Posts Tagged ‘creditors’

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

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New Lending Code 4:mental health, third parties

November 11, 2009
175. Where it is appropriate and with a customer’s consent, subscribers should work with advice agencies and health and social care professionals in a joined-up way to exchange information and ensure an effective dialogue. [Reproduced with the kind permission of the British Banking Association -see link below]

Many creditors, and some debt collectors, may well prefer to work with representative agencies. Always much easier to work to a routine and have someone else work out the details, and do all the questioning and examining.

Especially if that intermediary, that third party, because of its own pressures, needs to pigeonhole and classify elements of the debtors finances and problems.

Often this is presented as a requirement. To my mind this is disgraceful, and a breach of the terms under the defunct Banking Code, the new Lending Code and under the Consumer Protection Regulations.

Of course this third party representation can work sometimes for the debtor. But many cases have unique elements that are quite difficult to satisfactorily understand, let alone resolve.

For that reason among many others, such as the individual’s rights in a democracy, it is important that the right to represent oneself is again emphasised.

By implication the institutions are told that they are dealing with an individual, and that individual will decide whether to use an intermediary or not.

Notice also the reference to a ‘joined up way’ and ‘effective dialogue’. One hopes this is more effective that Tony Blair’s joined up government. But putting that humour aside, it does mean that the obligation is on the creditor to ensure proper collection of information and making inclusive judgement after all the to and fro discussion.

Creditors are also, by implication, required to inform themselves on mental health issues. This is why a specialist department for the vulnerable cases is not just a good idea, but sound practice. The creation of such departments should be treated both as a matter of urgency, and enforced by the OFT.

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 2: mental health, systems

November 6, 2009

Debt and mental health
This section of guidance is relevant to both personal and micro-enterprise customers.
173. The impacts of financial difficulty can be especially acute for customers with mental health problems. Subscribers should consider their processes and systems to ensure that they can be responsive to a customer in financial difficulties, from the point at which they are made aware of a mental health problem. [Reproduced with the kind permission of the British Banking Association – here]

The Lending Code is now part of the formal equipment of the Office of Fair Trading, and sits more certainly side by side with holding of Credit Licences and with such fair dealings rules as the Consumer Protection Regulations.

Monitoring remains with the Lending Standards Board [that was the Banking Code Standards Board], but penalising becomes a matter for the OFT.

This is why this is such an important advance. It is now a requirement for creditors and debt collectors to take into account mental problems where there are financial difficulties. This is already covered in the CPRs, under the guise of vulnerable debtors. Vulnerable includes the elderly and those without funds.

While the Debt and Mental Health section is by no means as definite as I would like, it is such a big strengthening of the position of debtors with such health problem that the wording is to be praised as improving the experience of such debtors.

By featuring the good practice guidelines of the Money Advice Liaison Group, the other members of the vulnerable classification are effectively included. The more definite advice in the guidelines also becomes part of good practice.

It is also worth glancing at the 2005 comments of the Treasury Select Committee.

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

New Lending Code Overview

November 4, 2009

I am not used to eating my words, but this may be the occasion. Fortunately the matter is one that has not just my approval, but is a demand of mine.

The new code has taken on board the advice of the MALG forum on mental health issues and debt. For me this makes the new version a cause for celebration.

Because it is rather hidden away my first glance did not take it in. But the lay out of the pdf of The Lending Code is, in fact, very well designed and does make it easier than usual to find one’s way about.

So congratulations Paul Ross, who is in charge of the code for the British Banking Association. This is a success.

Make the most of this praise ;-), there is unlikely to be any more!

I need time to evaluate the content, of course. I will have to take some pretty small bites and chew hard, so there is no option but to write many blogs to give you the information you need.

Next blog will look carefully at the entries on the mental health advice to creditors, and I will try to give a good overview followed by detailed discussion of the effects of the different paragraphs.

But this inclusion has certainly cheered me.

Of course I do take credit for its inclusion. Don’t laugh.

When I spoke to Paul Ross on the phone I July I did try to impress on him how important it was, and that the information needed had been published by the Money Advice Trust in the 2007 review of the Banking Code. the impression I got from him was that there was no way he would include it.

I wrote on this to him in July also. Either he was pulling my leg, which I doubt, or I did spark his thinking. And after investigation I suspect he came to the same conclusion Idid about its importance.

