Debt Questions forum. General questions on debt issues.

Moderators: TalbotWoods, JaneClack

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By JaneClack
#270313 As you know we in the industry would like to see the creation of a regulated debt management programme in England and Wales as they have in Scotland. Please listen to this and then sign the Daily Mirror's petition!

http://www.bbc.co.uk/iplayer/console/b012l4nl

It confirms what a lot of us have been thinking!

I am also reposting an article which appeared in the Daily Mirror on 30th March 2011 and asking you to please sign the petition and if any of you are willing to speak as a case study about bad treatment we can let the Mirror know - just pm me if you wish to discuss this!

Stop the Debt Rogues: Join our campaign to stop rogue debt management firms from ripping people off


by Tricia Phillips, Daily Mirror 30/03/2011
Stop the Debt Rogues: Sign our petition to get the debt industry regulated - Sign the petition: http://www.mirror.co.uk/advice/money/2011/03/30/stop-the-debt-rogues-sign-out-petition-to-get-the-debt-industry-regulated-115875-23024970/
HUNDREDS of thousands of people have been forced deeper into debt by rogue firms offering debt management plans.
The Government has the power to do something about this – but it simply hasn’t bothered.
After receiving heartbreaking calls from readers who have had their lives devastated, we’ve decided enough is enough and it’s time to take action.
We are launching a campaign to get the debt management industry properly regulated and stop companies ripping people off.
But we need your help.
We need you to sign our online petition so we can force the Government to stop more innocent people falling victim to these dodgy companies.
We already have the backing of leading Labour MPs and debt charities, who have major concerns about a multi-million pound industry that preys on the most vulnerable.
Action is more crucial than ever as the debt crisis deepens and demand for debt advice is set to soar past the 2.5 million mark this year.
Yet at the same time, funding to debt help charities such as Citizens Advice is being cut.
This means more desperate people will be forced to seek help from fee-charging debt management firms.
These companies are only loosely regulated by the Office of Fair Trading and that leaves the door wide open for ¬unscrupulous companies to lure people in with false promises of a solution to their debt problems.
Many charge extortionate fees running into thousands of pounds, promising to pay off creditors and simplify debt ¬repayment, but leave people worse off and owing more money. An OFT report into the sector found 129 firms in breach of its rules – but it failed to name and shame them, meaning innocent people are still at risk and could still fall victim to bad practice.
Shadow minister for business, ¬innovation and skills, Gordon Banks MP, says: “There appears to be a body of evidence which shows that many vulnerable individuals who have financial -problems are not getting the best and most cost effective advice and support when they most need it.
“The OFT findings are a real worry and action needs to be taken to eradicate the ¬problems they uncovered.
“Exploitation must be tackled – and quickly – as the numbers of those falling into difficulties is likely to grow.
“Labour left the current Government an opportunity to act in this area as a result of our 2009 consultation but to date they’ve failed to address the problem.
“I urge the Government to move forward on this matter in a way that protects these vulnerable individuals at an extremely difficult time for them.
“In doing so they will deliver better returns for creditors and a better solution for those needing a debt management plan. I fully understand the Government’s reluctance to introduce more regulation but they must take action now to address the problem.
“I would urge them to speak to the opposition, the OFT and the “no fee” providers about the best way to do this so an agreed solution can be delivered.”
A debt management plan is a ¬voluntary, structured arrangement between a person in debt and their creditors.
It allows a person to repay what they owe at an amount they can afford.
A debt adviser should go through a person’s income and expenditure to work out what they can afford to pay once all essential living expenses have been covered. This should then be distributed to the person’s creditors by the debt management company on a pro-rata basis.
The very name “debt management” should give a clue as to what these firms should do – manage debt. But mismanagement would be a more appropriate name for the way many of these companies deal with people’s finances and the devastation it causes.
Citizens Advice says it is dealing with 9,500 new debt problems every working day – putting demand for advice at an all-time high.
Last year the charity saw a 23% increase in debt-related inquiries – 2.4 million in total – and many of these were due to the impact of the recession.
Peter Tutton from Citizens Advice says: “We’re on the brink of things getting much worse, with many more people losing their jobs, facing cuts in their working hours or having to accept a pay freeze while the cost of living keeps going up.
“A lot of Citizens Advice Bureaux have also had their funding cut and sadly this will mean we may have to reduce some of our services at a time of growing need.
“Inevitably more people will turn to ¬fee-charging debt management companies, which is why effective new debt problems every working day – putting demand for advice at an all-time high.
Last year the charity saw a 23% increase in debt-related inquiries – 2.4 million in total – and many of these were due to the impact of the recession.
Peter Tutton from Citizens Advice says: “We’re on the brink of things getting much worse, with many more people losing their jobs, facing cuts in their working hours or having to accept a pay freeze while the cost of living keeps going up.
“A lot of Citizens Advice Bureaux have also had their funding cut and sadly this will mean we may have to reduce some of our services at a time of growing need.
“Inevitably more people will turn to ¬fee-charging debt management companies, which is why effective new debt problems every working day – putting demand for advice at an all-time high.
Last year the charity saw a 23% increase in debt-related inquiries – 2.4 million in total – and many of these were due to the impact of the recession.
Peter Tutton from Citizens Advice says: “We’re on the brink of things getting much worse, with many more people losing their jobs, facing cuts in their working hours or having to accept a pay freeze while the cost of living keeps going up.
“A lot of Citizens Advice Bureaux have also had their funding cut and sadly this will mean we may have to reduce some of our services at a time of growing need.
“Inevitably more people will turn to ¬fee-charging debt management companies, which is why effective regulation is so vital to ensure more people don’t end up in greater debt as a result.

