Posts Tagged ‘token payments’

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