Cold calls from high pressure salesmen are a real nuisance. Personally I hate them so much that I registered with the Telephone Preference Service. But a recent spate of calls has reminded to update the register with my current address. (Anyone who wants to do the same can also register, at www.mpsonline.org.uk/tps/.)
So far this year I have received about one call a week from agents asking if they can act on my behalf to clear old debts. (In fact I don’t have any – which proves that they operate on chance, not knowledge.) As this page explained last week, there are lots of these calls being made to people across Northern Ireland at present. The simple advice is don’t be taken in.
The problem is reaching crisis point. The Office of Fair Trading is so worried that it issued a special warning last week about people claiming to be able to write-off old credit card debts.
Agents on the phone sound plausible. They explain that the Consumer Credit Act requires lenders to have a proper contract for a debt and if they cannot locate this, then the debt is unenforceable. This is only partially true.
It is correct that there should be a contract. But debtors are being fleeced out of their money on the pretence that this means that if the lender cannot produce the contract that the debt does not have to be paid. The sting, of course, is that innocent consumers who owe money are being persuaded to pay an advance fee for a service – to clear the debt – that they will never receive. Many of the companies cease trading days after taking the money.
Now the OFT intends to issue guidance on this thorny problem. The legal situation, explains the OFT, is that lenders must provide a ‘true copy’ of a credit agreement, but the true copy does not have to be a photo copy or exact copy of the original.
The lender may reconstruct an agreement, providing it is accurate – and it does not require the borrower’s signature or date of signature to be included. Where the lender is unable to comply with this, it has limited recourse to debt collection and should not threaten court action.
“There has been a great deal of confusion over the meaning of these sections with many borrowers being misled into thinking that they can get their debt written off,” explains Ray Watson, director of consumer credit at the OFT. “This guidance is to clarify the legal position and the OFT view on standards expected of the industry, and to make consumers aware that they may be at risk if they seek to use these sections to avoid paying legitimately owed debts.”
Consumers should be equally aware of cold callers offering other debt management services. Some companies are contacting people who have taken out individual voluntary arrangements (IVAs), suggesting they can stop making payments on these.
One financial advisory agency, EuroDebt, has taken the unusual step to issue a warning to consumers not to use another agency, the IVA Review Board. EuroDebt says that if consumers follow advice to stop making payments agreed under an IVA they risk having the IVA terminated and being immediately liable for the repayment of the entire debt.
The OFT confirms that it has taken action against the IVA Review Board, but is at present unable to prevent it from trading – with the result that consumers may still be contacted by it, or by the associated ‘Department for Personal Insolvency Review and Assessment’. It maintains an impressive website under the IVA Review Board name.
A spokesman for the OFT says: “We have not made an announcement yet because the company that owns the IVA Review Board has appealed, but we have taken away their credit licence.” While the appeal is pending – and it could take some time before the appeal is heard – the IVA Review Board can continue operations.
The underlying problem, says Moneysupermarket.com, is the extent of consumer debt caused by the recession is such that legitimate debt advisors are swamped. At present, about 20,000 consumers a month sign debt management plans. Debtors who cannot wait are turning to agencies charging fees, not all of whom operate to high standards.
Tim Moss, head of loans and debt at Moneysupermarket.com, warns: “We can expect to see around 30% more applications for debt management plans this year and consumers have to be very careful when dipping their toe into this world, as it currently exists outside the realm of government regulation.” He says that where consumers do choose a commercial agency, they should be certain they understand the fee structure and likely charges and only use firms conforming with the DEMSA (Debt Managers’ Standards Agency) OFT Approved Code.
But consumers in trouble should start by contacting either Citizens Advice (details via its website, www.citizensadvice.co.uk/en/getadvice/) or the Northern Ireland Executive-funded agency, advice4debtNI (0800 917 4607).
Q. I have three credit cards with the same APR%. I pay £150.00 a month to each to cover the interest and a small part of the balance. What is the best way to pay-off the amount I owe?
A. Virgin Money, Santander, Egg, Halifax, BT and Nationwide all do 0% balance transfers for existing credit card balances. The lowest transfer balance fee of these is 2.98% with Virgin Money: the others charge 3%. If you transfer all your balances to one of these cards, your repayments will pay-off the balance rather than simply keeping track with the interest. It is important to avoid new interest charges by not using your new card for purchases or cash withdrawals.