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The CEO of MBNA Europe is having dinner with a top banking executive, and up pops the question, “How’s business then Charles in the credit card world?”

‘Err... okay’, stifled Charles with a cough. ‘Slight problem with the UK City regulator, nothing too much really’.

Well if I were Charles I would be very concerned. Not only have MBNA been investigated by the Office of Fair Trading (OFT) but  what they uncovered caused real alarm; simply ignoring UK debt recovery guidelines which many see as bullying and intimidation of the credit card holder.

The official story is that the OFT has ordered MBNA to improve the way they deal with 5 million of its customers should any experience a problem repaying their credit card debt.

Cutting to the chase; they have been told in not so many words to stop pressurising confused customers and start acting within UK guidelines.  If it wasn’t for the Citizens Advice Bureaux raising the issue then how much longer would they have been able to get away with it?

What the OFT uncovered

Having been tipped off by the CAB the OFT found that MBNA had not being sufficiently clear when communicating with customers in financial difficulty who were offering token payments, even though it was proven this was the best they could afford.

Also in some instances they were failing to follow its own policy or procedures by bypassing customers' appointed representatives.

By ignoring the customer appointed representative, whose job it is to negotiate a smaller debt repayment, this meant that the likes of me and any other debt advice firms or debt charities would be disregarded.

Own policy? What about the OFT Debt Collection Guidelines? The MBNA policy is derived from these guidelines and arguably MBNA chose to breach them. It has nothing to do with their own policy which has been found to be somewhat lacking.

The debt collection guidelines that were breached

My interpretation is that MBNA breached sections 2.6f, 2.8c and 2.8d of the OFT Debt Collection Guidelines

He who shouts the loudest gets paid!

It is well known in the debt collection industry that the lender or debt collector that puts the most pressure on borrower / debtor for payment is the one that usually gets paid.

This means that if the lender can badger, confuse, intimidate, hoodwink or simply bully a customer who isn’t aware of their consumer rights then they are going to get paid.

Ray Watson, Director of the OFT's Consumer Credit Group, said:

'Our investigation found problems with the way MBNA communicated with customers in financial difficulties. MBNA has agreed that it will make its debt collection letters clearer and clarify its policies and procedures for dealing with appointed representatives.'

It’s a shame the OFT did not ask me for comment, because if they had, I would have said something along these lines;

‘What the OFT is basically saying to MBNA is stop pressurising customers into paying back what they cannot afford.  MBNA were doing this when they ignored any appointed representative of the customer; usually a debt charity or commercial firm.

This action left the borrower / debtor in a more vulnerable position and under pressure to pay more even though it had been proved they could not. Step out of line again and we will put restrictions on your licence to trade, plus hit you with a £50,000 fine for each breach.’

What’s difficult to understand in that?

If you take a look at the MBNA press release on their website, the line they take on this issue reads somewhat differently. Perhaps that is why I will stick to defending consumers in financial crisis and not go into PR.

Read more: Is MBNA guilty of coercing and bullying non payers?


To be able to transfer your credit card debt of £6,500 to a new provider offering a 0% interest rate makes sense, doesn’t it?  After all what could go wrong? For one police officer rather a lot, ending up costing him over £1,800 in penalties and interest, all this on top of his already high credit card debt.

So what went wrong?

With the knowledge that he had been accepted for the deal the officer planned his finances down to the last penny, or so he thought.  Needing cash he withdrew £10 per day on his credit card for the 3 days leading up to pay day, expecting to incur a cash withdrawal fee of £2 each time.

What the officer didn’t realise though was that the fee was £3 and not £2 which subsequently made him overdrawn by a paltry £3.

The deal breaker

Because he was now overdrawn, the 0% deal was terminated and he was also hit with a £12 over- the- limit charge plus interest of £140. On top of this his credit file was marked down and he was tied into a 15 month term, no longer at 0% but instead at a whopping 17%.

Why you must make that first payment on the balance transfer deal

Going over your limit is one deal breaker; another is to miss that first payment. Therefore you must set up a direct debit with the credit card company to pay at least the minimum amount in time to make your first payment. If they delay it, and it is in their interest to do so, and it does not get paid then you will be charged the £12 fee for late payment as well as the balance transfer fee - 3% on £6,000 = £180! You could also find that the special introductory offer has been withdrawn, as happened to the police officer in this case.

