Debt escape court cases put on hold

[Storm]

The next area that these companies will enter is the area of Unfair Relationships introduced in the 2006 Act -a couple of cases are going through the courts at the moment which could set some interesting precedents.

Another area that is evolving for these companies is the question of "Secret Commissions".

[MelanieGiles]

What does that mean Storm? I have not come across either of these terms before.

[Storm]

"Secret Commissions" relates to the monies paid by the lender to the broker or for example car dealer that were not disclosed to the customer at the time of the loan and which would have materially effected a consumers decision to take a loan - for example on a 5 year car loan for £10k it would not be unusual for the broker to have earned 10-15% of the loan in commission without the consumer being aware. While the capital sum would still have been £10k the interest rate charged would be inflated to recover the secret commission payment over the term of the loan.

A couple of cases are going through at the moment that this is unreasonable and if the consumer had been made aware of the secret or hidden commission they would not have entered into the agreement.

Unfair Relationships in essence replaced the old extortionate credit bargains provisions. http://www.oft.gov.uk/advice_and_resour ... 06/unfair/

The area being tested is the way in which the lender has exercised or enforced its rights under the credit agreement or a related agreement.

[MelanieGiles]

Thanks Storm - I had not realised that interest rates were actually inflated to cover brokers commission. That is very interesting, and I certaintly would have more sympathy towards that sort of challenge than the Unfair Contracts ruling. You are right, that this will be the next money spinner for claims firms.

[Adam Davies]

Hi
Think it would be true to say that some car deals are agreed because the dealer has factored in the commission that he/she will receive from the finanace, making the price or trade in value different[ cheaper price or higher trade in value] compared to a cash only deal.
Difficult one but I guess that the market will move towards mirroring the mortgage/insurance industry where payments are disclosed.
Regards

[cazlizzy]

I would agree with most that has been posted here and the whole idea of what may be called debt avoidance, is I feel just one aspect of the erosion of a very fundamental foundation stone that runs across a whole range of issues, that of responsibility for our actions. Just look at the rise in the have you had an accident in the last five yrs brigade.
I would never say that there are not genuine causes for complain and restitution, Storm has highlighted some in this scenario, and of course some very serious situations regarding health and safety have been addressed in others but there is a growing and for me, alarming growth in what I would read as responsibility avoidance. The concept of our actions having consequences that we have to take at least some responsibility for seems lost at times.

The real concern of course, is the huge growth in companies willing to make profit from promoting what ultimately results in an attitude amongst a growing number,that accidents don't happen anymore, there must be someone we can blame, or in the case of finances,a loophole we can take advantage of. When the bottom line is we all mess up at times, and while we can be mislead or make bad choices in times of vulnerability, ultimately, we have to take the consequences.
If we are lucky, we find a place like this and get the best advice to deal with it, and that may include information that shows we have a claim against another for shared responsibility. My gripe is not that these options should not be there, just that they should not be the starting point.

Ok, rant over, and my disclaimer is that this is a general rant and not meant to be aimed at anyone, I hope no one takes it personally or takes offense at my lat night ramblings.[:)]

[MelanieGiles]

That is a brilliant post Caz, and best sums up what most of us actually think about that growing industry.

[Skippy]

Can I also add that my original posts were in no way condoning debt avoidance companies, or the people who use them - I think anyone who has read my previous posts on the subject will know that!

My main fear is that in the past some people who are desperate and didn't know what to do about their debts might have been seduced by the websites and promises - I'm sure that these companies present it as a legitimate way of dealing with debts.

There has been so much bad publicity about these companies now that anyone using them is purely trying to avoid their responsibilities and get out of paying what they owe.

Like Cazlizzy I'm not directing this post at anyone, it's just my feelings on the subject.

[kallis3]

I still think that there are people who will not have seen any bad publicity, won't have found this forum and think it is the answer to their prayers.

The desperate, whilst I don't in anyway condone it, will see it as a way to get out of the black hole they are in.

The others are just irresponsible and want to get out of paying and think this is the best thing since sliced bread.

It's about time the loophole was closed and people made to pay back the money they borrowed.

[Storm]

It can't be closed without repeal of the Consumer Credit Act - the latest ammendments to the Act make it so that courts have discretion on the remedy rather than rendering the agreement unenforceable but you have 20 years of agreements out there.

[shelli 832]

brilliant thread, I would say one thing if I may, If it is found these companys broke the law and the contracts is null and void, I agree that you borrowed it so you should pay it back, but a vast majority of detb is the subiquent charges added to the original amount borrowed, So if they have broken the law the same as we have by not paying our debt, should'nt the orignal amount be the only thing left outstanding,
Also what is a reasonable wage to pay and IP and support staff, £175 an hour, £75 an hour, that is hardly reasonable, My ip has charged £13,500 for a iva with one veriation included, it that not proofiting from these vulnerable debters. I dont know what is.
i.e A Firend of mines son owed a bank £120 overdraft when he was made redundant last year, he had no way of reduceing that overdraft so they withdrew it, each month form then til now they charge him £75 a month in charges for being overdrawn without autherization, being overdrawn, failer to pay arears. they even at one point increased his overdraft to cover the debt, then the following month took it back just to add more charges.then took all his JSA leaving him nothing to live on,is that helping the volnerable.
The lad owes £120 what he borrowed not over £800 which they have caused through exaggerated charges. The courts should rule on all of the above and stop money grabbing thiefs from operating at all. which is worse a loan shark or a legal loan shark, a loan shark will brake your arm so you can still work to pay him, a legal loan shark will fix you for a minimum of 6 years and will make sure everyone knows so they want lend to you ever again.

to close I will pay back all that they claim I owe and the ip super charges because I can sleep at night because I am honest, A lot out there should have nightmares while claiming to be legal. The banks owe billions which they will right off for themselves, I dont in total about £12,000 i borrowed. you can bet your bottom dollar thats not what my IVA is worth.

[MelanieGiles]

I think that you make a very good argument shelli - for the interest and charges to be wiped off if the contract is deemed unforceable, but we will have to wait until the Court's rule and then see where this all goes.

With regard to your IP's charge out rates, these are now largely irrelevant in the IVA marketplace as it is more normal for fees to be either fixed or based on a percentage of realisations. The fees that have been paid to your IP would have had to have been agreed by you in advance, and also your creditors. But I agree that £13,500 does seem pretty high. If you are not paying your creditors back in full, then it is the creditors who are actually bearing those costs.

[Adam Davies]

Hi
Yes unreasonable bank charges etc etc are a genuine reason to fight your corner, that in my eyes is not debt avoidance.
IP fees have in the past been far to high, many times because the fees have been charged on a time cost basis. Creditors have put a stop to this and fees are now reasonable, in fact in some cases I am sure that the IP will actually make a loss, due to low disposible income cases or cases not being accepted.
Regards

[plasticdaft]

I cant see many Ips making a loss Andy,given that they can select who they should put forward into an IVA. That and the fact they get their fees early on means that should IVA's fail into the 3rd of 4 th year the IP has already taken their pay and the creditors lose out.Win win for Ips as far as I can see.

As for debt avoidance, remember that some people are desperate and if offered a way out will grab it. If you told someone that they could wipe out their debts by chopping off 3 fingers the response would be "which ones do you want??"

[MelanieGiles]

I have never charged on a time cost basis for voluntary arrangement work. Some IPs were charging far too much, and have spoilt it for the rest of us hardworking practitioners who are now struggling in some cases on very limited budgets, where the IVA protocol expects us to do more work.

IPs do not get their fees early on! They get them at the same time that monies are distributed to creditors in the vast majority of cases.