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I have always been an ardent supporter of debt advice charities. But in light of two cases that I recently came across, I am beginning to have second thoughts.

In both cases, the debtors sought help from debt charities as they were eligible to propose a debt relief order.

The criteria for this includes having unsecured debts of under £15,000, assets below £300 and no more than £50 per month left after paying for normal living expenses.

The first case was that of Fred McCarthy, a respected 73-year-old ex-serviceman who was struggling to pay £8,500 of credit card debts.

Fred was told by his local Citizens Advice Bureau that he could propose a debt relief order. On its recommendation, he contacted various debt charities, which all told he wasn’t actually eligible because he had too much money left over each month.

Instead, he was told he needed to take out a debt management plan.

Thankfully, Fred finally managed to get a debt relief order, but it was not without a struggle.

The second case concerned Leon Fallas, who is 38, registered blind and has credit card debts of around £3,000. He experienced similar problems to Fred and I am now working with him to ensure he gets the debt relief order he so desperately needs.

Both these cases highlight the sometimes inconsistent and confusing guidance provided by different debt advisers, whether a charitable organisation or not.

Both men claim they were steered away from the debt relief order towards a debt management plan.

So what’s wrong? The fact that less than 12,000 debt relief orders have been proposed since their inception in April 2009 suggests a reluctance across the industry to process these.

I suspect the low £90 fee that is charged to the borrower to administer a debt relief order could be to blame. A debt firm earns the first £10 as their fee, with the remainder going to the Insolvency Service.

In contrast, debt management plans can earn a firm hundreds of pounds. So where is the incentive for a debt advice firm, charitable status or not, to propose a debt relief order instead of a debt management plan?

Most people believe that the debt charities are impartial, but are they really?

Your answer must surely depend on your interpretation of ‘impartial’. In my book it means: neutral; unbiased; independent; balanced; and (importantly) detached. 

The question is: can a firm funded by creditors and sponsored by creditors be impartial?

I believe that not-for-profit debt agencies serve an important purpose but I wonder how many other desperate and vulnerable people have experienced the same treatment and will continue to do so until this area is more closely controlled.

Read more: Are debt charities really impartial?

 

Lindsey was down for the weekend to catch up on University days with my daughter when  I overheard her say, “When I got my handbag stolen it cost me a fortune to get new car keys cut, strangely though I got my driving licence back, so it wasn’t that bad after all”. 

Alarm bells started ringing “So I take it that you are now a fully signed up member of CIFAS?” I quipped.  Lindsey replied, “Never heard of it, what on earth is it?”   

Oh dear I thought and, being an ex copper, went into police mode. The interrogation was brisk and I then spelled out exactly what my concerns were. 

You, me, Lindsey, we all need our identity to function in everyday life. In someone else’s hands however it can be worth a lot of money as fraudsters can use it  to fulfil their crime of impersonating you and me and obtain credit as well as services or products – in our name. 

My worry was that Lindsey had the bag stolen about two months ago and reported the matter to the police but at no time was she told about the risk of someone cloning her identity and taking out credit or services in her name in the future. Soon she may not be the only person using her personal details. 

Lindsey’s identity can be stolen and used in a variety of ways. One way is for the fraudster to impersonate Lindsey by taking out various forms of credit using her name including credit cards, personal loans and running up mobile phone bills of thousands of pounds. Eventually the fraudster will start to take over her current bank account by pretending to be her. 

All he or she will need, yes fraudsters are female as well, are a few details from a document with someone’s name and address. If the sender’s correspondence has a letter head, such as a bank’s, then that is a huge bonus as the fraudster no longer has to work out who you bank with. 

The fraudster can then use the information on such documents as bank statements, passports, driving licences. Remember, Lindsey’s driving licence was returned but was probably photo copied enabling the fraudster to apply for credit and purchase goods or services under the assumed identity of the victim. 

This practice is referred to as identity theft or identity fraud and is the fastest growing type of fraud in the UK and in 2007 alone the Credit Industry Fraud Avoidance System (CIFAS) identified and protected over 65,000 victims of identity theft. From January to September 2008 a total of 157,913 cases were identified and this prevented financial frauds to the value of over £606 million. 

