Posts Tagged ‘debtor’

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

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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 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

Lending Code secrecy ‘is a disgrace’

October 12, 2009

I have just released this press release; as you see it is a matter of some seriousness

The new Lending Code, which replaces the credit and financial difficulties sections of the defunct Banking Code, is due to come into effect on November 1. Some nineteen short days away.

There is to be no public sight of these changes, nor any consultation process before these changes come into effect.

Specialist author Joseph Harris – Debt Control Man – has been trying to get sight of these changes since June. He has been told they will not be released until they are in effect on November 1 by Paul Ross, the man who is writing the new document for the British Bankers Association, in an email.

“This is a clear case of dictatorial behaviour,” declares Mr Harris. “It is a disgrace that no one concerned with the field, nor any debtor – whether defaulting or not – has any idea how the changes will affect them.

“Vince Cable was wrong when he said Gordon Brown had changed from Stalin to Mr Bean. On the basis of this secrecy and undemocratic behaviour he remains Stalin.”

Phone calls and emails to the FSA and the OFT result in classic Civil Service dropping the query into the new virtual filing bin.

“Even though there are many rules to help debtors negotiate the treacherous waters of finding the best way for their needs, too many creditors and debt collectors – including the biggest companies – do their best to sidestep them.

“Lack of a clear knowledge of what is happening among debtors and their advisors leaves these worst companies a window of opportunity to harass and bully particularly the poorest and most vulnerable debtors,” adds Mr Harris, author of Control Your Debt Crisis on Your Own Terms http://www.controlyourdebtcrisis.co.uk/book-cydc/cydc_Book_intro.shtml .,

“It is also a tragedy that the opportunity to include the requests of the Treasury Select Committee in 2005 and of the Money Advice Liaison Group has been lost.”

While most of the Banking Code is being operated as statutory Code of Practice directly by the FSA, the credit and financial difficulties sections move to the The Office of Fair Trading to sit beside the OFT’s duties controlling issue of Consumer and Business Credit Licences.

Joseph Harris, Debt Control Man

Does the FOS Work for Us?

April 14, 2009

I have earlier praised the Financial Ombudsman Service for its very existence.

My thinking is that it will act as a check on creditor failures to observe the rules, and that findings would take into account these rules in dealing as ‘piggy in the middle’.

Well I’ve been in ‘the waiting room’ of the FOS now for over a year and I am far less certain of this. Even more important I am very concerned at the extent to which the debtor has still to fight to get a proper hearing.

I cannot give you full details of the cases involved, since to mention the companies could well bring those savage legal departments sniffing like the monsters in any one of a thousand science fiction films! I can say that the process of the FOS is wearing for the debtor.

That process is three-stage. More if you take the delays into account.

The queue does of course relate to the changes in the volume of work, and the time it takes to train up; no basic criticism over that since it has to take the banks’ unfairness on its shoulders. and we know there is plenty of that.

First stage of actual process is with the adjudicator. Here one is dealing with a new process, so in essence it is necessary to repeat the arguments you have given to make sure they are fully understood, together with one’s perceived faults in the bank or credit card company response.

If you don’t like that – and from my experience don’t expect to – you can ask for the adjudication to be reviewed. If you don’t like that you can request your case go to an actual Ombudsman. Each time you need to re-present your case to some extent.

Now I am sure many people are happy with their experiences at the FOS so I am not going to dismiss its work out of hand, but sometime this year I will be dealing with an actual Ombudsman and that will certainly tell me whether I still have praise for the process.

Any way, for the umpteenth time now I am having to prepare my response to what I consider an appalling adjudication which reads to me almost like a letter from one of the companies.

I plan to write more on the service, and on the whole process, here, in my book, and on my website.

Joseph Harris
Debt Control Man

Negotiating With Creditors for Changes in Terms and Loan and Debt Schedules – 5

September 27, 2008

There are just a couple more thoughts I would like to share with you on this topic. These relate to what changes any debtor might ask a creditor to grant.

But first let’s consider how much room a creditor has to grant variations. Well, look at their terms and conditions. The creditor assumes the right to change any terms and conditions.

So they can change practically anything in light of a negotiation. Unless of course they want to admit force majeure, unfair practice and any other weaknesses in their position.

So ignore any ‘we can’t do that’. You can point out to them that they may wish not to follow some path, but they themselves declare there is no actual restriction on their action – let alone in a reasonable negotiation.

I think the actual amount of repayment is a fairly obvious matter we have dealt with. But I do wonder if the frequency is carved in stone or set in concrete. Whether it might make sense to alter that is for a particular debtor in a particular circumstance. But don’t be afraid to seek it if you need it.

Any debtor is going to be in default or risking default because of changes; there can be so many of these I won’t list or example them.

But the solution to the new situation can be any one of a number of things or a combination of some of them.

It may be that the only route you can see is having all your debts written off. Now this is expressly mentioned in the Banking Code Guidelines as an option. So don’t be afraid to suggest it if it is appropriate.

It is more likely that your problem is a lowering of expectations and so a lowering of the sum available for repayments. It may be that you have a ‘between jobs’ situation with an assured income to start ahead.

Think what that requires from your point of view, don’t worry about the creditors’ view – any creditor is well able to worry for themselves.

You might need a break from payments for some months. You might feel able to meet the repayments on the sum as it is, but fear the worry of interest costs. Your proposal should reflect such need.

The balance can be frozen. Payments delayed. Interest rates reduced. Payment amount varied.

You may be going into hospital, or have some other serious interruption in your normal life. Or you may have to deal with the effects of such an interruption afterwards. Talk to the creditor. There are many provisions which protect you in these circumstances.

And the creditor is not excused from due diligence just because there is an outstanding debt.

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

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

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