free debt advice-believable
As there are numerous advertisments on TV on how to sort out you debts I
thought this NG would find this article from T R A D I N G S T A N D A R D
S N E T useful.
DEBT MANAGEMENT COMPANIES - WORTH THE EXTRA?
Anyone who has watched a lot of daytime television will be only too
aware of the huge advertising effort of debt management companies
such as Baines and Ernst to attract new customers.
Although perfectly legal some people have described debt managers
as parasitic and immoral. The debt managers negotiate with creditors
to reduce people's repayments, then distribute payments on their
behalf.
Reduced loan repayments have obvious attractions, but they also mean
debts take longer to clear - sometimes almost a lifetime.
One example was a customer who was paying off a £10,000 loan at £286
a month but then had monthly payments reduced by Baines & Ernst to £15.
This left the customer facing over 55 years to clear the debt and a
bad debt record for the whole period.
The costs don't end there as debt managers typically charge 15 per
cent of clients' monthly repayments or a standard minimum monthly
charge of for example £25.
It has been calculated that debt managers' charges add around £1,000
to the cost of an average loan.
Some firms also impose a penalty if people leave before clearing their
debts - potentially hundreds or even thousands of pounds.
The other aspect to the whole arrangement is that the debt management
companies cannot guarantee the agreement of creditors to withhold
sequestration proceedings or refrain from seeking court decrees against
the debtor. In many cases decrees will be granted against the debtor
as the instalment proposals offered by the debt management company
are unreasonable.
Against this background it is very difficult to see what benefit this
service (at an additional monthly charge) is to individuals who are
already in significant financial difficulties.
There are free alternatives to debt managers:
Citizens' Advice Bureaux and many trading standards departments and
Social Work Departments will also negotiate with creditors to agree
affordable repayment - FREE OF CHARGE, and lenders say they too are
keen to help borrowers who are struggling.
Most people are only going to these companies because they don't know
about the alternatives.
A report, commissioned by the Federation of Independent Advice
Centres (FIAC), found that many clients did not seem to understand
the payment system and were unaware they would forfeit their initial
payment should they break their contract with the company.
The report was undertaken because of widespread concern about debt
management firms, which range from one man bands to nationwide
operations.
The report also warned that the lengthy negotiations which some
debt management firms conduct with their clients' creditors
"mean that some clients could be making payments to debt management
companies for several months before any money is passed on to
creditors".
But FIAC also points out that some firms are much more client-friendly
and says the better ones help people work out affordable debt
repayment plans that they stick to. It argues that despite the
hostility of some creditors and providers of free debt advice,
debt management companies are not going to disappear and should
therefore be properly regulated.
This is certainly an area of great concern, and in a society where
more and more consumer credit is being given every year, there
should be greater regulation for firms who charge a fee to
reschedule debt. Ever decreasing resources for the providers of
free debt advice services such as local authorities, has meant
more and more profits for debt management companies, who charge
a significant amount of money to the people who can least afford
it - for a service which often achieves nothing or even increases
the debt burden.
any ideas?
_I think you're right. Every other advert on Cable seems to be for debt
management, by Carol Vordeman who should know better. Or for the equally
dubious ambulance chasers like Claims Direct.
Lets face it both leave a bad taste, as you know they're basically going
to screw vulnerable people. It's about time the contingency legal fee
legislation was revisited, and the various financial watchdogs (There
are oodles of them) took a long hard look at debt management.
The speed these companies are growing at alone gives cause for concern.
_The thing is that these so-called debt management companies give you
loans at a relatively high rate, charge you a whopping fee for doing
so (do they put that fee into the capital sum ?) and simply spread
your payments over an eternity, in the long run you end up worse off.
I hate the feeling that they are preying on vulnerable people and
agree with the description of these organisations in your post. These
people seem to offer an easy solution to a difficult problem, why on
earth do people use them instead of going to the Citizens Advice
Bureau or other free advice agencies ?