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Tackling your debts

Are your lenders treating you fairly?

Posted 23 September 2015 by Sarah Symons

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Find out how to contact your lenders when you are struggling with your payments and how to deal with feeling harassed over your debts.

If you find yourself ignoring your post and screening phone calls to try and avoid your lenders, then now might be the time to stop and take action. If you have problem debt, it’s really important to keep in contact with the firms that you owe money to, even if you can’t keep up with your payments. If you explain to them that you are in financial hardship, then they are obliged to give you time to try and resolve your financial problems.

 

Things can escalate if you don’t keep your lenders informed and you may find that they take you to court or send bailiffs to your home to recover the cost of your debt.

Priority and non-priority debts

If you have numerous debts, it can be hard to pin point exactly how much you owe, and who you should pay first. It’s a good idea to spend a bit of time going through your statements and any letters you’ve received from lenders asking for money. This will then give you a clear picture of how much you owe and who you owe it to.

 

Once you have this, you should always pay your priority debts first and tackle your non-priority debts second. Priority debts are those that have serious implications if you don’t pay. For instance, not paying your mortgage could lead to you losing your home. Similarly, not paying your gas and electricity bills could result in you getting cut off.

 

Non-priority debts have less serious implications and include things like payday loans, credit cards and personal loans.

Contacting your lenders

If you don’t feel able to talk to your lenders, then you could ask a debt expert or independent third-party to speak to them on your behalf. A debt expert, such as those at the Debt Advisory Centre, can also explain the different ways of dealing with your debts. They can talk you through the different debt solutions available, such as IVAs and DROs … for which fees may be payable.

 

When you first contact your lenders to explain that you are in financial hardship, you need to explain that you are willing to make payments but need more time to repay back what you owe. They may be willing to freeze the charges and interest you pay in the short term, which could bring you some relief. At least then you know that your debt shouldn’t be getting any bigger. They may also be willing to suspend any plans they had to take you to court over your debts.

 

If the person you speak to isn’t understanding, ask to speak to their manager. Lenders have a regulatory duty to treat you fairly … and also provide help and support to customers in financial difficulties. Make a record of every conversation, email or letter you have with your lenders, just in case you need to prove that you have spoken to them at a later date.

 

Your lenders may wish to see proof that you are in financial hardship, so you may need to show them copies of your bank statements or even draw up a budget to show them what you have coming in and going out. If you can’t afford your repayments at the moment, but expect to be able to once you start a new job, you may be required to produce a letter confirming your start date.

Working out your budget

In order to go back to your lenders with a figure they are likely to accept, you need to look at your budget. You need to figure out how much money you have left over once you have paid your expenses and your priority payments. This amount is known as your ‘available or disposable income.’

 

You need to make sure that you pay your non-priority lenders fairly by making pro-rata offers. This means that you need to pay the most to the creditor you have the biggest debt with. To do this you need to multiply each individual debt by your available income and then divide by the total amount to all your non-priority lenders. The amount you get is the amount you should offer to pay the lender.

 

Here’s an example:

 

Available income: £300

 

Credit card 1: £7,000 debt

Credit card 2: £4,000 debt

Personal loan: £5,000 debt

 

Total debt: £16,000

 

To figure out the amount you could afford to pay credit card 1 creditor, you would multiply £7000 by £300 and then divide by £16,000 = £135.25

 

To figure out the amount you could afford to pay credit card 2 creditor, you would multiply £4000 by £300 and then divide by £16,000 = £75

 

To figure out the amount you could afford to pay personal loan creditor, you would multiply £5000 by £300 and then divide by £16,000 = £93.75

 

When you make your offers to your lenders, you will need to provide details of your other debts and other firms you owe money too, so that they have a fuller understanding of your situation. They may agree to your payment plan for a set time, but may then require a review in case your financial situation has improved.

 

If they won’t agree to your proposal, or agree to your suggested payments but then change their mind, it might be a good idea to get professional advice. If this all sounds too complicated or more than you want to have to deal with, then don’t forget a debt management company could deal with them for you.

Feeling harassed?

Lenders (or their agents such as debt collectors that they appoint to act for them) must not behave in a way that you find harassing or aggressive manner. They should never make you feel humiliated, threatened or unable to cope. There are very strict rules about when they can contact you, for instance they can’t contact you late at night or call you up several times a day.

 

You should never feel stalked by a lender. They can’t contact you on social media or contact your family, friends or employer to discuss your debts. They can’t send you fake court letters or put pressure on you to borrow more in order to make your payments. Nor are they allowed to put you under pressure to sell your home or make payments larger than you can realistically afford.

 

Lenders may only use one debt collector at a time and they must inform you if they pass your debt over to a debt recovery agency. They can’t exaggerate the truth and claim that court action has been taken against you if it hasn’t, and they can’t claim that your house could be repossessed without you receiving a court order first.

 

They are, however, allowed to send you reminder letters and demands by post to ask you for payments and they can call you as long as it is at a reasonable time and they don’t call numerous times on the same day. Taking the matter to court isn’t classed as harassment.

 

If you feel you are being harassed by a firm that you have no history with or don’t recognise, then it may be that your original lender has passed your debt on to them. If this has happened then your original lender should have written to inform you … which is why it’s important to open your post so you’re aware of any changes.

Taking action

If you feel as though you are being harassed, then complain to your lender in the first instance, providing evidence to support your claim. If they have been ringing you several times a day, then you should have call log information that you can pass on as evidence. If someone else was present during a visit and can support you on your claims, then try to get witness statement from them. If contacting the lender by letter, then make sure that you have copies of the call log info/witness statements etc., just in case the letter gets lost in the post.

 

If the lender does not act or you aren’t happy with the response to your complaint, then you can also take your complaint to the Financial Ombudsman Service. If you have a complaint about a debt collection firm then contact its trade body - the Credit Services Association.

 

If the person you owe money to is a loan shark then visit the www.stoploansharks.direct.gov.uk website for help and advice. Loan Sharks are not operating legally, so don’t fall under the same legislation as other creditors.

by Sarah Symons

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.