So what exactly is CIFAS? In 1988 the major lenders in the UK consumer credit industry decided to form a non-profit making membership association solely dedicated to the prevention of financial crime. 

It was set up to detect and prevent fraud and so safeguard innocent people whose names, addresses or other details are used fraudulently by others in order to get credit. It does not provide a credit reference database - it provides a fraud prevention service but for an annual registration fee of £14.10 (including VAT) CIFAS offers a service to protect your name and personal details from being misused in this way. 

A CIFAS warning against your name means that CIFAS members will carry out further checks which may include seeking confirmation of identity to ensure they are not dealing with a fraudster. This ensures that the innocent victim does not find themselves being chased for money they do not owe. 

You should also consider registering the name of a deceased person, say a relative, if you believe that their identity could be used by a fraudster to obtain credit or other products and services in the future. 

There can sometimes be a problem if there is a registration against your name and you have not requested it. In this case you need to request its removal by the lender that flagged the registration in the first place. 

Remember though, if  you do go on the register it will not only make it difficult for a fraudster to get credit in your name but a lender will need to be more convinced of who you really are so be prepared for  more thorough checks when applying for credit or service. 

Lenders are becoming increasingly aware of the need to combat identity fraud, demonstrated by the requirement to show evidence of who you are to open a bank account, obtain credit cards, finance, loans & mortgages, to purchase goods / services and to claim benefits etc. I know it’s a hassle but it’s nothing compared to what you will experience if you get cloned! 

So be aware, if you have lost or had identification documents stolen, as in Lindsey’s case, then you are at risk! You, the consumer, will remain unaware that a fraudster is using your identity until you start receiving bills demanding payment for goods and services you know nothing about. You have been warned! 

You can find out more on the registration by visiting CIFAS or telephoning 0330 100 0180 (Mon-Fri 8am-8pm, 10am-1pm Sat).

 

Read more: Stolen handbag reveals more problems than first thought

 

Just a few days ago I was busy in the kitchen, when the phone rang. Picking it up I was genuinely shocked by the caller’s opening line: “This is a public announcement on behalf of the government.”

Crikey, I thought, what’s all this about - an outbreak of the plague?

The call went something like this: “We have been asked by the government to make you aware that, under legislation, you can have your debts written off. If you have unsecured debts below £15,000 then we can help you clear these in just one year.”

My anticipation soon changed to anger as I realised I had been duped into listening to an automated call. I had just become another victim of one of the 230,137 unsolicited telephone calls made to UK consumers daily by debt management or personal loan companies.

The call ended with the message: “If you want to get rid your debts for good then press three now.”

What would have happened had I followed through? Well I already know, as around eight months ago I experienced a similar call.

On that occasion, I took the opportunity of speaking to someone, intrigued to know how they were going to ‘magic’ my debts away.

This is what happened. I was connected to a smooth talking salesman who actually knew nothing about debt and was just filling out some on-screen boxes about me, such as how much I owed and whether I was a homeowner.

At no time did he mention how much it would cost me to wipe out my debts or what impact this might have on my credit rating.

As there was also no mention of how his wonderful promise would be fulfilled, I asked.

His reply was: “I will need to pass that query onto the firm that will be in contact, they know all about this”.

“Will this affect my credit rating?” I asked tentatively.

“The firm that calls you soon will deal with that,” he replied. 

It was obvious this was a lead generator; basically, a firm that gets a whiff of a possible debt job, gathers information about you over the phone and then sells you on as a lead to a debt management firm.

Wanting to know more about how this operation worked, I decided to agree to have someone call me back.

Eight months later and I have received around six calls, always from a different person (and once from an overseas call centre).

On this occasion, the caller asked for my address in order to send me some important information.

“Well, before I do that, can you tell me how you propose to write off my debts?” I asked.

As I receive no answer to this, I repeated in – and the caller, in turn, continued to ask for my address. This went on for several minutes until the caller chided me for being “awkward” and slammed the phone down.

What I learnt from this exercise was that the limited data I gave to the first caller had been bandied around to various call centres and lead generators - and is still being sold on.

