The A4e blog: Isn't it time we did something about high cost lending

Last week the House of Commons rejected the idea of an amendment to the Finance Bill. This would have included with the Bill a review of high cost lending. This is a very real problem. In my view, one of the reasons the political debate often fails to make progress on debt issues and access to affordable and appropriate financial products for low income consumers is that the challenging issues are treated in isolation.... read more. 

Apprentice star's secret debts revealed
Wednesday 13th July 2011

Threatening debt management company loses licence
Tuesday 5th July 2011

Men Behaving Badly star in £1m IVA
Wednesday 22nd June 2011

Repossession hotspots revealed
Wednesday 22nd June 2011

FSA breakthrough in the fight against boiler room fraud
Wednesday 15th June 2011

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Neil Morrissey speaks out about debt problems

The British TV actor Neil Morrissey has spoken out to the press this week about the financial pressure he found himself under when his business collapsed. At one point, the former Men Behaving Badly star was believed to have debt problems totalling £2.5 million.

Speaking to the Daily Mirror, Morrissey explained how the hotel and pub business he had built up over the last decade had failed and how he was left with a hefty pile of debts to pay. He said:

“At one point it was so bad, I could have lost the shoes I was standing up in, but rather than go bankrupt, I decided to step up and try to pay it back.

“I did have days with a sick ­feeling in the pit of my stomach and I thought. ‘when will this end?’

“But everyone has those ­feelings at one time or another. I just had to pick myself up and get on with it. I had to sit down with the creditors and have a realistic chat about what I could afford to repay.”

Morrissey was advised by debt help experts to consider an IVA (individual voluntary arrangement). He is currently halfway through his IVA plan, which will see him pay back more than £1 million of his debt management problems.

As well as acknowledging the support of his long-term girlfriend Emma Killick in helping him through his cash crisis, Morrissey has also taken on more work recently. He has returned to TV in the BBC’s Waterloo road, and has even undertaken a regional theatre tour, all to help him reach his goal of being totally debt-free in 18 months.

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What You Need To Know When Thinking About Bankruptcy

If you are in serious personal debt, bankruptcy can protect you from the creditors you owe money to whilst allowing you have a fresh start. However, it is important to acknowledge the seriousness of bankruptcy as well as the significant consequences that follow it before considering it as a solution as in many cases this should be the last resort.

When filing for bankruptcy a Trustee is appointed by the court to control any of the assets you have which the Trustee may consider being non-essential.  Consequently these assets are then sold off and the money raised is used to pay your creditors. You will be entitled to keep your reasonable household effects and a modest vehicle if you can prove the need. Some examples of non-essential assets which the Trustee may sell include expensive jewellery, expensive/secondary cars, shares and any other form of investment. Another item to consider is your home, if there is equity then it is highly likely that this will be realised. Unless you can raise money from, for example, family or friends it is likely to be sold.

Bankruptcy also imposes many restrictions including removal of credit facilities, freezing of bank accounts and for certain professions and extreme cases the risk of censure and/or lose your job.

On most credit applications, lenders will often ask you for details of any previous bankruptcies, therefore after your period of bankruptcy ends you will also find it difficult to get credit or potentially a mortgage. It is also important to bear this in mind when applying for future employment as it can hinder your chances of getting another job.
The average cost of going bankrupt is £600 although this greatly depends on your circumstances. Typically the deposit of £450 will go towards the costs of administering your bankruptcy. This cost is payable in all cases, however the court fee of £150 may be in certain cases relieved  by the court if you are on Income Support.
In case that you are a married couple and you are both applying for bankruptcy then the fees are separate and each of you will have to pay your respective fees.
Before going into the bankruptcy domain you should look into other alternatives or seek debt advice. There are wide array of solutions that can work just as effectively as filing for bankruptcy but without the excess luggage solutions like IVA’s a tailored Debt Management Plan, re-mortgage or consolidation loan are all plausible and reachable alternatives that should be explored before making a decision.

Take Debt Advice Group’s Debt Test to find out what is the best solution for you.

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Study reveals students feel positive about debt problems

A study conducted by Ohio State University in America has yielded some surprising results relating to the way young people view their debt problems.

The research was conducted by Rachel Dwyer, who is an assistant professor of sociology at the Columbus-based university, along with colleagues Randy Hodson and Laura McCloud. It looked at the attitudes of 3,079 young adults from all parts of the country towards acquiring debt whilst at university.

Rather than feeling stressed or anxious because of the money they owed through student loan and credit card debt, the young people included in the study actually felt quite empowered by it. In fact, the larger the debts these people had, the greater their self-esteem was and the more they felt they had control over their lives.

Lead author Rachel Dwyer explained this surprising outcome, saying that debt could be a positive for young people as it gives them the financial support they need to achieve their goals, such as getting a degree.

She also pointed out that for some types of debt, such as credit card debt, students may feel positive about it only because it allows them to buy the non-essential things they want or need, without the need to delay gratification by having to save up.

