Debt interest may be waived for persistent debtors who cannot pay.

January2015

As someone who is now on a DMP, with all interest and charges zeroed and who is going for F&F settlements as and when I can - I think this will be a good starting point, but agree with Sourcrates post above regarding 6 month hold on interest, AP markers and defaults.

However - if the new guidance had been in place when we were racking up credit then maybe it would have stopped us in our tracks. If we had been challenged to make a repayment plan rather than minimum payments (and creditors still increasing our credit limits at the same time) then I would like to think we would not have ended up requiring a DMP to sort our finances out. I also think that if creditors put the proposed steps in place and it does get to eventually waiving interest and charges, it will be like offering those customers interest free credit cards for a period - which is common anyway so I don't see why people think this is a problem for customers strugging to pay - as opposed to customers who can afford to pay. It does not say the interest would be waived indefinitely - but even if it was, those creditors will be getting back more than they would if customers default and debts need to be sold on.

Personally, I think if this had been in place when I was racking up debts, the outcome for myself - and importantly, for my creditors - would have been significantly different. I think the creditors would have been on to a winner in terms of overall payback from me.

lazer-zxr

Apologies for the tone, but it really isn't fair to take money, and not repay it under the conditions you took it.

I do respect you SCrates, you and the fellow forumites have been a big help to me in the past.

sourcrates wrote: »

That's quite a "one size fits all opinion".

I'm not sure it's a one size fits all. The size can be adjusted to accommodate the lifestyle the individual can afford. I think perceived entitlement is skewed severely in our society. If you can have a mobile phone, cigarettes, fizzy pop, but can't make the loan repayment, then forego the goods."

sourcrates wrote: »

How do you work out that the "rest of us end up footing the bill" though ?

Bad debt is big buisness, the creditor certainly doesn't lose out, they sell the debt, and make some money from that, the rest they reclaim in tax relief and other corporate benefits.

The debt purchaser also makes money, if one account proves fruitless, they have several thousand more to chase up.

Creditors and the banks set interest rates, if you have a good credit rating, you can get low interest deals, if you haven't, then you pay more interest, but the setting of interest rates has nothing to do with the volume of bad debt, that is another, common misconception.

Any written off credit must be funded. Whether this is by tax relief (reduced tax contribution is a cost to "us" as tax payers); or discounted sale of the bad credit accounts at a loss being compensated by higher interest borne by the people that do pay their debts.

sourcrates wrote: »

Also most people don't wake up one morning and think, I'll just borrow a few grand I know I can't pay back, debt is often racked up over many years and the people it effects most are usually victims of other life changing circumstances, they are not all stupid or irresponsible

I accept this, but they are living beyond their means. Spending more than they earn. I can identify this, I've done it. And I spent someone elses money living in a manner I couldnt afford. I am working hard to put that right, and pay back the people who's money I took to do so.

sourcrates wrote: »

as you are entitled to your opinion, it's not a very helpful one.

I'm not sure any opinions on this are helpful as such, but it allows us to debate the issue

lazer-zxr

Lrimas wrote: »

I couldn't disagree more with Keepcalm & Lazer.

I am currently making money out of credit card companies through 0% cards.

And who is footing the bill? People who can't afford to.

So if I no longer get a few extra pounds a month (that I don't need) and someone else who is in serious trouble gets some help I won't complain.

I can't see how this bonus lead marketing is relevant to letting people off with what they owe other people. As an interest rate payer to credit card companies, I accepted the contract, and don't see a problem in how they spend the money they earn.

sourcrates

I think your misinterpreting the proposed changes here anyway.

All they are asking for is the freezing of interest to be made compulsory for people in financial trouble, ie on a DMP, instead of voluntery as it is now.

You must agree that if Janet can only afford £10 a month to pay her debt, yet the creditor is charging that in interest, Janet will never repay her debt, so continuing to charge her interest is pointless.

enthusiasticsaver

Having seen the misery caused by people being in serious debt I think this may be a step in the right direction. Even though I don't pay credit card interest I have counselled many debtors who either through circumstances or poor money management repay their debt many times over due to the high interest charged by some credit card companies.

I don't accept they are getting off lightly as if they have got to that stage the interest they have already paid is extortionate. I think in many cases the minimum repayment on a credit card is much too low and encourages people to think that they are managing ok when in fact only paying the minimum payment can sometimes mean the debt is never repaid. I think payday loans with extortionate interest rates should be outlawed and people in debt difficulties be encouraged to join a credit union so they have access to cheaper funds in an emergency. An upper limit on interest paid would be the ideal but I accept that this is never going to happen.

