advised. Again it looks quite harsh, but it does make better sense to ‘live to fight another day’.

The banks clearly reserve the right to confirm that appointing a receiver would be the right action, and I can’t see them arguing against it; I’m not sure what that provision is for, since it would be in the contracts anyway, I would have thought.

The complaints procedures are similar to the individual borrower’s and I will deal with that in a later blog here.

But there is particularly a requirement on the lender to enable moving an account to another bank.

Joseph Harris – Debt Control Man

Author: Control Your Debt Crisis on Your Own Terms

http:www.controlyourdebtcrisis.co.uk

New Lending Code 12 – Financial difficulties section.

November 24, 2009

 It has undoubtedly strengthened the content of the new Lending Code to put the previous guidelines into the body of code. In this section it has not only been incorporated, but the order and groupings have been made more logical.There have been some changes that limit the extent to which debtors were supposed to comply, and this is wise. I don’t think it removes the duty on a debtor to behave responsibly, but since few debtors will see or read the code before falling into arrears it makes no sense to appear to place an obligation on them in the code itself.There are nearly 50 paragraphs altogether in this part and, if they are enforced well, make a good basis for negotiation.Most interesting of all, perhaps, is the inclusion of a paragraph on treatment of micro-enterprise borrowers. I shall discuss this next time, and then cover the parts of the financial difficulties’ section, before describing the rest of the code.Joseph Harris – Debt Control Man

Author: Control Your Debt Crisis on Your Own Terms

http:www.controlyourdebtcrisis.co.uk

 

New Lending Code 11: mental health, MALG guidance

November 23, 2009

183. Further and more detailed good practice guidelines have been produced by MALG and are available at: http://www.moneyadvicetrust.org/download.asp . The MALG guidelines will not be monitored and enforced by the Lending Standards Board. [Reproduced with the kind permission of the British Banking Association -see link below]

Because I had read many of the documents some time ago, and not got round to all of them, combined with a period when my attention had to be elsewhere, I had confused the guidelines with the submission to the 2007 review of the Banking Code, and both with some parts of the Consumer Protection Regulations.

Albeit, I have this clear now and apologise should I have attributed rule and regulation to a document which it is not in. But the effect of my comments is unaltered.

While the guidelines are given a somewhat detached status, since they are to be neither monitored nor enforced by the standards board, they remain specified good practice. As such they will figure in considerations of the actions of creditors and debt collectors in other places, and cannot be ignored.

The guidelines were of great value when they were published in 2007. While they are not directly included in the Lending Code they are, by this paragraph, made best practice in carrying out the previous 10 paragraphs. This is an invaluable advance for those affected.

While there is no mention of the other vulnerable debtors – elderly and poor – in the new code or in the guidelines, their link in the CPRs should leave no creditor in any doubt that similar care is required for them.

There are 15 main heads in this document and invaluable additions, such as a listing of relevant mental conditions.

In my judgement they leave creditors for no excuse to behave inappropriately in relation to those suffering, once the creditor has been advised of the condition involved. Nor, indeed, against those who fall into the other two vulnerable groups. I would add more to the vulnerable areas.

This is because of the extreme unbalance in the ‘playing field’ between the enormous companies and the defaulting individuals who have no experience or knowledge of the area. For that group of scurrilous companies – some of the biggest of banks – who follow an aggressive  path, I feel these regulations still lack the teeth that are needed to protect.

Well, I suppose these gripes are part of my shopping list for the next reviews in all areas!

That said I believe thanks and congratulations are due to all those who have worked extremely hard over many years to make these new paragraphs and  their guidelines part of the body of rules.

Joseph Harris, Debt Control Man
Author: Control Your Debt Crisis on Your Own Terms
http://www.controlyourdebtcrisis.co.uk
The new Lending Code is here http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=1758
The MALG 2007 submission to the review of the code is here http://www.moneyadvicetrust.org/download.asp
And the Treasury Select committee view is here http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtreasy/274/27406.htm#a18

New Lending Code 10: mental health, court action

November 20, 2009

182. The subscriber should also only initiate court action to pursue the debt as a last resort and when it is appropriate and fair to do so. [Reproduced with the kind permission of the British Banking Association -see link below]

The only time I can see that court action is justified is where it can be clearly shown there is BOTH ability to pay AND wilful avoidance of resolving the matter on the part of the debtor.

Whatever the history of the creation of the debt – and there can be more than one side to this – the issue at the collection stage is about both the position of the debtor, and the reasonable actions to determine resolution.