Not all credit card companies operate in this way but a number of my clients have been caught out by this practice, having to pay interest on the balance before they can arrange another card provider. A simple way to avoid this happening and for peace of mind is to consider making the first payment manually, in plenty of time. So, make a note of when the introductory offer ends as missing this date could be costly!

The balance transfer fee

This can be anything between 2% and 5% and is often called an ‘admin fee’.  It can be quite expensive if you have only a small balance which you intend to clear quickly, in which case you could consider going for a ‘short term no balance transfer fee’ deal. For large amounts it is important to have a long period on the 0% rate when the balance transfer fee becomes less significant. 

The Holiday/Foreign transaction

By using the wrong card you can be charged between 2.75% and 2.9% on every transaction made abroad and in some cases incur an additional cash withdrawal fee which could total 5.75% or more.

Last year the banks earned more than £630 million in foreign transactions alone. No wonder credit card providers view these dealings with glee!

Will a 0% credit card balance transfer solve my debt problems?

Heed this warning. Once you move balances from an old credit card lender to a new credit card provider then the new lender may not support you in any later debt resolution, for example an Individual Voluntary Arrangement, (IVA) or Debt Management Plan, (DMP).

The reason is simple. Because they have only just advanced the money, as a new lender they require payment as per their agreed terms. Had you sought advice about your debts before moving to the new 0% balance transfer deal then the chances of the credit card company supporting any debt issues would be greater.

If a 0% transfer deal is properly thought through and properly managed, fine, but without knowing the full picture it is irresponsible for anyone to simply say that moving your credit card balance to a 0% lender will solve your debt problems. You have been warned!

Further reading, IVA pros and cons, What is an IVA, IVA information and Debt Management Companies

Read more: What can go wrong with a credit card balance transfer? Actually quite a lot!


As from 1st December consumers going bankrupt in the UK will have to pay more towards the cost of the administration of their affairs through Income Payment Agreements (IPAs). 

Previously, bankrupts kept any disposable income (DI) up to £99, above which they would pay back a percentage, ranging from 50% to 70%. Even those that went bankrupt prior to this date are not safe as the new regime could catch many thousands of others under any review.

For example, under the old policy an individual who was deemed to have £85 per month DI would keep all of this. If they had say £200 DI then around 50% to 70% would have been taken, this being £100 - £140, leaving them with £100 - £60 to keep. 

Under the new policy everything above £20 DI will now be taken. 

What is an Income Payment Agreement (IPA)? 

An IPA is a legally binding written agreement between the bankrupt and the Official Receiver (OR) that requires the bankrupt, or a third party, to make specified payments for  a specified period, usually 36 months. If the individual refuses then the OR can apply to the court for an Income Payment Order (IPO). 

How do you calculate disposable income (DI)?

The OR’s staff will review the income and expenditure of the bankrupt, using industry set guidelines and if there is any money left over after paying normal living expenses then this is known as disposable income (DI). For example, the individual takes home £2,000 per month after tax and their expenditure, agreed with the OR, is £1,800 - the difference is £200 which is the DI. Under the new policy the bankrupt will be left with £20 and £180 would go towards the IPA. 

Why the change in policy now?

There are several theories doing the rounds, one is that the Insolvency Service is subject to cutbacks under the Spending Review and because the cost of administering a straight forward consumer bankrupt’s estate is rising, currently standing at £1,725, increasing the income is seen as one way of balancing the books. 

I’m not so sure though as I hear that the Insolvency Service is suffering a downturn in revenue from bankrupts’ estates due to the falling valuations of their homes. Also they took on extra staff to deal with an expected surge in numbers of those going bankrupt which has not materialised.  

Another argument for a change in the regime is that IPA payments should be in line with those in an Individual Voluntary Arrangement (IVA) (where you make monthly payments for 5 years and at the end of the arrangement any remaining debts are written off) and where all the DI is taken after reviewing the expenditure in a similar way to a bankruptcy. This new policy will at least make IPA payments comparable even though the IVA runs for 5 years as against 3 years in a bankruptcy. 