Budgeting and money management should also be taught in schools as I have noticed parents in financial difficulties usually lack the skills to teach their children how to cope with personal finance once they are adults. We taught our daughters but not everyone is in a position to do that.

lazer-zxr

sourcrates wrote: »

I think your misinterpreting the proposed changes here anyway.

All they are asking for is the freezing of interest to be made compulsory for people in financial trouble, ie on a DMP, instead of voluntery as it is now.

You must agree that if Janet can only afford £10 a month to pay her debt, yet the creditor is charging that in interest, Janet will never repay her debt, so continuing to charge her interest is pointless.

Yes, agreed SCrates, on my interpretation and the scenario. Though I would argue there is always a way to reduce your costs, and increase income going forward. Janet could afford it if she walked instead of got the bus, or applied for one of the great employment opportunities I am interviewing for at the moment.

StopIt

lazer-zxr wrote: »

Yes, agreed SCrates, on my interpretation and the scenario. Though I would argue there is always a way to reduce your costs, and increase income going forward. Janet could afford it if she walked instead of got the bus, or applied for one of the great employment opportunities I am interviewing for at the moment.

What if costs increased due to illness? Or income was stopped through no fault of the debtor?


Not every situation is as simple as "Earn More, Spend Less" and just because you've managed to have your LBM and pay off your debt without the ordeal of defaults, DMP or worse, that is not going to work for everyone.


Again, you're arguing a very one size fits all approach and saying that this is bad because you personally don't need such support. Others will do.

lazer-zxr

StopIt wrote: »

What if costs increased due to illness? Or income was stopped through no fault of the debtor?

If your lifestyle and debt commitments require a certain level of income, maybe we should educate people of the need for a suitable insurance policy to protect against illness or redundancy. Surely this proactive approach is healthier than a reactive get out clause.

Having such insurances in place certainly gives me a little more confidence considering any upsets that may occur. I'm in debt, but if I become ill, or lose my job, I am insured to make sure my mortgage is paid and my debts are cleared.

Again, maybe I'm being narrow minded because it was my situation, and havnt had the exposure yourselves have had helping others in debt.

January2015

lazer-zxr wrote: »

If your lifestyle and debt commitments require a certain level of income, maybe we should educate people of the need for a suitable insurance policy to protect against illness or redundancy. Surely this proactive approach is healthier than a reactive get out clause.

Again, maybe I'm being narrow minded because it was my situation, and havnt had the exposure yourselves have had helping others in debt.

Insurance policies are not always worth the paper they are written on. I speak from personal experience here. We had one such policy for a secured loan and they refused to pay out when my OH was made redundant. He met all the critera when taking out the policy - had been in the job over 3 years. However, part of the requirement was to be actively seeking re-employment and the insurance deemed he was not doing this. This was because he could not afford to take a job at ridiculously low pay. He needed something with a pay at level which would enable us to afford the repayments we had taken on based on our income at the time. It was because he did not apply for low paid jobs (evidenced by the job centre!) they refused to pay out. Long story short, we had to take legal advice and it almost got to court before the insurance company gave in and paid out. This took almost two years - during which time we almost lost our home (would have done had it not been for a wonderful set of parents who bailed us out).

I realise insurances have come on since mis-selling scandals but it's wrong to assume they are the answer to all the problems created by credit and resulting debt problems for some families. Sometimes such policies are more problem than they are worth (as the scale of the PPI scandal evidences).

StopIt

lazer-zxr wrote: »

If your lifestyle and debt commitments require a certain level of income, maybe we should educate people of the need for a suitable insurance policy to protect against illness or redundancy. Surely this proactive approach is healthier than a reactive get out clause.

Having such insurances in place certainly gives me a little more confidence considering any upsets that may occur. I'm in debt, but if I become ill, or lose my job, I am insured to make sure my mortgage is paid and my debts are cleared.

Again, maybe I'm being narrow minded because it was my situation, and havnt had the exposure yourselves have had helping others in debt.

I suggest you talk to a debt charity and try your line of reasoning. You'd get that reality isn't as idealistic as you want it to be and the debtors that they deal with generally require help and sympathy, not contempt.


You sorted your debts, that's great. I personally am debt free and intend to stay that way. I will not judge others however and tell them that their circumstances can be fixed by just "bucking up" along with glib comments that cast aspersions on their lives.


As for insurance? Sure, I use insurance products as needed but they don't cover everything. For those in precarious financial positions that wont help much, along with the fact that as the PPI scandal has shown, these products seem to be more there to pad financial institutions profits than provide protection to their clients.