Now bear in mind that resolution may be achieved in many ways. The debt may be completely written off, without any call on the debtor in the future. It may be frozen on any basis from not chasing it at all, to regular contact; here the intervals of contact should relate the fact that freezing is going to be a response to small likelihood of payment. Annual contact should be sufficient.

There may be token payments, of say £1 a month. But here the use of this should be sparing, as this can cause problems for poor and disabled debtors. It is likely that the debtor has more than one creditor. Not only may the total pounds be noticeable, but the costs of paying can add 50 percent or even more.

The Debt Management Plan is not available where monthly repayments total less than £100 a month. At lower figures there is no way of using an intermediary, including charities, to distribute the total repayment.

Where there are a number of creditors it would be a good move for creditors to organise a clearing house for these payments. And that would permit something even more in keeping with fairness.

A debtor is generally required to treat all their creditors equally. But if only a pound or two a month can be afforded it is hard to divide; unless there is a clearing house that gathers many such payments, doing the computer-easy calculating and accounting, and passing sums on in bulk to the appropriate creditors.

It isn’t brain surgery. And not even rocket science!

Joseph Harris, Debt Control Man
Author: Control Your Debt Crisis on Your Own Terms
http://www.controlyourdebtcrisis.co.uk

The new Lending Code is here http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=1758
The MALG 2007 submission to the review of the code is here http://www.moneyadvicetrust.org/download.asp
And the Treasury Select committee view is here http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtreasy/274/27406.htm#a18

New Lending Code 9: mental health, debt agencies

November 19, 2009

181. If a subscriber has received appropriate and relevant evidence of a customer’s mental health problems they should consider whether it is appropriate to pass or sell the customer’s debt to a third party debt collection agency. [Reproduced with the kind permission of the British Banking Association -see link below]

I can see no justification whatsoever for a creditor using an agency or selling the debt on once it is aware the customer is in the vulnerable groups. Certainly in the vast majority of cases hectoring is not what is required, even less the harassment, worry and fear of these crude methods.

Much, much more is likely to be achieved by a sympathetic and supportive approach. I wonder about the decision making process that has developed the current blind and thoughtless path.

By the very nature of their situation few vulnerable debtors are likely to be in a position to clear a debt immediately. And often their incomes are so inadequate that it is unlikely recovery of the debt is likely.

Where that is the case all blindly cold processes are pure waste of money. At best they are deliberately cruel, and at worst actually sadistic. The latter is in itself a mental health issue, as it happens – but this time on the other side of the debtor-creditor divide.

Of course not all vulnerable debtors are in poverty or poor. But where the only assets are a house, or the means of getting through their day without difficulty, pursuit raises issues of human rights.

Far better, then, to approach all such cases with skill, knowledge, understanding, and sympathy. This form offers support to just that.

At the same time it should not be turned into a requirement in all cases. Where it can contribute and their is agreement to use it is, without question, an invaluable aid in working out the best course of action.

Joseph Harris, Debt Control Man
Author: Control Your Debt Crisis on Your Own Terms
http://www.controlyourdebtcrisis.co.uk

The new Lending Code is here http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=1758
The MALG 2007 submission to the review of the code is here http://www.moneyadvicetrust.org/download.asp
And the Treasury Select committee view is here http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtreasy/274/27406.htm#a18

 

New Lending Code 8: mental health, DMHEF evidence form

November 18, 2009

179. The Money Advice Liaison Group (MALG) has produced a Debt and Mental Health Evidence Form (DMHEF) which provides a standardised methodology for advisors and creditors to share relevant information about the customer’s condition from health and social care professionals. [Reproduced with the kind permission of the British Banking Association -see link below]
180. Subscribers are encouraged to consider the DMHEF if it is presented by the customer or their adviser (with the customer’s consent). [Reproduced with the kind permission of the British Banking Association -see link below]

I am not a great one for forms. I find them limiting rather than liberating, and often used to avoid real thought by creditor representatives. Filling them in is often a battle of understanding the intentions of the setter, and wondering if the reader will understand.

However, if kept relatively simple and used as a basis for discussion, thather than an avoidance, a well designed and focussed one can contribute greatly.

And this form is on pointedly directed at cases where the debtor has a number of professionals involved, and enables a gathering of information to advise the debtor on suitable action.