I asked several of my friends if they would respond to this type of cold call if they had a debt issue, and was surprised by some of their answers.

The majority said they would consider it mainly because debt is such a taboo subject and they wouldn’t want their family or friends to know that they were seeking help.

If you are having problems repaying your lenders then there are a number of places you can go to for debt advice – click here for a list of free organisations.

Other ports of call can be a reputable debt management firm or a firm of insolvency practitioners – but get a recommendation first rather than take a stab in the phone book or using just any old firm you find on the internet.

You can put a stop to many of those unsolicited telephone calls by signing up to the Telephone Preference Service (TPS), which is free and simple to do online or telephone 0845 070 0707.

My wife asked me why I let them phone me and then saw the mischievous look on my face. Mrs Thomas’s last quip was you don’t need debt help; you need to see someone about your own issues!

Read more: Press 3 to wipe out your debts....

 

It was back in 1977 when I first encountered something akin to the present day store card. My brother was getting married and, as best man, I needed a suit. 

So off I trundled to Burtons and got my first ever suit. It was expensive, but the store said I could pay just £3 per month. I was only 20 and didn’t really understand the implication of what I had signed up to. In fact, at £3 per month, it would have taken me around five years to pay for just one suit.

Now, 33 years later, there are 11 million store cards in operation in the UK with outstanding balances around £2 billion.

Store cards are similar to credit cards, except that you can only use them in the specific store (or the group of stores) that issued it. While using them may entitle you to special discounts, interest rates tend to be much higher than for a typical credit card.

If used correctly – i.e. clearing the balance each time the bill comes in – store cards are a good way to save money off purchases.

You can get as much as a 20% discount off the day’s purchase, usually on the day you open the account.

If you apply for a store card, you could save more money by asking your family and friends if they need anything else as well. You then make the first big purchase on behalf of everyone, get the discount and then pay off the balance.

Next time, someone else from the group signs up and buys on behalf of you all. And so on and so forth.

Many store cards have special store cardholder evenings with special offers - a bit like an exclusive membership club. Some stores will even gift wrap the items you purchase.

However, many people don’t use store cards in the right way and end up paying heavily as a result.

Store cards are not cheap and it is not uncommon for some to attract interest rates above 25%. 

Meanwhile, some experts claim that applying for a store card can have an adverse affect on your credit rating – which could make it hard for you to get credit, such as a mortgage, in the future.

Finally, is it right that we can be sold ‘credit’ over the counter by a shop assistant? Are they fully qualified to talk about offering credit? 

My concern, which is echoed by the insolvency trade body R3, is that financially unqualified shop staff should be banned from selling commission-driven store cards.

This type of credit can have a devastating impact on consumers as it lures them with discounts and can potentially leave them with mounting and uncontrollable debt.

The next time you are offered a store card while making a purchase, ask: “Are you qualified to offer me credit and do you understand the repercussions if I was unable to clear the balance every month?”

You can expect some annoyed and evasive answers as you will be seen as a threat to their commission.

Perhaps now is the time to rebrand the store card. Maybe it should be called ‘in store debt card’ - not such a good marketing name I suppose, which why is I am just a debt counsellor rather than in public relations.

Read more: Think stores cards are an easy way to get a discount?

 

The government has at long last decided to review the workings of debt relief orders, the new, lower-cost option for people to avoid bankruptcy.

Introduced in April 2009, a debt relief order is a less stringent form of bankruptcy but still with the same restrictions as a normal bankrupt. They are designed for people with a certain amount of debt, little disposable income and few assets and are intended to place the least complicated debt discharge cases on a fast track through the court system with no personal appearance at court required.

See Debtwizard guide to Debt Relief Orders.

On paper, debt relief orders sound great and are just what we need to help consumers battle with their debts.

But are they really any good? Rather than detail the qualifying criteria it might be simpler if I identify those of us that won’t qualify for a debt relief order - surprise surprise, most of us.

First off, you will not qualify if you have unsecured borrowing in excess of £15,000 (which includes credit and store cards, personal loans and overdrafts) or if you have assets above £300.