Well that’s my story, and I’m sticking to it ;-). Here is part of my email on July 22:

“In this I am particularly conscious of the MALG advice in 2007 – and the BBA is a member of MALG – that seems to have simply fallen by the wayside. This dealt particularly with the problems of vulnerable debtors. While the major part of the industry does seems sensitive to this anyway, there are some big players that appear not to appreciate the responsibility on them for fairness in these areas.

“I also appreciate the main thrust may be to ensure the new wording equates to the old, but it might be a useful move for the BBA to indicate at least the new broad heads to enable early thought by the multiple users of the code regarding the changes they will all have to make in their references.

“November 1 is very near in practical terms, only three months away. Any early information on the change would be much appreciated by all users.”

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

Bailiff Power: “We have the balance wrong”

June 13, 2009

Every time I think I have reached the bottom of this government’s inanities over bailiffs I am apprised of further actions which make sense only if these people are in the pay of the financial casino.

Thanks again to the Zacchaeus 2000 Trust I have learned of the Bill introduced by Karen Buck M.P., (Labour for Regent’s Park and Kensington, North), a few days ago under the ten minute rule. It has gone now to second reading which is a triumph for her preparation work which has taken a year.

[Most often ten minute rule Bills are killed at birth!]

In her introductory remarks Ms Buck offers these points which are worth some thought by us all: Bailiffs (Repeals and Amendment) is the title of the Bill and it “… make requirements in respect of the use of force and forcible entry by bailiffs; to make provision for the reference to court of certain cases involving vulnerable clients; and for connected purposes.”

“… Debt and debt recovery action have become a reality for ever larger numbers… the arrival of a bailiff is, for many of those people, the ultimate trauma and humiliation… people have had heart attacks when the bailiffs have arrived. The mental and physical stress… is one of the worst things that will ever happen to them in their life.”

She points out that not all bailiffs fail to be as helpful as possible. But “… many.. are desperate and vulnerable people, and many are also victims of error. … even the actions of bailiffs who behave entirely reasonably… are disproportionate and excessive.”

“… it has become clear to me that we have got the balance wrong,… we need to review… We must certainly not, in any circumstances, think of escalating the powers available to bailiffs, and the Government should rethink their approach to regulation.” [my emphasis]

“… In my local authority alone, and in respect of just… council tax… more than 13,000 cases ended up in the hands of bailiffs over a three-year period.”

“What does it mean… It means fear and trauma for people, particularly children. I have heard of moving cases… children have refused to leave the house or have insisted on having the lights out at home because they are so frightened of a bailiff… seizing their television or computer.”

“… also means an escalation of the original debt, which simply compounds the problems that caused the financial crisis in the first place.”

“For one single parent with three children, one… disabled… (a) parking fine, about which I was making representations, had escalated from an original £60 to £700 by the time the bailiffs arrived.” [my emphasis]

In another “… two sets of bailiffs (were) chasing the same debt. Payments had been made to and acknowledged by the council, but did not then appear on the system.” [my emphasis] This lady wrote “… each party refers me to the other, the fees are ever increasing and.. threatening the removal of goods for the same amount.”

The Bill’s aims “.. are threefold. The power of forcible entry into a person’s home and the power for bailiffs even to use force against debtors are far too extreme to be given to civilian enforcement officers. The balance has been tilted too far against the householder’s right to be secure from trespass into their home. ” [my emphasis]

“… overturns a long-standing common law tradition,… in the Tribunals, Courts and Enforcement Act 2007… some p[owers] have not (yet) been brought into effect… such powers should be repealed.”

“… the power to enter domestic premises forcibly… for collection of criminal fines is already legal, and that too is creating appalling distress for many vulnerable households. Many… fines are levied on people on low incomes for offences such as the non-payment of TV licences, fare dodging and truancy.”

“… the issue here, too, is one of proportionality,… I also seek a statutory procedure requiring bailiffs to return cases involving vulnerable and impoverished debtors to the courts or the creditors, and powers to allow people subject to any bailiff action to apply to the courts for any bailiff warrant to be suspended… (this) is (currently) available only to people subject to county court bailiff warrants.”

“… case law, which holds that a distress warrant cannot be withdrawn once it has been issued. That directly contradicts the national standards for enforcement agents, which suggests a procedure enabling the bailiff to return cases of vulnerable fine defaulters to the court.”

“… disproportionate fines are being paid by benefit claimants and other low-income groups, intensifying the poverty that pushed many of them into debtY Finally, we need a statutory provision for bailiffs to accept ‘affordable payments’, with a definition of what that might mean in practice…”

“… I believe that they need greater protection, and above all, to be freed from the fear of the implementation of the excessively harsh powers held in reserve in the legislation.”