Dwyer said: “We thought educational debt might be seen as a positive because it is an investment in their future, while credit card debt could be viewed more negatively.

“Surprisingly, though, we found that both kinds of debt had positive effects for young people. It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.

“Some young people may be using credit card debt to help finance their college education – for items like textbooks – which is why they may see it as a positive. But there is no way to know that from the data.

“Obviously, they are probably using credit cards for multiple purposes. Along with education spending, they could be using credit cards to pay for non-essential items.

“They may feel good about their debt only because it allows them to buy the things they want without having to delay gratification.”

However, this attitude to debt may also be a dangerous one, as Dwyer explains in the study:

“Young people seem to view debt mostly in just positive terms rather than as a potential burden.”

“By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs.  When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped.”

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Parents need to speak to their children about debt

Over the past few years the huge problems facing millions of households in the UK due to debt issues have become increasingly prevalent. The global financial crisis and recession has put the focus firmly on these debt problems, and with job losses and government cutbacks adding to the issues the various debt charities that are in operation in the UK are experiencing difficulties in keeping up with demand for debt related advice.

As a result of the issues that have stemmed from high personal debt levels across the UK many have called for the school curriculum to be changed so that personal finance related subjects are added. Officials believe that kids will benefit hugely by learning about money management and the problems that huge debt levels can create.

It has now been suggested that parents should also take responsibility for educating their children about personal finance matters whilst they are still young and likely to take in the information. For many it is too late by the time they leave college because they have already managed to get their hands on a credit card or other form of finance and started the debt ball rolling. Official want parents to tackle the issue sooner rather than later so that kids are able to make more informed financial choices as they get older.

It seems that parents are only too willing to do this because many are already trying to teach their kids about money, especially after seeing the huge problems debt has caused over recent years. As many as 78 percent of British parents are said to be keen to teach their kids about money issues.

One official said: “While parents themselves have made some changes to their financial and environmental behaviour since having children, they clearly feel an even stronger duty to pass these values on to their children.”

Tags: result, school, government, percent, behaviour

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Consumers warned about April tax shock

Wednesday 16th March 2011 The UK's working population could be in for a financial shock at the beginning of next month.All 29 million workers will be stunned by changes to tax and benefits, according to new reports.The charity Credit Action has identified 45 tax and benefit changes, which will take effect on April 6, in its latest report.Many households will be hundreds of pounds a year worse off, with better-off families being hit the hardest, according to figures calculated by the Institute for Fiscal Studies (IFS).The average loss to families will be £200 a year, which comes after changes in January which saw a rise in VAT, accounting for a total of £680.The biggest change for most people next month will be income tax. Calculations suggest 750,000 more people will pay tax at the higher rate of 40 per cent because the higher rate threshold has fallen from £43,875 to £42,475.Speaking to DMT, Credit Action’s Joanna Parsley said: "If you don't think about the changes until April, you might be in for a bit of a shock, as 45 major changes will come into play and these will affect everyone- there really is no way to avoid them. “Over a million people will be affected by the changes to tax, as according to the IFS, 750,000 people will become higher rate tax payers and 500,000 will stop paying income tax.” As far as National Insurance contributions are concerned, all 29 million employees in the UK will pay an extra 1 per cent, rising from 11 to 12 per cent.But higher earners are not exempt from rate increases.Until recently, employees had to earn over £844 a week to pay an additional rate for higher earners. However, from April 6, anyone earning more than £817 a week will pay, with the contribution rate doubling from one to two per cent.Taking both the tax and NI changes into account, the IFS estimates than anyone earning more than £35,000 a year will be worse off.In addition to tax and national insurance, there are changes to working and child tax credits. Child benefit will be frozen for three years, before being phased out for many families in 2012.Child tax credit will be reduced for some, with the baby element removed altogether.As if the tax and benefit changes were not difficult enough, millions of households are also being squeezed by inflation.The rise in VAT to 20 per cent in January has had a knock-on effect on inflation, hitting restaurant bills, new cars and alcoholic drinks.The price of petrol and diesel has risen dramatically, with the duty still due to rise by 2 per cent above inflation in the forthcoming budget.Joanna continued: “Combined with the changes to National Insurance it’s vital that we all check our payslips closely to see how the changes have impacted on our take home pay.“Although not all of the 45 changes will have a detrimental impact, changes to tax and welfare benefits coupled with rising energy and food prices, and fears over potential interest rate rises and further job losses, mean that household budgets in 2011 will continue to be squeezed.Joanna had some words of warning for those concerned about the changes.“It is vital that with under a month to go until these changes take effect everyone looks to revisit their finances and get them in order. Budgeting is key and the easy to use interactive Credit Action Budget Builder allows everyone to budget simply and easily,” she said.On a positive note, half a million people will be taken out of the tax bracket altogether. That is because the amount anyone is allowed to earn before paying tax rises from £6,475 to £7,475.
Manchester debt firm is liquidated owing creditors over £2.2m
Wednesday 11th August 2010

Bankrupt football legend probed by police over loan fraud
Monday 2nd August 2010

Mortgage broker ordered to repay £1.5m of client money used to pay off debts
Wednesday 14th July 2010

Barclays lifts lid on banking write-offs
Wednesday 20th February 2008

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Insolvency Service Warns consumers about wedding costs

by Nazma Noor on February 23rd, 2011

The Insolvency Service has recently issued a warning to couples planning their weddings this year – ensure that wedding suppliers are financially stable.

