thedebtblog.co.uk

When a debt management acts as an appointed agent for a client, it undertakes to calculate and disperse any disposable income to a client’s creditors, and as soon as the debt management company is informed by the client of the receipt of collection letters, the debt management company will contact the collectors and ensure they are sent the relevant documentation and payment is made correctly.

A debt management company’s staff should be directly available by phone, post and email to all clients and creditors in order to provide an effective service for all parties.

The first thing a creditor needs to understand is whether a debtor is in the ‘Can’t pay’, or ‘won’t pay’ category.

By receiving good information from a debt management company, this allows the creditor to make an informed decision and can reduce collection costs.

Since legislation came into force in April 1999 and following reviews by the Lord Chancellor Lord Justice Woolfe, the County Courts processes discourage dishonest actions which overload a debt companies systems and it’s up to creditors to justify their actions if they refuse reasonable offers of repayment.

Therefore, if a debt management company acts as an appointed agent for a client; it is unusual and unnecessary for creditors to proceed with legal action.

Many, if not most creditors will reduce or freeze interest and charges when a debtor is trying to repay their debt at the best rate they can afford. This demonstrates the client’s commitment to clearing the debt as effectively as possible by making regular payments. This isn’t a speedy process and many creditors will refuse the initial repayment amount offered ask for higher repayments.

This happens because the creditors have policies to only accept a specific percentage and they think the debtor has a higher disposable income than stated in the income and expenditure report.

There is most certainly a place for free debt help services, just as there is also a need for state benefits where appropriate. However there is also an important role for fee charging debt management companies, for the people who hold up their hands and are prepared to be accountable for resolving their debt problems.

Debt problems are often experienced by people with reasonable to good incomes, who admit to careless overspending.

This is more bad news for the debt industry, particularly with regards to First Plus offering a large number of it’s secured loans to customers wanting to consolidate their existing debts.

First Plus is the largest provider of secured loans in the UK and is owned by Barclaycard. This hasn’t however stopped the announcement that they will no longer be accepting new loan business from 9th August 2008.

It is common practice to use a secured loan in order to pay off existing unsecured debts. The secured loan is, of course, secured against any equity in the applicants property. The worrying consumer trend associated with debt consolidation loans is that around 60 per cent of people who use a secured loan to pay off debt will then go on to apply for, and use additional means of unsecured credit. Plunging them deeper into debt.

It’s no surprise to me that debt in the UK is at its highest level ever and still rising. Uswitch.com have bullet pointed the main facts and it’s concerns, please see them below;

• Firstplus, the market leader in homeowner loans and best known for its adverts fronted by Carol Vorderman, has confirmed that it will be closed to new business from 9 August 2008 and will make 300 job cuts.
• Firstplus is “market leader” in home loans with 128,000 customers, 430 staff and £4.7 billion in receivables. Today’s news is a huge blow to the personal loans market and another signal that the consumer credit market is quickly drying up.
• Their departure will leave just seven players in the market, down from 18 last year before the credit crunch hit.
• A large proportion of business is sent to them via brokers. Brokers will now struggle to help consumers that need secured loans and consumers will in turn struggle to get hold of cheap consolidation loans as companies continue to tighten their lending criteria. Lenders have reduced the amount of credit on offer to applicants and is undoubtedly harder to come by.
• Having the wrong, or uncompetitive, financial products can mean consumers are wasting money that could be put to better use. Anyone with outstanding debts in need of refinancing onto a cheaper deal needs to act now to secure a competitive loan before rates increase any further.