Not surprisingly the move will generate quite an additional income on top of any realisation (selling) of the bankrupt’s vehicle or home, as over the past 4 years there has been a total of 53,694 IPAs and 294 IPOs.

What about those going bankrupt before 1st December 2010? 

There are now a lot of even more worried bankrupts out there and I don’t blame them. I spoke with the Insolvency Service and they informed me that those bankrupts that currently have an IPA and have a change in circumstances, i.e. they have an increase in wages then they will be reassessed under the OLD policy and will not be subject of the new regime. 

However those that are bankrupt before the 1st December 2010 and have not been subject to an IPA and experience a change in circumstances that then produces a DI above £20 then they will be subject to the NEW regime where anything above £20 will be taken. 

Is the government right to do this? 

I believe they needed to level the playing field for bankruptcy and IVAs payments but I would have liked to have seen only 75% of DI taken in both scenarios. 

This then gives the consumer an incentive to work, with any extra DI in their pocket going to help cover any ambiguities or unexpected expenditure and would also help prevent IVAs from failing through too little expenditure allowances, which is all too often the cause. 

A favourite quote from the coalition government is ‘we are all in this together’, and by the looks of things this includes bankrupts as well!

BBC Essex - Dave Monk Show

You can hear Mike explain the key change in policy by The Insolvency Service that will affect all consumer bankrupts post 1st December 2010.

You can listen to the whole show or just Mike's bit by clicking on  BBCiPlayer - BBC Essex - Dave Monk Show, set timer to 01.08.40, ends 1.15.30 (7 minutes)

Remember this is a BBC recording therefore any competitions or prizes are no longer applicable. Will drop off the BBC iPlayer Tuesday 14 December 2010.

See forum thread

Read more: Bankrupts to pay more under coalition government


Debt Relief Orders (DROs) set to soar as pension changes come into effect 6th April 2011

Great news for those over-indebted consumers as Edward Davey, Minister for Employment Relations, Consumer and Postal Affairs announces changes to the Debt Relief Orders to allow those debtors with approved pensions access to the DRO procedure.

Previously any debtor that had a pension fund worth £300 or more was excluded from proposing a DRO to their creditors, even if the pension is not receivable for many years.

The announcement follows a consultation launched in March this year, after debt advice agencies expressed concerns that DROs excluded some vulnerable people struggling with small debts.

The proposals which will come into force on 6th April 2011 will change the rules to allow approved pensions as defined under Section 11 (2) of the Welfare Reform and Pensions Act 1999. This means that the majority of occupational and personal pension schemes will now be accepted.

DRO qualifying criteria

A DRO is designed to provide a fresh start for the most vulnerable people trapped in debt. They must have unsecured debts below £15,000, disposable income of less than £50 per month and assets valued less than £300.

The DRO will help to place the least complicated debt discharge cases on a fast-track through the court system with no personal appearance at court required.

Pensions barred one in eight applicants

Initial estimates suggest that as many as one in eight people who met all other eligibility criteria for a DRO were unable to access the regime due to having a small pension fund in excess of £300.

DRO key stats 

  • In the period 6 April 2009 to 31 March 2010, there were 17,441 DROs granted in England & Wales.
  • At 31 March 2010, there were 1,430 approved intermediaries available to assist debtors in applying for a DRO.
  • The profile of debtors accessing DROs, in terms of age and location, is broadly in line with bankruptcy data. The incidence of women seeking DROs is, however, far higher than for men, a pattern which is the opposite of the profile for bankrupts.
  • London and the South East had the lowest rates of DROs in England and Wales, whilst the South West and North East had the highest. This is in line with bankruptcy rates for the same regions in 2008.
  • The profile of debtors accessing the DRO system would seem to be those types of individuals for whom the relief was intended, i.e. low income, predominantly unemployed, individuals.
  • The total amount of debt scheduled in DROs to 31st March 2010 was £150.5 million.
  • The majority of debt, over 53%, was owed to banks, building societies and credit card companies.
  • The average number of creditors per DRO was 6.
  • The average liability per creditor was £1,358.
  • The average DRO level of debt was £8,700.

