Thousands hit by hidden charges ~ Debt Managements and Consolidation

Wednesday 2nd March 2011

With inflation levels making everyday living more expensive, we should be paying more attention to the small print on our bills, not less.

Yet all too often, a lack of attention towards our direct debit payments and other bills, means that we miss hidden charges and end up in spiralling into financial difficulty. Although direct debit payments simplify the task of paying regular bills, they also mean hefty penalty charges if we happen to have insufficient funds in our account. Utility bills are a particularly troublesome source of direct debit dilemmas; if payments are missed or late, the consumer is at risk of getting billed the next month with ‘late payment charges’, inclusive of interest fees. Furthermore, if these payment issues become too regular, we are at risk of being cut off by the supplier and then facing a reconnection fee in order to restore the service. Beverley Budsworth, Managing Director of The Business Debt Advisor, said: “Arrears of utilities and council tax are a common theme we encounter with individuals in debt. There are savings to be made by paying by direct debit, however, this also means the utility suppliers are at liberty to vary your payments and this could mean that there any insufficient monies to cover the payments resulting in direct debit penalties which can be significant. “In these types of cases it is important to retain control, temporarily cancel the direct debit and pay the utility bills plus extra towards arrears by BACs (Banks Automated Clearing System) or debit card until order can be restored to the individual’s finances."Back in June 2010, a report was carried out which estimated that, on average, households were being charged £84 annually in hidden taxes on energy bills, due to mounting pressures to offset carbon emissions and combat climate change. These unpaid bills mount up, meaning that we incur additional fees as well as the initial direct debit payment. And in addition to depleting our household budget, these unpaid charges can find their way onto our credit files, giving us an adverse credit rating. Una Farrell, a spokesperson for the Consumer Credit Counselling Service, told The Observer: “People need to get to the bottom of their debts and regularly assess their financial products because not paying off these smaller amounts, as well as the larger ones, can affect their credit rating.”According to comparison site Uswitch.com an estimated 5.5m households are in energy debt, with the average debt being £132. A significant proportion of this debt is hidden when we move house.When we change our address, we are often more concerned with buying a new two piece suite than chasing up our finances. Consequently, direct debit payments that relate to our previous address continue unless the supplier is notified and the payment is cancelled or updated. Andrew Hagger, a spokesman for the comparison website Moneynet.co.uk told the Telegraph:“The unauthorized charges debited to your account could cost you up to £6 a day. The bank will write to the address it has on file, but as you’ve moved you wouldn’t know you were overdrawn.”And it seems that cancelling a credit card is not enough to escape mounting payments, as doing this simply leads the credit card company to issue additional administration fees. Beverley Budsworth, Managing Director of The Business Debt Advisor, added:“Budgeting is absolutely crucial to making sure that all priority debts including mortgage/rent, council tax and utilities plus any arrears are paid prior to unsecured debt i.e. credit cards and loans. It is much easier to negotiate payment plans with personal debt than it is with priority creditors.”
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