Bad Debts And Bankruptcy Reach Record Level

March 27th, 2008 IVA Information Administrator

The number of people unable to meet debt repayments reached record levels in the second three months of this year, as more than 26,000 people were declared insolvent, official figures showed today.

What Are The Advantages Of An IVA Over Bankruptcy? - Click Here For A Video Clip Answer

The figure marked a 10% increase on the previous three months and a 66% increase on the same period last year. Analysts suggest the UK's £1 trillion combined debt could mean the problem will continue to grow.

At the end of a week that has seen all the major banks report an increase in bad debts, the government's Insolvency Service said 14,915 people were declared bankrupt in the second quarter of 2006. This was a 3.3% decrease on the figure for January-March this year, but a 32.5% increase on the number in April-June last year.

Meanwhile 11,105 people entered into individual voluntary arrangements (IVAs) with their creditors in the same period, 35% more than in the first quarter of 2006 and up 153.2% on the same period last year.

IVAs are an alternative to bankruptcy and allow a borrower to repay part of a loan to their creditor while the remainder is written off. They have grown in popularity as awareness of them has increased.

Separate figures from the Council of Mortgage Lenders (CML) showed the number of borrowers unable to meet their mortgage repayments was also increasing, with a rise in the number of homes repossessed in the first half of this year.

The CML said 8,140 properties had been possessed by lenders, a marked increase on the 5,690 possessed in the second half of last year and the highest figure since the first half of 2001.

The number of borrowers who were more than 12 months in arrears on their mortgage also rose, to 15,070 from 14,380 in the second half of 2005 and 12,580 in the same period last year.

However, there was a fall in the number of mortgages that were three to six months in arrears, and the number that were six to 12 month behind in payments levelled off.

The CML said payment difficulties had been driven by interest-rate rises between autumn 2003 and summer 2004.

Yesterday's base-rate rise would add to payment difficulties for some borrowers, it said. However, the effect should be limited as more people now have fixed-rate mortgages which shield them from any change.

The CML's director general, Michael Coogan, said the organisation was working with the government to see how more borrowers could reduce their risks by taking out long-term fixed-rate deals.

He added: "Repossessions are up, but remain historically low. Arrears have been stabilising, though the latest interest-rate rise may have a modest effect over time. But we continue to expect repossessions to run at levels of around 15,000 a year between 2006 and 2008, well below their long-run trend."

The Conservative's director of Policy, Oliver Letwin, said the rising number of insolvencies was evidence that the economy was "built on borrowed time".

Mr Letwin said: "As the economy fails to live up to Gordon Brown's expectations, the number of bankruptcies is rising faster and faster.

"There is a personal tragedy behind each of these insolvencies and this shows that many families are feeling the pressure of rising interest rates and rising fuel bills. Gordon Brown is doing nothing to help these families with more and more stealth taxes and ever increasing council tax."

Howard Archer, chief UK economist at consultancy Global Insight, agreed that it was likely figures for insolvencies and repossessions would continue to rise.

"With unemployment continuing to rise, utility bills soaring, many home owners stretched to the maximum and debt bills at record high levels, it seems highly likely that individual insolvencies and mortgage repossessions will climb markedly further over the coming months," he said.

"This danger has been magnified by the Bank of England raising interest rates this week."

KPMG's director of personal insolvency, Mark Sands, predicted the number of personal insolvencies in 2006 could reach 100,000.

"The increase in the number of people entering IVAs is causing concern," he said. "With these record levels courts have never been busier - we calculate that someone is entering insolvency every minute of the court's working day."

Changes to the law introduced in April 2004 mean that bankrupts are discharged after one year instead of three, which may be behind some of the increase.

Wider marketing of IVAs and bankruptcy by debt advice services, as well as increased publicity for agencies such as the Consumer Credit Counselling Service, have also made people who are struggling with debt more aware of their options.