You can work out the value of your assets by establishing the purchase cost and times it by between 5% and 10%. For example, a fish tank you bought for £300 would be valued around £15 to £30.

Now do this for all your possessions - I bet you get to past the £300 mark before you have even done the contents of one room.

And if your assets are £301 then forget the debt relief order.

Even if you qualify up to this point, if you own a vehicle with a market value of £1,000 or more, then you're excluded.

Next up we have the disposable income - this is the sum of money you have left after meeting your normal reasonable expenditure costs. If this is above £50 then, again, the debt relief order is out.

Now we move onto your home. If you own a home then you cannot take out a debt relief order – even if you are in negative equity (that is, the value of your mortgage debt is greater that the value of the property).

Now, on to pensions. If you have a pension pot worth in excess of £300, then you cannot propose a debt relief order. In contrast, in bankruptcy you can keep your pension and still make payments into it.

The government’s review will focus on the criteria for the value of pension pots.

Business minister Ian Lucas says: “Debt relief orders help people who would otherwise be trapped in poverty to get back on their feet. Following representations from independent money advisers, I’m proposing a common sense change to ensure that vulnerable people with a very small pension pot are treated fairly. The government will consult on this change shortly.”

Note the words “common sense change”. If there were any common sense being applied, the government would deal with the whole issue by:

* Increasing the assets amount to around £3,000
* Including homeowners that are in negative equity
* At least doubling the car amount to £2,000
* Increasing the disposable income level to £100

However, addressing these areas would probably push up the insolvency figures - so I shan’t hold my breath...

Read more: Government’s new debt solution isn’t working

 

I have just learnt that as from 6th April 2010 the fee you will have to pay to go bankrupt will jump a whopping 25%, from £360 to £450!  On top of this is  the court fee of £150, and  although there are exemptions for those on benefits it means that generally, the already  struggling consumer will soon need to find £600 just to go bankrupt.  

At a time when insolvencies are running at the highest level since records began back in 1960, this has just got to be total madness. Where is the caring Government that professes to help and support the consumer?  You have got to ask whether this hike in fee has been done deliberately to keep the bankruptcy numbers down and is a ploy to force consumers into other options such as long term debt repayment programmes (DMPs) which offer no debt relief and do not appear in the bankruptcy figures. 

With unemployment levels expected to climb again this year and more house repossessions likely, there will be an increasing need for some to be able to petition for bankruptcy. Ironically the fee prevents many from doing so. 

Take the case of Jo for example; diagnosed with cancer, no longer able to work and without an income her house was repossessed in 2008. This was sold for £25000 less than its true value and now the mortgage lender is pursuing her for the shortfall, interest and legal charges of around £30,000. 

With £9,000 on credit card debts and paying £60 pcm through a debt management plan, it will take her 13 years to clear her debt if the interest is frozen.  Jo is struggling to meet even this £60 pcm and is convinced that the underselling of her property has forced her into bankruptcy. 

Jo told me that in the past she has always supported friends when they had money worries not knowing that in the future it would happen to her. She said to me ‘I have no security, I'm such a home loving person it’s destroying me, I have no hope now’. 

Problem is, with no security and  no assets apart from an aging car which often takes what little money she has, she will struggle to find the fee to go bankrupt, and, having spent much time in helping her face up to the prospect of bankruptcy, I dread having to tell her about this latest increase. 

We need urgent decisive action to help clear the ‘log jam’ of individuals, like Jo, caught in the limbo of being unable to take effective action to deal with their debt situation. Instead of increasing the fee it should instead be reduced in order to enable more to take this course of action and help erase their misery and suffering. 

Any reduction in the fee would obviously have cost implications but it would demonstrate a positive commitment towards a vulnerable element of society and would be welcomed by the debt counselling profession.  

According to the Insolvency Service back in May 2009 a bankruptcy costs on average £1,715 to administer, part of which is met from current fee. The Insolvency Service told me that ‘If the Official Receiver’s deposit were to be waived in its entirety, all the costs of case administration would have to be met from other sources, in particular, the tax payer and creditor.’ 