Disincentive to work for those on DROs  

The main criticism of the DRO is that once it is granted then there is a natural disincentive for the individual to find employment. Under the eligibility rules for DROs the person must disclose if their circumstances and or income were to change over the 12 month period the order is in force. 

If for example the individual were to find employment on month 11 of the DRO then this extra income may well mean that he/she is no longer eligible and the DRO may be revoked. 

The concern would then be that he or she may only have sufficient money to pay priority creditors like rent and utilities but not the lenders that previously featured in the DRO. 

I personally would like to see the qualifying criteria changed to widen the appeal to many other desperate and vulnerable consumers that would otherwise be rejected.

My recommendations would be to; 

  • increase the assets amount to around £3,000
  • include  homeowners that are in negative equity
  • double the car amount to £2,000
  • increase  the disposable income level to £100

However, addressing these areas would probably push up the insolvency figures even further - so I shan’t hold my breath for too long...

Read more: Government gives date for radical change in Debt Relief Orders DROs


Keeping your credit file in tip top condition is a bit like servicing your car, if you don’t look after them both then they will eventually let you down, when you least expect it.

So if you are thinking about going on that journey of applying for credit then make sure you service your credit file first, one good way would be to tidy up or remove default notices and any wrong information.

What is a default notice?

A default notice is something that a lender puts on your credit file if you fall behind with your payments.

When you borrow money from any financial institution you usually sign an agreement, in the terms and conditions of this agreement you give permission that should you fall behind with your payments then the financial institution can inform the credit reference agency of this, hence the default notice.

Also, before a debt can be sold on, the lender has to demonstrate that that they have tried to contact you and keep the payments going, once you have two default notices against you then the debt can be sold on.

The default notice has nothing to do with a county court; it merely alerts future lenders that you have not kept up with the payments.

How to remove the default notice

There are several ways you can have a default notice removed, you will have to be patient and persistent but it is worth a try. To have them stay on your credit file will cause problems getting future credit, for some potential borrowers  it will be a complete refusal and for others a much higher interest rate.

The first step is to identify the financial institution (lender) that placed the default on your file; you may already know this, if not then do a credit search on yourself to see which one it is. How to see your credit report on-lin for £2.   

If any of the below apply then you have a chance, you should write to the lender that placed the default notice asking if they would consider removing it.

  • The loan has now been repaid in full
  • You have come to a new arrangement to repay the loan
  • The payments are now up to date and you are no longer in default
  • You can demonstrate that the default was placed incorrectly on your credit file.

If they agree to your request then ask them to confirm this in writing on their letterhead.

Some lenders may charge a small administration fee for the additional work.

If the lender agrees to your request then send a copy of their letter confirming such to one of the credit reference agencies asking them to remove the default notice from your file.

What if the information on your credit file is incorrect?

If the information is correct you cannot expect them to change it because it is embarrassing, only if it is incorrect can you do the following:

  • Write to the agency asking it to either remove or change the entry that you think is wrong.
  • Within 28 days from receipt of your letter the agency should tell you that it has either removed or changed the entry or taken no action.

Notice of Correction

If you are unhappy with the response or would just like to explain the information on your file you can send a Notice of Correction. This is a statement of up to 200 words that will be added to your file as long as it isn’t defamatory, frivolous or incorrect. Again the agencies have 28 days to respond.

If still no action, resend the Notice of Correction. If information is amended the agency must send details to any lender who has enquired in the last 6 months.

If an agency declines your Notice of Correction it then it must refer to The Information Commissioner

Read more: You service your car; why not service your credit file?


Well around 100,000 people do just that through a firm known as Buy-As-You-View (BAYV) which has its head office based in South Wales.  Established in 1972 it now employs 750 staff, it does no high profile advertising relying on business being generated by word of mouth and yet is largely unknown outside the mainly deprived communities it operates in.

The slot machine on the television

“Pay-as-you-view" borrowing is where customers repay their debt for loans to purchase household consumer goods, such as televisions, furniture or washing machines, by putting coins into a meter installed by the loan company, which is connected to a borrower's television. This method then dictates how much viewing time the customer receives and to stop it being switched off regular deposits of coins have to be fed into the meter.