The Guardian

August 5th, 2006

http://myvesta.org.uk 

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Trust Deeds - Online Video Resource Now Available

March 27th, 2008 IVA Information Administrator

Myvesta UK, the Financial Crisis Centre has now launched a new online video resource for Scottish consumers and debt advisor. The Protected Trust Deed video series answers many of the more common questions asked about Protected Trust Deeds in video format an features Maureen Leslie, a Senior scottish Insolvency Practitioner. The video clips can be accessed via the link below:

Protected Trust Deed Video Series - Click Here

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Changes To Banking Code To Encourage Responsible Lending

March 27th, 2008 IVA Information Administrator

Adaptations to the Banking Code could give extra security to consumers borrowing from banks, building societies and credit card companies, according to the Banking Code Standards Board (BCSB). New guidance on the code covers consolidation loans, joint income borrowing and a general addition of consumer information on the borrowing process. Subscribers have been told to take more care when providing consolidation loans to those with perceived financial difficulties and lenders should assess the purpose of the borrowing in relation to the period of repayment. Another change includes granting loans in joint names if two incomes have been considered in the repayment process. Ian Mullen, chief executive of the British Bankers' Association, said: "One of the key attributes of the Banking Code guidance is its ability to be adapted to reflect new developments in the market place. "The introduction of the new guidance is a prime example of this in action and formalises good practices that are already widely employed by the industry." Seymour Fortescue, chief executive of the BCSB, added that its recommendations should "encourage responsible lending". He also stated that due to the new guidance, borrowers should have "fewer problems" and banks should have "lower bad debt". The Financial Services Authority (FSA) said earlier this week that young people in particular need to assess their financial situations. As a result, the FSA has begun an initiative to improve the public's financial awareness.

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Not All Debt Management Organisations Are Created Equal

March 27th, 2008 IVA Information Administrator

"Not all debt management organisations, be they charitable or commercial, offer the same level or range of services. Most will not actually intervene on behalf of consumers with secured or priority debts such as mortgages or utility bills. Indeed, the majority of 'debt help' organisations simply don't offer a debt management service that will include secured or priority debts," Mr Rhode said. "Organisations, be they commercial or charitable, that offer debt management services should be more transparent to consumers about exactly what type of debts they are willing to take on board as part of a debt management plan."

Mr Rhode said that some debt assistance organisations turn individuals away who don't meet their requirements.

"Many consumers that need help with more complicated priority debt issues are effectively 'fobbed off' with a self-help pack by supposedly helpful groups if the debt situation involves difficult, time consuming priority debt work or if the majority of a person's creditors are not unsecured lenders," Mr Rhode said. "At Myvesta we don't think that approach is reasonable and we certainly do not discriminate about the types of debts we will assist consumers with."

According to Mr Rhode, consumers often solely choose a debt management organisation based on the issue of fees.

"Consumers would be mistaken to select one organisation over another simply because one claims to offer services for 'free'. The offering of free services alone is not an indication of the quality of service on offer or the type of debt help and intervention that a particular organisation is actually willing to provide. Debt is debt, regardless of whether the debt is unsecured debt or not. Organisations offering 'free' debt help should intervene with all types of debt problems."

"At Myvesta we offer a not-for-profit hybrid approach including free intervention services for those individuals that cannot afford to make fee contributions for debt help and intervention and fee-based programmes to those individuals that can. This is fairer, more transparent and allows us to be completely independent from creditor influence."

Mr Rhode said, "Having learned from our many years of assisting people in the United States we understand the fundamentally flawed nature of the 'free debt management plan' argument. In the US, debt counselling organisations that used to be very vocal about offering services for free have 'egg on their faces' because they now all charge fees to remain in existence. As American credit card lenders began to reduce funding to these organisations and also tie their funding contributions to the level of collection performance, those US agencies had to start charging fees to consumers to stay in business. Their claims to be independent from creditor influence have also been shredded. As a result, their focus moved away from assisting consumers to pleasing creditors and they were basically turned into collection agencies for the creditors. We don't want to see that happen in the UK."