The Bill has six more stages; second and third reading in the Commons; first, second and third readings in the Lords; and signature by Her Majesty. It is only a pity that with this government tottering and the next election in any case but a year away the chances of it becoming law are slim.

But ‘good on yer’ Karen Black; you’re one we need back in the Commons. And keep it up Zacchaeus Trust; we need you.

Debt Control Man

Low Cost Online Bankruptcy

April 11, 2009

Let me just apologise for the long gap in my blogs. Sometimes things do not go as one would like, and – as Robert Burns put it – The best laid plans of mice and men / Gang oft aglay [’aglay’ is Scots dialect for ‘awry’, or simply ‘wrong’ – ‘gang’ for ‘go’ – ‘oft’ is short for ‘often’.]

 

I am now back with some moderately good news for low income readers with debts below £15,000. A new service – DRO, Debt Relief Orders – is now in effect according to The Financial Times.

 

This enables those who qualify to become bankrupt for £90, as opposed to the £500 or so in court fees for the conventional service. Access is through a third party, with the Citizens Advice Bureaux the most often mentioned in reports and comments.

 

This can be a great relief to those caught in the debt trap with no way to pay, and with creditors or their debt collecting agencies harrassing [forbidden under the Consumer Protection Regulations 2008].

 

With the trend for the economy down the likelhood for most of us of getting an income to beat our present ones is small. And for the small debtor [and £15,000 is small today] this is a helpful possibility.

 

I have now my website – http://www.controlyourdebtcrisis.co.uk – open and the first part of my book on offer. My debtwiki has been massively spammed and I am just in the process of turning it into a conventional Debt Dictionary.

Look forward to your visit.

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

A Word For Debt Collectors

October 5, 2008

Preparing part of the step by step book I am hoping to have ready for you very soon I had to think about debt collectors.

And, in a way, I do have some sympathy for them. And moreso perhaps for their staffs.

There are, after all, one or two areas where their activities are useful. These are where the people who they are chasing really are out to cheat and maybe involved in scams of one sort or another. And they seem to have an expertise in hunting down people who move around.

That is a word for them in support. There is another word for them when they are making the lives of people trying to do their best a misery.

Putting aside the scurrilous game of chasing debts that are out of time or already paid, they cannot get involved unless the creditors call them in.

Now in my experience creditors call in debt collectors inappropriately. They call them in when there is a negotiation on the table. I have seen them called in when the creditor tells me I have eight weeks to respond to a letter.

I have seen them called in when a negotiation has moved on the the FOS. Once there, until the FOS reaches a decision the matter is in arbitration.

I have seen them called in erratically during early exchanges of a negotiation. And I have seen them called in even after an agreement has been reached.

And I have seen recovery teams within a creditor formed into an inhouse debt collection agency, with all the pretence of being a separate company.

So, while there are many things to be said about the manner of debt collectors, they really should be in the mix only after all negotiation, including the FOS arbitration, has been completed AND if here remains real reason to believe that default is deliberate; and that means NOT by assumption, by rote or by procedure.

And there are many things to be said about the manner of debt collectors. Here the regulators are very weak in enforcing fairness. But that deserves not just another post in this blog, but a whole book!

Joseph Harris
Debt Control Man

Negotiating With Creditors for Changes in Terms and Loan and Debt Schedules – 4

September 25, 2008

Let’s now talk about the repayments and the charges from creditors.

So far this set of blogs has covered the basic thinking for a negotiation, what the companies are like and the need for understanding the rules, and my ever-critical view of interest rates.

Repayments are a contractual obligation, and nothing I say should be seen as altering that basic point. There are however many different ways of viewing what this means in practice. Especially bearing in mind the matter of force majeure.

When the debtor – you and I – are able to pay without any problems there is no reason for varying the payment schedule, unless it is to match changes on your own income receipts or to put right a change made by the creditor using his supposed right to vary any terms unilaterally. There are reports of this being done to trigger late payment charges.

There are also cases of increasing repayments by 50% by upping the monthly percentage, which obviously causes budget stress and increases the likelihood of triggering charges.

More significant in the call for repayment variations is the reduction of personal disposable income. There are many ways this can happen. I would suggest that among these is loss of bonus, loss of job and taking lower paying jobs, the effects of inflation, additional family commitments and accident or ill-health problems.