BAYV has recently attracted attention from anti-poverty campaigners because of concerns about its tactics as it lends money to its customers making them pay back through their television sets and if they don’t pay then the television gets switched off and action follow to recover the goods.

It is claimed that these expensive meter-based loans, which charge average APRs close to 40%, are targeted directly at low-income groups - those that are more desperate and vulnerable.  These people have little or no access to cheaper high street credit and debt campaigners are calling for this type of lending to be more closely scrutinised by regulators.

Insurance fees and service agreements

This method of ‘borrowing’ is not widespread and is limited to less well of areas of the community. Whilst  anti-poverty campaigners accept that these lenders are preferable to alternatives such as loan sharks, who operate outside of the regulatory system and have a reputation for intimidation, there are concerns that once interest, insurance fees and service agreements are added, some borrowers can find themselves paying almost three-and-a-half times the high-street cash price of goods they have obtained.

The catalogue

There are currently 290 items available to purchase, either through the Company’s catalogue or on-line, ranging from mobile phones, bedroom furniture and baby equipment to mobility scooters.

I looked at a, Sharp LC32LE600E television they had for sale offered at a cash price of £699.

The repayment plan is over156 weeks at £5.50 per week which adds up to £1,170. If the customer took their ‘All Sorted’ maintenance policy then the total repayable for this television climbs to £1,521.

I could buy the same television today via the internet for £388. Okay no maintenance policy but I still have a guarantee and consumer rights and more importantly make a saving of £1,133.

Is it legal?

The business model of lenders such as BAYV is entirely legal and subject to statutory regulation and the company says it is committed to offering customers value for money and to being clear and upfront about all costs.

It emphasises that it does not do door-to-door sales, just debt collection from meters and says collecting payments directly from homes means that many customers save money by not having to travel to a retailer to make their payments. It stated that a quarter of its new business comes from customer referrals, which was evidence of satisfaction with its products.

The alternative lender

Many will argue that those on low incomes would be better off going to a credit union as they offer cheaper interest rates ranging from 12 to 24 % which enables the borrower to make cash purchases at far more competitive prices.

Credit unions are not that widely advertised so perhaps more needs to be done to highlight their existence and promote the help they offer to those more vulnerable in our society thus preventing them from having to pay a very high price for credit. More information on Credit Unions and how to find one at DebtWizard guide to Credit Unions.

The high street banks could also do more to help these people by making smaller sums of credit available instead of the minimum £3,000 or so upwards, an amount which low earners cannot service.



Read more: How do you fancy paying back your debts by watching television?


The latest insolvency figures show a small reduction in the number of people going insolvent through bankruptcy and Individual Voluntary Arrangements (IVAs), Mike Thomas, aka The DebtWizard, looks at how bankruptcy compares with an IVA, answering the questions that most worry consumers;

What debts can be included and will they be cleared?

Bankruptcy - At the time of going bankrupt all your unsecured debts, such as credit and store cards, personal bank loans, overdrafts, catalogue debt are cleared. Also cleared is any claim from the mortgage lender if after repossession of the home there is still money owed if the sale proceeds were not enough, i.e. the shortfall. Some people say that the debts are not erased but the obligation to repay them has been removed. In any event you no longer have to pay them back. What are not cleared are secured debts such as your current mortgage on your home, court fines and debts arising from fraud or maintenance payments.

IVA - The same debts as above can also feature in an IVA and once completed satisfactorily then any remaining debt will be legally written off so lenders can no longer demand payment.

Can I keep my house?

Bankruptcy - If you own your home then the Official Receiver (OR) who oversees a bankrupt’s financial matters, will look at their share of any equity, that is the difference between the value of the home and the mortgage outstanding. If the equity is low or negative then it is possible for the bankrupt or a friend or family member to purchase the OR’s interest in the home for a nominal sum. Sometimes this can be as little as £1 plus a small admin fee so yes, in certain circumstances a bankrupt can still keep their home.

IVA - Again if the equity is low or the home owner is unable to re-mortgage their share on year four of a five year arrangement then they can often extend their payment into the IVA for six to twelve months to cover this. Most people usually keep their home in an IVA.

Do I have to make any payments and if so how long for?