With debt levels reaching historic highs in the UK, Mr Rhode recommends reaching out for assistance at the earliest moment and doing some research to find the right organisation to help resolve your situation.

"If you've waited until you're thirty minutes from bankruptcy to seek help, you've lost out on many good options and solutions available," Mr Rhode said. "The key to finding a quality, inclusive solution for your debt issues is to search as early as possible for options and then realise that shopping around for the right organisation to help you just makes good sense."

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Banks Told To Tighten Up On Debt

March 27th, 2008 IVA Information Administrator

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SNP Blasts Banks

March 26th, 2008 IVA Information Administrator

The Scottish National Party (SNP) has launched a scathing attack on high street banks, calling them "legal loan sharks". The SNP claims banks are targeting the poor by setting up secondary firms and offering loans at increased interest rates, reports website icScotland. In a report released by the party's justice spokesman, the SNP say the banks are offering loans to people with bad credit and low incomes and are able to charge them inflated interest rates because they would not be able to get a loan elsewhere. It is reported that some lenders are forcing borrowers to pay up to seven times more interest than the typical rate. Personal debt in the UK currently stands at over £1 trillion.

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Bankruptcy Report Gives Advice and Details on Bankruptcy in UK

March 26th, 2008 IVA Information Administrator

In total, there were 67,580 bankruptcies filed in 2005 but those in the debt advice industry are warning that as many as 100,000 people could go bankrupt in 2006.

The Bankruptcy Report, therefore, has been produced to help people with serious debts to understand the details and processes involved in bankruptcy and, above all, avoid bankruptcy altogether.

The Bankruptcy Report also aims to dispel some of the myths that have developed around bankruptcy, such as it being an 'easy way out' of serious debt problems; on the contrary, bankruptcy carries with it serious risks to key assets as well as numerous financial restrictions, as detailed in the Report.

Another key aspect of the Bankruptcy Report is its detailing of alternatives to bankruptcy, such as the IVA, or Individual Voluntary Arrangement, whereby someone with debts over £15,000 can enter into an agreement with creditors to pay off a greatly reduced sum over a five-year period.

John Porter, a senior counsellor with The Debt Counsellors, says: "Everyone knows of the term 'bankruptcy' but many are unaware of the details. So the Bankruptcy Report provides vital information for anyone who wants or needs to find out more."

Porter adds: "Of course, the main message of the Report is that bankruptcy is best avoided, so there is information on how to do that by exploring the alternatives and getting professional advice on the problem."

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Bank Set To Pay Instant Interest

March 26th, 2008 IVA Information Administrator

The bank says it is the first in the UK to do this, in response to discontent among customers who think banks take too long to clear cheques.

But it is not giving customers instant access to the money being deposited.

The Office of Fair Trading will publish a report this summer into ways the banks can speed up the underlying three-day cheque clearing system.

A survey of 8,000 High Street bank customers has revealed what critics have always claimed - that customers are fed up with banks taking their cheques, but not crediting them with the money or the interest until after the three-day cycle for cheque clearing has been completed.

Lloyds TSB says its move will benefit customers depositing cheques worth up to £1,000 each.

The change will apply regardless of whether or not the customers are in the black or are running an overdraft.

Although the use of cheques has been declining rapidly in recent years, in the face of the more popular debit cards, the bank's customers last year deposited 55 million of them, worth £32bn.

Last year the banking industry body, the Association for Payment Clearing Services (APACS) reported that the number of cheques written in the UK halved between 1990 and 2004.

Of these only 19% were used in shops while 13% were used to settle credit card bills. A further 19% were for regular bills such as utilities and another 17% were paid to businesses, for example plumbers.

The Halifax bank has already predicted that on current trends cheques will become extinct within 20 years.

The banking industry has already agreed that by next year transfers of money which are triggered by instructions over the phone or internet will take place on the same day.

