Posts Tagged ‘fairness’

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