Bankruptcy - Usually 36 months if it is deemed that you have at least £100 or more of any Disposal Income (DI).The DI is worked out after going through your normal and reasonable expenditure.  Even then usually only around 60% – 70% of this will be taken.

IVA - The payments are normally for 60 months, two years longer than bankruptcy, and the individual will pay 100% of their DI, which is reviewed annually to see if contributions can be increased. Lenders also require 50% of any net overtime or income above what is stated in the IVA proposal, not a reduced sum as in the bankruptcy.

Do I keep my car/motorbike?

Bankruptcy - If the vehicle is paid for and nearer the value of £2,000 or above then it is possible that this may be taken and sold. However if it is needed to get to and from work which generates an income then it is possible you can keep the vehicle. Mobility vehicles are excluded. ORs have different views upon the value of the car; some will have a higher threshold of say £2,000 - £2,500 for which you can still keep the vehicle.  If it is on Hire Purchase (HP) the vehicle belongs to the lender and in the majority of cases can be kept provided the payments and type of vehicle are reasonable.

IVA - If the same HP criteria applies then you may be able to keep the car and when the HP payments cease you direct these payments into the IVA to boost the monthly contributions. If the vehicle is paid for and is of high value, e.g. £6,000 upwards then you may be required to sell the vehicle and purchase a cheaper one for say £3,000 and put the remaining sale proceeds into the IVA to boost the overall return to lenders. Remember, the IVA is for five years so a reasonable vehicle is required to see you through the arrangement.

What do I need to pay in fees?

Bankruptcy - The person going bankrupt has to pay a fee of £600, which is made up of a £450 Official Receiver's fee and £150 Court fee. If they can demonstrate that they are on benefits then they may be exempt or pay a reduced court fee.  This fee jumped a massive 25% from April this year, which many cannot afford.

IVA - Some IVA firms still charge up front fees but there are many that do not charge the consumer but take their fee from the contributions paid into the arrangement. These fees are set by the lenders that feature in the IVA and will be drawn over the term of the arrangement.

Will my name and address be advertised in the local paper?

Bankruptcy - Since the 6th April 2009 honest and co-operative consumer bankrupts have not needed to have been advertised in the local paper. However those bankrupts seen as un-co-operative or not to have revealed all their assets or liabilities may still be advertised in addition to any other cases that the Official Receiver feels warrants public interest.

IVA –These have never been advertised in the local paper. However, there is a public register that bankrupts go on until discharge, usually for one year, and in the case of IVAs, for the duration, usually, five years.

Do lenders have to agree to my bankruptcy or IVA?

Bankruptcy - No.

IVA - Yes, 75% of those lenders in value voting will be required to accept your proposal, once achieved then those that initially rejected it or who did not bother to vote will be legally bound by the arrangement.

An insolvency procedure is always going to be a big step so it is vital you seek professional advice as how best to manage any debt issues, need help,? If so then see our list of Helpful Organisations.

Further reading

DebtWizard guide to bankruptcy

DebtWizard guide to Individual Voluntary Arrangements (IVAs)

Read more: Bankruptcy v IVA, the answers to questions that most worry consumers


Fraudsters are always looking for new ways to suck you into parting with your cash. Mike Thomas warns you of the latest trend and shows you how to avoid it.

No-one in their right mind would enjoy a visit from a debt collector but imagine how you would feel if you received a letter threatening such a call when you weren’t even sure if the debt existed!

Recently around 5,000 people have had just this experience, receiving letters from either a UK Pay Day loan company or their appointed debt collectors, demanding they pay back a loan which none of them knew anything about.

In this particular Pay Day loan scam fraudsters had applied for loans of up to £300 in someone’s name with their correct address and date of birth. However  the mobile telephone number and the bank details for where the money was to be paid did not belong to that person, but to the fraudster, netting them the money in that person’s name.

This is no small fraud and the Pay Day loan company claims to have lost around £1.5 million pounds before it realised it had been targeted. So just how can you deal with something like this? 

Many, I know, would just ignore the demand letter and bin it. Not a good move as more letters will follow and you could find enforcement action beginning and your credit file marked down as non-payment.