My response was that that I did not agree as I am convinced that it is often the creditors’ lack of support, together with additional interest charges, that force an individual into bankruptcy in the first instance. If creditors were aware that they would have to bear some of the cost of administering a bankrupt’s estate then they may think twice. I also don’t believe tax payers will need to foot the bill of reduced fees because bankrupts actually do pay something back towards the cost of administering their case.  

All bankrupts are assessed to see if they can make any payments under an Income Payment Agreement (IPA) which is a legally binding written agreement between the bankrupt and the Official Receiver. The IPA will run for a period of 36 months, initial payments will cover the cost for the administration of the bankruptcy order, after which creditors receive a dividend of the surplus funds. If so ordered by the court to pay then this becomes an Income Payment Order (IPO). 

Between 2007 -2009, 41,170 IPAs and 204 IPOs were implemented and which do not account for the selling of any assets such as vehicles or homes that belonged to the bankrupt. So in fact the Government does actually make quite a lot of money from bankrupts! 

Even more money is made, subject to the timing of the petition, in a well hidden scheme whereby an individual going bankrupt and in receipt of an income, will receive a NT tax code and the tax is diverted to the Official Receiver towards the administration costs for up to 12 months. 

Another important point is that many consumers recover from bankruptcy and rejoin the ranks of tax and National Insurance payers and contribute to the income stream, so it is not all doom and gloom for the PM. 

So let’s cut to the chase; why is it so expensive to go bankrupt? When a consumer does not have the ability to repay their debts and cannot afford to enter into any type of repayment programme through lack of funds why is there not more support? 

The last debtor’s prison shut in 1869; come on guys, that’s 141 years ago, society, culture and attitudes have moved on. You don’t hear anyone harping on too much about Portsmouth Football club about to go into Administration with debts of 70 million!

Read more: Bankruptcy fee to leap a massive 25%; can it be justified? No, says Debtwizard.

 

Whilst quietly supping a pint of bitter in my local pub with a good mate of mine, he suddenly blurted out that he hadn’t slept in a week after receiving a letter from a firm of debt collectors, chasing him for a debt he had many years ago. I must admit he did look a bit knackered, and whilst us blokes don’t normally talk about such things, he knew that I knew a thing or two about debts and wanted some advice. 

The letter said that he had to pay £11,003.38p within 14 days or field agents would call at his home to discuss ways of paying the money back. What should he do? Ignore it and hope it would go away again or should he pick up the phone and talk to the Debt Collection Agency (DCA)? Hmmm. harassment, intimidation… that’s for another blog, let’s focus on this one. 

I asked what his Missus thought, silly question as I got the expected, ‘I daren’t tell her’. This was all before they met he said. ‘I don’t know what to do, we are struggling as it is, don’t need this’. 

I knew he has been married for over six years and a  further questioning established that the debt was in his name only, was on a personal loan he had many years ago and that about eight years ago he fell out of work for a year and had not paid or heard anything since. The solution then began to look quite simple as in this case the debt would have been ‘statute barred’ under the Limitations Act 1980 which applies to residents of England and Wales

Under the Act creditors/lenders are given a fixed period of time to chase their debtors/borrowers. The time scale mainly depends on the type of debt and can be extended at the courts discretion. The time limit begins when the named individuals on the agreement last admitted owing the money or made a payment. 

Should the creditor/lender fail to maintain contact with the debtor for a period of six years or more and no payment has been made, it is possible to claim that the outstanding debt is "Statute Barred" under the conditions of the Act. 

After I had explained to my good friend that the letter was likely to be a ‘fishing’ exercise by an opportunist debt collection agency and that they would not be able to pursue the debt through the courts he couldn’t have been more delighted and relieved. Whether he eventually told his wife about the issue I will never know! 

Thousands of people receive requests for payments on debts, mainly on credit cards and loans, from lenders and DCAs. Some demands are fair and reasonable but many are not with the firm demanding the money often having no legal basis to claim and therefore unable to take the borrower to court, even though threatening this in their communications. 

What is worrying is that many people actually respond to these letters because they do not know how to deal with them, feeling guilty or frightened of the implied threat of being taken to court. 