It has been developed by the Royal College of Psychiatrists for MALG to support the MALG guidelines. It is available from http://www.moneyadvicetrust.org/content.asp?cid=88  (adviser version) and http://www.moneyadvicetrust.org/content.asp?cid=89 (creditor version), with  advice on how to complete the form here  www.cml.org.uk/cml/filegrab/GuidanceFinal8808.pdf?ref=5990 .

Joseph Harris, Debt Control Man
Author: Control Your Debt Crisis on Your Own Terms
http://www.controlyourdebtcrisis.co.uk

Get the DMHRF here http://www.moneyadvicetrust.org/section.asp?cid=53
The new Lending Code is here http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=1758
The MALG 2007 submission to the review of the code is here http://www.moneyadvicetrust.org/download.asp
And the Treasury Select committee view is here http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtreasy/274/27406.htm#a18

 

New Lending Code 7: mental health, time allowance

November 17, 2009

178. If a customer informs a subscriber that they have a mental health problem that is impacting on their ability to manage their financial difficulties, the subscriber should allow the customer a reasonable period (e.g. 28 days) of time to collect and submit relevant evidence to the subscriber. This evidence will help the subscriber to work with the customer,
advice agencies and health/social professionals where appropriate to determine the most appropriate action to deal with the customer’s financial difficulties. [Reproduced with the kind permission of the British Banking Association -see link below]

How one can be both happy and unhappy with  a provision at the same time!

The idea that vulnerable debtors need more time is made very plain by this paragraph, and leaves  debtors with no excuse for placing unreasonable time limits on them.

But the example of time is not realistic.

Bearing in mind that most debtors with problems are able to quickly arrange a new schedule with their creditors, and the number who have to take time or make explanations is relatively small, there is no real reason for hurry in this kind of case.

Indeed the use of harassing techniques is a costly piece of unkind futility.

In the normal course of events 28 days is not unreasonable for provision of detail information. Often debtors are lucky  to have routine responses from creditors in less time.

Unless there is good reason to act otherwise, I always advise that debtors should insist of communication by letter. There are many advantages, which I discuss in my book, and for some – and for many on occasion – the very act of putting something in writing, or collecting it together, is a difficult and slow process.

To a creditor this can look like deliberate procrastination; a strong reason this paragraph is so valuable. Only a specialist staff can actually understand – and it will take experience for them to do so fully – why there is nothing suspicious in delay in some conditions.

But even with these problems many people will want to manage their own affairs. So there is not easy fix of turning all these cases to intermediaries. Indeed, with the best will in the world, intermediaries can be just as lacking in understanding. And they can be too pressured to spend the time that is needs to represent properly.

So, while calling for the training of specialist staff to be a requirement, I welcome this contribution to a better experience for vulnerable debtors.

Joseph Harris, Debt Control Man
Author: Control Your Debt Crisis on Your Own Terms
http://www.controlyourdebtcrisis.co.uk

The new Lending Code is here http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=1758
The MALG 2007 submission to the review of the code is here http://www.moneyadvicetrust.org/download.asp
And the Treasury Select committee view is here http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtreasy/274/27406.htm#a18

 

New Lending Code 6: mental health, specialist staff

November 13, 2009

177. If a subscriber has specialist staff to deal with cases of debt and mental health problems, they should ensure that appropriate mechanisms exist to refer the customer to the appropriate support. [Reproduced with the kind permission of the British Banking Association -see link below]

This is an excellent emphasis on the need to have training to deal with mental health issues, and indeed other issues of vulnerable customers. But the idea that staff who are not trained should deal with them is not a good position.

The mental health field is vast, and understanding the effects and potential effects of particular disorders requires considerable attention. Even more important is the question of the effects of the stress of harassment which is more or less normal in collection procedures and creditor behaviours.

The great value of this section is the fact it has been introduced to the code, which removes the prior behaviour. That behaviour consists mainly of a challenge as to its truth, should anyone reveal to the agent that there are mental health problems.

This discourages the more timid or, for example, any debtor in depression or – as is normal – in shock, from revealing the need for great care to be taken. Apart from the effect being counter-productive to the purpose of collection departments, it can have serious effects in deepening a mental condition.

So I hope there will be strenuous efforts to ensure all in the credit field observe both the letter and the spirit of this new entry into the code.

Joseph Harris, Debt Control Man
Author: Control Your Debt Crisis on Your Own Terms
http://www.controlyourdebtcrisis.co.uk

The new Lending Code is here http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=1758
The MALG 2007 submission to the review of the code is here http://www.moneyadvicetrust.org/download.asp
And the Treasury Select committee view is here http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtreasy/274/27406.htm#a18