When personal data goes missing it’s just not good enough for a firm to simply write to customers saying “sorry, we have lost your personal data and here’s a website where you can learn about how you are at risk of identity fraud or theft if the data falls into the wrong hands. Read article Are consumers at risk as more Personal data goes missing?

This is it what Welcome Finance and Shopacheck have done following the loss of two tapes containing such data. If they have fallen into the wrong hands then this is a major concern as identity fraud is one of the fastest growing crimes in the UK, so what more should  they be doing about it?

I looked at the Shopacheck and the Welcome Finance websites today and there is nothing about the data loss so any new customer looking at the site will be unaware of their problems.

According to one Shopacheck customer who has been in contact with me, the lost data contains names, address and dates of birth, telephone numbers and payment records. It seems that she, like all Shopacheck customers, and I suspect those of Welcome Finance, are being referred to a website www.identitytheft.org.uk and my initial thought was, so far so good.  But then the website mentions quite a lot about fraudsters and how you can be targeted if you have been a bit relaxed with your data but it could do more to promote and explain better how the consumer can get increased protection if they sign up to CIFAS (Credit Industry Fraud Avoidance System) or a credit agency.

My informant also said that she had previously given Shopacheck her National Insurance number and in my book that’s more or less everything a fraudster needs to start cloning someone’s identity. We are not talking about a low number of consumers here - 1.4 million could be at risk!

In my view it would be better for these two firms, and any other organisation come to that which loses data, to be made to pay for a year’s subscription for each customer to CIFAS and to membership of one of the credit reference agencies that sends an alert if the credit file has been accessed.

So apart from having to post presumably 1.4 million second letters at a cost of £504,000 do these two firms have the money to pay for this, and should they? I say yes to the latter. A free helpline, on 0800 8406 563, has been set up for customer.

If you are worried about identity fraud, and I would be in this case, then see our simple do’s and don’ts to help protect yourself, which can be found here.

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It is just total madness to pay a mortgage or the rent using a credit card or other form of credit such as a payday loan, personal loan or overdraft.

I fully understand that people who have resorted to this are desperate, wanting to ward off the threat of repossession or eviction but in fact, if owned, they could be putting their home further at risk by doing so.

This is because any credit card provider, payday lender and bank can apply to the County Court to have their debt secured on the property of the borrower should he or she fail to make the payments.

Therefore, failing to pay your unsecured debt if you are a house owner could lead to your lender forcing you to sell your home so it can recover the money owed.

Everyone is affected

According to Shelter, millions of people have resorted to paying their mortgage and rent in fear of being repossessed or evicted from their property and we are not just talking about those on low incomes; this has also hit the middle classes and other more affluent households.

There are three government schemes that could help people who fall behind on their mortgage payments and you can find out more about these on the DirectGov website and from organisations such as Shelter and Citizens Advice.

If you are behind with your rent

If your rent is not paid, the money owed is called 'rent arrears'. Rent arrears are 'priority debts', which means that the consequences of not dealing with them can be serious - there will be a risk of eviction.

Read more about what rights renters have against repossession

Read article - A staggering 'seven million people' are putting their home at risk

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Using the last three quarters’ insolvency numbers, PKF Accountants predict that 20,000 more Scots will go bust this year, warning that even those Scots who feel they are relatively comfortable could also be at risk through unexpected redundancy and extra squeezes on their finances through the ongoing downturn in the economy. PKF refer to those who can only pay the interest on their debts each month as 'zombie' debtors as any slight change in their circumstances means they are likely to be plunged into insolvency.

PKF also predict that around 25 Scottish firms a week will go bust this year as the latest business insolvency figures for the third quarter of 2011 saw the number of companies becoming insolvent rise by nearly 50%  compared to the same quarter of 2010.

Not all doom and gloom though, on a positive note at least the Scottish consumers have a decent Insolvency and debt repayment program which in my view is far more advanced than that which we have in England and Wales.

For a start, it only cost £100 to go into sequestration, the Scottish term for bankruptcy, as against £700 here in England. They also only pay for three years under a Protected Trust Deed (PTD) the Scottish equivalent to our Individual Voluntary Arrangement (IVA) where here the payment term is at least five years and which some cheeky lenders stretch it to six.

The Scots also have legal protection when entering into a debt repayment program under the Scottish Debt Arrangement Scheme (DAS), something we are sadly lacking somewhat back in England and Wales.

News article - The rise of the Scottish 'Zombie' debtor

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As far back as July 2009 the OFT decided, after an in-depth look at the way payday loans, pawnbrokers and home-credit worked for consumers, to back away from recommending price controls on expensive forms of short-term borrowing. In short this was the green light for Payday loan companies to flood the market and go against the cries of many debt advisers.

The OFT has said that although this form of borrowing is expensive, it actually serves a purpose for those on low incomes needing short-term borrowing so they were wary of barring it. The OFT also felt that intervention would not necessarily address problems in this sector because controls might reduce competition and if these firms were not around then there was a serious risk consumers would go to an unlicensed money lender, a loan shark.

Why consumers take out Payday loans

There are millions of consumers who just do not plan/budget for an unexpected expense. For example, the car breaks down and money is needed to get it fixed in order to get to work or the washing machine needs replacing sooner rather than later. Many consumers I talk to say they took out such a loan to pay a pressing bill such as council tax to avoid the bailiffs calling.

The banks don’t offer short term loans other than an authorised overdraft. Payday loan companies will argue that their loans are cheaper than an unauthorised bank overdraft and yes, they are right if the payday loan is paid in full within the time frame agreed.

65 Payday loans

I know of one chap, Steve Perry, who has 65 Payday loans, each taken out to pay off interest and meet other payday loan commitments and who has now started a campaign against Payday loans. More can be found here Say No to Payday Loans

No credit checks

One of the major problems with a payday loans is that they are too easy to qualify for. All you need is to be 18 or over, have a bank account and be working. However I am hearing of cases where unemployed people are still qualifying and taking out these loans.

Because there are no affordability or credit file checks it is inevitable that many consumers will not have budgeted for the repayment of the loan and will eventually default. This means that the late payment charges, often at over 2,000% interest, can soon get out of control and be greater than the payments being made resulting in the debt growing daily!

Credit Unions

People on low incomes with a chequered credit history need to be given a level playing field and be made more aware of other means of borrowing, such as from a credit union which can be  considerably cheaper.

It just does not seem fair or justifiable for those on low incomes to have to pay extortionate rates of interest for the profit of the lender if they fall behind with their payments

Banned in the USA

Payday loans are banned in 15 states in the US because of the way lenders rack up the interest rates once a borrower falls behind with the payments. Should we think of banning them here as well?

The bottom line is that a Payday loan is really only suitable for those looking to pay back after just a few days. Beyond this the cost to the borrower can be obscene - miss a payment or two and it gets out of control. So the moral of the story is, if you need to use one, do what you’re supposed to do and pay it back in full on payday.

DebtWizard guide to payday loans, door step loans, logbook loans and loan sharks

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