Read the letter carefully, break down the content, what do they mean, are they fishing, do they have anything at all but most of all don’t be panicked. 

Just because someone has written to you demanding money ‘or else’ does not mean you have to pay them. Weed out the chancers and opportunists that have no legal basis to pursue you for the alleged debt. One way to deal with a request for payment on an old debt is just to ignore it but if they persist do not acknowledge or admit the debt. 

You would do no harm in writing something similar to ‘before I can begin to understand the basis of your claim please furnish me with a breakdown of what sum is capital, interest and fees…. the date of the last payment that was made on the account…. under what authority are you writing… do you own the debt or are you an agent, if so who are you representing?  You know the stuff. I write this sort of letter a dozen or so times a year for my clients and have so far been 100% successful in ending things there and then. 

The key to all this is when was the last payment made on the account in question. If not within the last six years by any named person on the agreement (sole or joint names), and neither has acknowledged or made a payment in the past six years, then the debt is statute barred and the creditor/lender or agent cannot take the matter to court. 

There are, as always, exceptions to this and different rules apply in Scotland and in Northern Ireland, more on this can be found on the Debtwizard guide to dealing with old debts

I agree that we should always pay our debts, especially when we have the means to pay. However I do have an issue with lenders or DCAs that cannot get their acts together to ensure the debt is still legally recoverable through the courts as arguably they deserve to have the debt statute barred.

Rules are made to benefit both parties; lenders know these particular rules only too well; consumers now just need to wise up to their rights. 

We have a template letter for you and more information at the Debtwizard guide to dealing with old debts.

Read more: The pint of beer that saved one man £11,003.38p

 

With many home owners struggling to meet their mortgage repayments it is hardly surprising to see that repos are still high, 46,000 or so for 2009, according to the Council of Mortgage Lenders (CML). In fact I think the number, in reality, is even higher!

Although the statistics are collected correctly by the Council of Mortgage Lenders (CML) and the Ministry of Justice (MoJ) in my view they do not accurately reflect current market conditions and I believe the problem is far greater than it appears.

Looking  at the broader picture and I can  offer some very valid reasons why figures are nearer to those of the last big house recession back in 1991 when 76,100 homes were repossessed. Here are my thoughts;

No one has taken into account the number of homes being sold by families to private landlords, under 'Sale and Rent back’ (SAR) schemes, or flash sales. The Office of Fair Trading (OFT) said back in October 2008, ‘It is likely that there are upwards of 1,000 firms, together with an unknown number of non-professional landlords, who have conducted about 50,000 transactions to date’. 

Since that announcement some 16 months ago the SAR industry has gathered momentum leading to the intervention of the Financial Services Authority (FAS) and full regulation being implemented this July, rightly so in my opinion. 

Based on the OFT figures and on increasing consumer awareness of the SAR scheme I estimate that the number of homes sold under SAR in 2009 is nearer the 25,000 mark. 

Another damning factor is that the CML only collects the number of first charge holder repossessions. There are no records of how many second charge holders, usually secured loans that are repossessing homes. How many are there of these that the CML do not know about? 

What is more is that the introduction of the Mortgage Pre-action Protocol in 2008 could be a delaying factor in eventual repossession for some home owners.

The latest annual Moore Blatch 2010 repossessions report, reveals that 67% of mortgage lenders and repossession experts are predicting an increase in the number of repossessions in 2010.

Paul Walshe, Head of Lender Services, Moore Blatch, says: “The Council of Mortgage Lenders revised, and subsequently lowered their 2009 predictions for repossessions from 75,000 down to 48,000.

“However, much of this fall was due to the implementation of a government initiative to provide consistency in lenders’ approach to repossessions; the Pre Action Protocol, as it is known. This created a bottleneck which will start to clear in 2010”.

Read more: House repossessions - look though the smoke and mirrors

 

As the number of personal insolvencies reaches record levels, with consumers battling against unemployment and credit problems, I say the total number of insolvencies for last year in the UK should have been nearer the million mark.