Weddings can be costly and if you’re on a tight budget the last thing you need is one of your wedding suppliers disappearing with your deposit.

A recent example of this happening is Anouska Antonia Semp, the 35 year-old former director of Avorio, a Sheffield-based bridalwear retail company. On 25 January 2011, she was declared bankrupt at Barnsley County Court.

Similarly, another bridal wear shop in Peterborough, Perfections, had one of their business partners file for bankruptcy this year. The landlord of the premises they rented sealed the doors and withheld stock in lieu of outstanding rent payments. As part of the initial investigation by the local Official Receiver(the government officer responsible for investigating financial failure) it was found that the shop had taken more than 80 deposits of around £300 each on wedding dresses. The brides, being unsecured creditors, are now unlikely to receive the wedding dresses they ordered.

It’s not just bridalwear shops you need to be wary of, in August 2010 Peter Gelardi and Pepita Diamand, directors of Wrapit PLC, a failed wedding gift company, were disqualified from acting as company directors for a total of 15 years when an Insolvency Service investigation found they had continued to take payments from customers of at least £872,000 when they knew the company was insolvent. Wrapit’s accounts showed the company had never made a profit and when it collapsed in 2008 there were 72,000 undelivered wedding gifts for which the company owed over £4 million.

The Insolvency Service has advised anybody planning their wedding this year to make a few simple checks before paying deposits or entering into a contract with a wedding supplier or venue. Below are the checks and how you can make them:

You can check if a director is subject to a bankruptcy order or has been disqualified from the world of business, on the Insolvency Servuce website database here: Disqualified Directors Search.

Again, this can be checked online for free and more detailed information can be accessed at a charge of £1. You can check for this information on the Companies House website.

If you’re looking for some tips for planning a budget wedding, see the blog we wrote about this last year: Weddings and debt, two things that always go hand in hand? and if you’re in an IVA and want to find out how getting married will affect your arrangement, read our blog about this here: Marriage, Divorce and Debts.

Do you have any tips for planning a wedding, whether they be about how to save or how to protect yourself from financially unstable suppliers? Leave a comment below and share your views now!

By Nazma Noor and is filed under Managing Your Money.
Tagged with: debt, insolvency, shopping, weddings.
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Posted in: about,consumers,costs,Insolvency,service,warns,wedding

Ten million Britons have nothing good to say about their bank

Two out of every five consumers are dissatisfied or indifferent towards their current bank, according to a study by the “ethical and sustainable” Triodos Bank.

The research showed that ten million bank customers cannot find a single reason to recommend their bank to others.

Customer service was the main reason for people’s dissatisfaction with 38% of those surveyed saying they would not recommend their bank after poor experiences.

Around 29% of the 2,000 adults questions claimed they were unhappy because their bank does not treat them as an individual.

Only 6% of customers picked their bank based on recommendations or its reputation for good customer service. Almost one in five admitting that they chose the bank nearest to where they lived or worked while 195 went for one with a large number of branches.

More than one in ten still used the bank account their parents set up for them.

Over a third of those questioned said it is important to them that a bank places importance on issues such as the environment, human rights and sustainability.

Huw Davies, head of personal banking at Triodos, said: “The general public is feeling let down and disillusioned with the banking sector so it is not surprising that this many people struggle to find a reason to recommend their bank, and that there appears to be such high levels of dissatisfaction. With so many Brits feeling this way about the banks at the moment, we’d like to challenge people to turn this dissatisfaction into action.”

Some 37% said that they felt resentful towards their bank as a consequence of large staff bonuses and excessive profits. The survey was published after the chancellor George Osborne was accused of going easy on the banking sector and failing to introduce tighter regulation after the financial crisis. It was revealed yesterday that city funding to the Conservative party has doubled since David Cameron became leader.

The chancellor sought to dampen anti-bank sentiment when announcing levies on the sector earlier in the week: “The anger at the terrible mistakes of the banking industry, and the failure of those who regulated it, will long remain – and rightly so. But let us as a country confront this hard truth. Anger and retribution will not bring one percentage point of economic growth or create one single new job.

“The anger will remain. And we must never make the same mistakes again. But Britain needs to move from retribution to recovery.”

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40 per cent of over 60 year olds concerned about energy bills

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We aim to reduce debt in the shortest possible time. We are members of DEMSA - (The Debt Managers Standards Association). We adhere to the code of conduct as set out by DEMSA which aims to protect the interests of both consumers and lenders. The DEMSA code of practice is approved under the OFT (Office of Fair Trading) Consumer Codes Approval Scheme (CCAS).

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