“Unfortunately it can be difficult to tell good fee-charging debt management companies from bad ones and the hard-sell tactics of some of the rogue operators prey on people at their most desperate.
“Self–regulation just hasn’t worked and we still see far too many people whose debt ¬problems have been made far worse by the sky high fees as well as the poor service of some of these debt management companies.”
Joanna Elson OBE, chief ¬executive of the Money Advice Trust, which runs National Debtline and My Money Steps, says the charity has felt for some time that the fee-charging debt management industry is in urgent need of closer scrutiny.
“We have experienced countless examples of people finding themselves in a worse position having enlisted the help of a ¬fee-charging debt management company,” she says. “The recent investigation into the industry by the OFT found that more than 90% of fee-charging companies are failing to meet the basic standard of service required.
“This makes it clear just how widespread poor practice by fee-chargers is.
“In my view it is ¬unreasonable and ¬impractical to expect vulnerable people to be able to work out which of these organisations they can trust.
“We have heard fee-charging debt management companies claim their sector makes an important contribution, but it is clear that much of the fee-charging industry is not in a fit shape to be trusted and the OFT doesn’t have the resources to keep on top of all the companies springing up.”
Dealing with unmanageable debt is a difficult problem, but it’s vital that people who take the brave step of facing up to their situation and try to repay what they owe are helped back to financial health, rather than preyed on by commercial organisations eager for a quick profit.
CASE STUDY:
Simon is devastated. He thought he had found a solution to his debt worries. But after paying £4,500 into a debt ¬repayment plan over a year, he was horrified to discover he had only reduced the amount he owed by just over £200.
The firm he signed up with failed to negotiate reduced repayments with his creditors and charged him almost £2,000 in fees.
Simon (we have changed his name as he is embarrassed about his debt and doesn’t want his family to find out) had a good job and was in control of his finances.
But, after being made ¬redundant in 2009, he was left struggling to keep up repayments on more than £22,000 worth of debt.
He found a new job but he had to take a big drop in salary and that left him struggling to keep up repayments.
Worried about falling into arrears, he decided to sign up to a debt management plan last year.
“I agreed to pay £500 per month but I had to pay more the first month as part of the figure would be taken as a set-up fee,” says Simon, 39.
“In December, I decided to check how things were going and asked the company how long they thought it would take me to be debt free.
“They told me they couldn’t ¬calculate this. That really worried me. I thought they were meant to be managing my debt.
“I then asked how much I’d paid off so far and they hit me with the bombshell that my debts had been reduced by just over £200. I felt like I had been robbed.”
Simon knew he had to do something or he would never get out of debt.
“I heard about a firm called Payplan, which doesn’t charge fees for their debt management plans. They get their money from creditors.
“I was worried I’d end up in debt for the rest of my life but I now feel like I could be heading towards a future where I could be debt free. Every penny I pay into the plan goes towards reducing my debt.”
Tips for avoiding debt
●Go through your finances and work out exactly how much money you have coming in and how much you have to pay out every month.
●Look closely at your spending to see where you can make savings. Make sure you are on the best deals for all your financial products and switch where ¬necessary. Write a ¬shopping list for the weekly shop and don’t be tempted by special offers.
●Set yourself a budget and stick to it.
●Think of ways you could make some extra money – sell unwanted stuff on eBay or at car boot sales or maybe take on a part-time job.
Sign the petition: http://www.mirror.co.uk/advice/money/20 ... -23024970/
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By JaneClack
#270413 Thank you - it surprises me that it took nearly two months to get to 1000 signatures - if people do not object to the current system then they have no reason to try and reform it - and we do not want to have to tell everyone to move to Scotland to take advantage of the DAS!
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By DuffNCustard
#270923 Maybe the Daily Mirror should also refuse to take adverts from these organisations then - put its money where its mouth is. I just clicked the link and there on the DM web page were all the sponsored links to fee paying debt management parasites. I'll say no more - I feel a swearing rant brewing up.
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By JaneClack
#270933 But two wrongs do not make a right - the fact that people are not signing the petition is grist to the mill of those people who believe that a statutory debt management plan is not necessary as people can choose to pay... it really upsets me when I talk to people who say their debts have gone up since they joined such and such a company and whilst none - not even CCCS or Payplan - can guarantee that interest and credit will be frozen - at least they do not charge a fee for the privilege ..... or tell clients not to pay their creditors whilst they collect the first two month's payments as set-up fees...

sorry, my rant over!