Figures released by the Insolvency Service show that the number of individuals in England and Wales who went bankrupt or proposed an Individual Voluntary Arrangement, (IVA) during 2009 reached 134,142, a massive increase of 27,598, this equates to a rise of 25.9%. This is the highest number of insolvencies since the Service started collating records back in 1960. See insolvency figures since records began.

However, research by R3 has revealed that around 700,000 ‘hidden debtors’, are in long term debt management plans some of whom have no hope of ever paying their debts back in their lifetime and  are technically insolvent. They are instead, languishing in long term informal repayment programmes with no debt, or for many, no interest relief.

I think this is just the tip of the iceberg as too many people have debts that they have no realistic hope of repaying. Some try to offer an IVA to their creditors only for it to be rejected by a lender. There is also the issue of the cost for a person to go bankrupt, currently £510 or £360 if on certain benefits. I have many clients that just cannot afford to go bankrupt, are no longer paying their lenders, and the debt, pressure and stress is building everyday.

Also included in the figures are Debt Relief Orders, (DROs), which were introduced by the Government in April 2009. A DRO is designed to allow those with debts of less than £15,000 and minimal assets to write off their debts without entering into a full blown bankruptcy or having to go to Court. These are proving to only help a selected few and are totally ineffective in helping consumers because of the ridiculous and unreasonable qualifying procedure; still they work for some as 11,831 have been issued since their inception.

Insolvency involves an individual either going or being made bankrupt or successfully proposing an IVA, which is seen as a less stringent form of insolvency. An IVA allows a borrower to enter into a repayment programme, usually for 5 years, and interest and charges are frozen with the remaining debt written off upon completion of the arrangement.

Read more: 2009 Insolvency figures hide true level of unmanageable debt.

 

The Royal Bank of Scotland causes a right royal stink  

I was incensed to read today that RBS is to pay their staff bonuses in shares that can then be cashed in after just 12 weeks. Apparently this is their way of sidestepping Government policy on the 50% ‘share tax’. 

You and I own 84% of this previously insolvent bank and what voice do you have? None, so I will shout on your behalf. 

There is no way the bonuses should be paid in any shape or form. Instead the money should be added to the balance sheet so that the bank can start lending again to the firms and consumers that they so eagerly threw money at before they got in a mess. 

I often hear from commentators that the bonuses have to be paid to keep ‘key’ staff and that the present employees are irreplaceable. Their argument is that if ‘key’ RBS staff leave then the bank will flounder with a risk of it going under then there will be no bank and the public will lose their money. 

All the banks would argue that they don’t want to pay bonuses to anyone, they pay bonuses to retain good staff so they can remain profitable. 

I argue that you should replace the lot as there are plenty of young talented individuals out there looking for work and would be happy just to receive a decent wage in these troubled times and still do a pretty good job as well. 

There are only so many jobs around for these bankers; once the top slots are filled they will be grateful for anything. 

It is important to note that my disgust is not aimed at the other banks. Whilst I am still not happy with the bonuses they are paying, RBS is different because we control it and have kept it alive.  It’s not the staff’s fault the bank got in to trouble – it was management failings and a culture of greed. 

All this is really irritates me as the bank is lucky to still be in existence. Their business model over the past few years has been flawed evidenced by the fact that they were insolvent and rescued by us, the tax payer. 

It is arguable whether RBS should have been nationalised last year and even more so with the recent revelation that the Bank of England (BoE) bailed out RBS and HBOS with a secretive emergency loan of £61.6bn last autumn, apparently to prevent loss of confidence with the financial system. This was probably the best time to have gone for full nationalisation; we didn’t and now look at how the bank says thanks. 

If the consumer/tax payer had not rescued the banks then the board would not be in place nor would the so-called high fliers still have their jobs. RBS staff should be thankful they have work and a regular income which enables them to meet their monthly commitments such as mortgages (subsisised?), food on the table and heating bills, unlike many consumers.   

No-one is irreplaceable.  I feel we should have nationalised the bank and called it the ‘People’s Bank’. Then start in earnest in bringing normality back to those business and consumers that have been stuffed by RBS. 

Read more: The Royal Bank of Scotland causes a right royal stink

 

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