The majority of creditors will discuss lower payments, though they have their own ideas of what lower means. For you this is a matter of redoing your budget and seeing how that places you. This is the information that will inform each of we debtors and this will also inform them.

Since it is my view that inflation is about to show some serious muscle I advise frequent and regular personal budget reviews.

You do need to think in terms of treating all creditors equally, so the usual way is to establish what you might be able to afford and apportion that in relation to each debt. If you have any difficulty sorting it out any of the online charities will give help. Maybe the excellent fora – forums if you prefer – will have mathematical geniuses who will put a little time in to giving you the answers.

Don’t take no for an answer and don’t let the creditors bully.

And then… and then… and then is the matter of penalties and special charges. These are applied in all sorts of ways and are purely profit centres for the creditors.

In a ruling early this year the Office of Fair Trading determined that charges should relate to the actual costs that the charges relate to. anything above that becomes a fine, and there is no legal support of companies to levy fines.

Unfortunately the OFT also stated a maximum level for a bundle of different charges and set it at £12. this was less than the previous figure of £20 – and sometimes £25 0r £30. Of course putting it this way was a gift to the creditors who immediately made all charges £12 [and I would be interested in any evidence of new types of charges being levied at that time].

Now it is my contention that these charges are mostly illegal fines. The reason rests on the rules of fairness and the point in the ruling about relating to costs. I will talk only about late fees, but this will stand for others as well.

Examine the way a late fee is determined and levied (as a fine). The computer – yes, the computer – has a program written by groups of clever fellows to do all the paperwork, calculate interest, instantly apply changes of all kinds, and react to the time a payment is received.

If the deadline is midnight and the payment comes in a one minute past – maybe one second – the computer automatically triggers the late fee script and sets it for the following statement. On the statement this requires a miniscule amount of bulk-purchased ink or powder and enough extra time on the automatic printing system to print one extra line.

If you have ever seen those in action you know we are talking about a fraction of a second. The script action requires no extra time since it is a choice of options. At a guess we are talking 0.0001p for the ink and 0.001p for the time.

So by my estimate a £12 levy includes a justifiable charge of 0.0011 and a fine of £11 99.9989p.

If anyone has figures to disprove this estimate I welcome them. The idea floated by one senior executive that there is a little man in a smoke-filled back office checking every charge is not just risible, but an obvious …er… mis-statement.

Joseph Harris
Debt Control Man

Negotiating With Creditors for Changes in Terms and Loan and Debt Schedules – 2

September 18, 2008

Everything now is going to depend on which creditor you are dealing with. They vary in ways that are not really logical, and can have differences according who you are speaking to and what section of the company is dealing with your account.

You might think this is a bad thing, I would rather say it shows how important it is to be confident in the knowledge you have made sure you have.

A good company will respond to what information and figures you have given them. It will try to find an answer that suits both you and them. Here you are able to talk in a more relaxed way and with less feeling of guardedness. But that doesn’t mean you should leave the decision up to them.

It is your life; you still need to be sure the outcome is realistic for you.

But then there are the companies that seem to have no interest in what you say to them and simply want their money back willy nilly.

These companies are going to behave unreasonably, and try to sidestep the rules which apply to them. They will prove obdurate, unyielding and take the matter to the bitter end. That end should be the Financial Ombudsman Service, which does insist these companies do the right thing. The FOS has the power to force compensation payments as well, and does.

But all this can be a long road. It can be over a year before there is a resolution, and these companies do try to bully you. I encourage you to not only resist but tell the companies quite bluntly that you will complain as appropriate to the regulators who decide on how to regulate, those who enforce the regulation and issue the licences to trade in credit, and the FOS itself.

The rules are clear and bad behaviour should be reported so the companies may be censured, fined or have their licences revoked.

You are not without power in this.

Once you have grasped what the rules are – by research and advice – you will see how my methods work, and why this is the way is should be done.

As time goes on you may find the companies offer deals that may be very helpful. I have, for example, been offered 50% write offs for payment of the other 50% – usually as a lump sum, of course. With such offers there may be mileage in consolidation, but it is as well to bear in mind you also have obligations.

Among what is expected of you is the general rule to treat all creditors the same. That is subject to common sense and reasonableness of course. Never refuse a full write off, for example, just because only some creditors have offered it.

And if you want to agree to a 50% deal, as I describe, you should strictly offer the same deal to other creditors. It certainly needs thinking about and it is worth checking with one of the charitable advisors how you should handle it.

Joseph Harris
Debt Control Man