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New Bankruptcy Petition Fees Take Effect

March 26th, 2008 IVA Information Administrator

Read more at: http://myvesta.org.uk/blog/2006/04/new-bankruptcy-petition-fees-take.html.

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Gordon Brown Must Help Poor & Elderly Avoid Fuel Poverty

March 26th, 2008 IVA Information Administrator

 It claims two million elderly and disabled people in England now spend at least £1 out of every £10 on energy - making them "fuel poor". That's DOUBLE the number three years ago and follows a whopping £350 hike in average gas and electricity bills since 2003. The Fuel Poverty Action Group is urging the Chancellor to loosen the purse strings - or see the crisis spiral out of control. It says the government has no chance of eliminating fuel poverty among the vulnerable unless more cash flows into energy efficiency schemes. The group wants him to commit an extra 30 per cent over the next four years. In order to find the money, it's calling for a possible windfall tax on giants such as Scottish Power.

The Chancellor already draws an estimated £13billion from taxes on the oil and gas industry. Ministers are also being asked to consider new rules to force energy suppliers to offer cut-price tariffs for the needy. "The significant increase in the number of households in fuel poverty is a very big setback after years of progress," says action group chairman Peter Lehmann. The call comes days after npower hit six million customers with their second inflation-busting price hike since January. Bosses blamed a four-fold increase in wholesale energy costs in the past three years. But it pushed up average npower bills by another £114 a year - matching the increase in this year's basic state pension. Npower's hike followed record-breaking increases from British Gas and Powergen last month. As a consequence, one household is falling into fuel poverty every 44 seconds, uSwitch.com claims. More than two thirds of the estimated 3.5 million fuel poor across the UK as a whole are "vulnerable" - either drawing disability benefit, in retirement or a low-income family. FPAG warns that while the government and energy watchdog Ofgem have made progress in tackling the crisis, the reaction has not been "strong enough". Most low-income customers use prepayment meters and these are typically 10 per cent more expensive than direct debit payments. But FPAG argues that new, cheaper prepayment meters trialled in Northern Ireland could close the gap - meaning a saving of up to £60 a year on the average bill. The Chancellor committed an extra £45million to fuel efficiency schemes for pensioners - such as Warm Front - in his pre-Budget report last autumn. But FPAG claims the increase isn't enough to keep pace with rising bills. It adds that the huge hikes in wholesale energy costs show the market may not be working. And it argues that intervention, through rules to keep prices down or forcing companies to share savings from mergers or takeovers, should be looked at. "It's very important for government and Ofgem to strain every sinew to ensure that prices are as low as possible for low-income customers in a high-price environment," says Mr Lehmann. "There is now little time left and further resources are required to meet the 2010 fuel poverty target." FOR some of those struggling with ever-rising bills, the government's Warm Front scheme may help. It awards grants of up to £2,700 to make homes warmer and heat efficient. With this, you can receive insulation or heating improvements tailored to the needs of your home. Insulation improvements include loft insulation, draught-proofing and cavity wall insulation. Heating improvements include gas, electric or oil central heating and repairs to your existing system. You qualify for Warm Front if you receive one of a range of benefits and allowances, from Working Tax Credit to Disability Living Allowance. You can also claim if you're pregnant, have a child under 16 or you're aged over 60 when on income support, or housing benefit, council tax benefit, or draw an income-based jobseeker's allowance. For more information, call Eaga Partnership, Warm Front on 0800 316 6011. SAVE IT.. 1 Ensure your heating and hot water is only switched on when you need it. 2 Shelves above radiators push heat into the centre of the room rather than letting it collect on the ceiling. 3 Fix dripping taps quickly and turn hot water taps off properly. 4 Regular defrosting of fridges and freezers reduces running costs. 5 Put lids on saucepans and turn down the heat when the food starts to boil. 6 Close your curtains at dusk to keep heat from being lost through the windows.

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