Some will pick up the phone and plead “I have never borrowed from this company” only to be told by the debt collectors, “But you agree we have your correct name, home address and date of birth don’t you, so you must have had the money, now pay up!” Now you’re puzzled. How come they have all that information about me?

So no matter how miffed, narked, upset or just plain confused you are, you really need to deal with demands for payment on debts you do not recognise promptly and effectively as there may be more trouble ahead if you don’t.

How to stop enforcement if you are a victim of fraud

The Office of Fair Trading Debt Collection Guidance states that it is unfair to send demands for payment to an individual when it is uncertain that they are the debtor in question so the obvious first step is to write to the lender who is claiming you owe them money or the debt collection agency acting on their behalf and state that you are a victim of fraud and that you dispute the debt.

If you need help with the letter then see our template letter 1 -  Disputed debt, a debt you do not owe.

Protecting your identity

As you have just become a victim of identity theft you need to do some homework and make sure nothing else untoward is going on and that this is a one off.

First conduct a credit search on yourself to make sure all is correct on your credit file. Apart from looking for information about loans and credit cards or even mobile phone contracts, have a look for details of any searches on your file. For example if Easy Credit bank has searched on you and you have not applied to them for a loan or credit card then this must ring warning bells. How to see your credit file 

Get ahead of the fraudster

If you are worried about identity fraud, where others can obtain loans, credit cards and other services in your name, then you may want to be placed on the Protective Registration For Individuals.  Telephone on 0330 100 0180 (Mon-Fri 8am-8pm, 10am-1pm Sat). The cost for this is £14.10 including vat per year.

Once on the register, when an application for credit is made on your behalf there will be additional checks to those already in place making it far more difficult for the fraudster to access your details. You will also find that your applications for credit will take a little longer to process but it will prove to be well worth it in the long run.

Also think about changing passwords and generally tightening up your identity protection by shredding all paperwork with your name and address on and of course not giving out sensitive details like passwords and dates of birth over the telephone or in emails.

This time you may have been have been caught for a small sum. Make sure that next time it is not for thousands!

Read more: How do you deal with debt collectors chasing you for a debt you do not owe?


We all know that debt help charities have an important role in helping over-indebted consumers resolve their debt issues. However, there must now be serious concern about their future levels of service if they have not escaped the level of their government funding being cut in the Spending Review. 

It is estimated that for 2009 there were around four million debt enquiries from over-indebted consumers. I know some of these would have been multiple applications to numerous debt management agencies, including the debt charities, but what on earth is going to happen to these consumers that need help if the funding is cut?  Remember this is BEFORE the Spending Review announcement; over the next two years the numbers of consumers seeking help is expected to rise dramatically.

Although difficult to be exact, many experts believe that the free sector of the debt advice industry can only handle around two million new debt enquiries per year. So where does this leave the rest, should the funding be cut to the CAB or National Debt Line when there is such a demand for its services?

It’s arguable that if it wasn’t for the fee charging commercial sector then the debt charities would just collapse under the volume of enquiries. The Citizens Advice Bureau, which is funded through local authorities, is seeing on average just under 10,000 new debt enquiries every working day.  

A bit like private education and health insurance, there is a need for the fee charging and extra service it provides.

Unemployed a major trigger of debt

Unemployed along with separation is one of the main triggers for debt problems. We currently have half a million vacancies in the UK with unemployment sitting at five times that. I read various reports that another half a million jobs are to be lost in the public sector with another half a million in the private sector.

Without any new jobs being created then the job / employment ration will be one job for every seven people! We haven’t even included any of the five million that are currently on benefits and the welfare system that will be forced back into work whether they like it or not. So key to all this will be to create jobs and pretty darn fast.

Is it all doom and gloom?

We can all be armchair economists which is all I seem to hear.  Most people are predicting doom and gloom, but what if the coalition get it right and do actually create the two million or more jobs they are predicting and the economy begins to recover and gather pace? What will the pessimists say then? Probably that they were lucky.

For some it will be too much, they will be under immense pressure to meet the mortgage payments, failure will lead to further house repossessions. Consumer insolvencies (bankruptcy, individual voluntary arrangements and debt relief orders) will break all records as consumers lose the battle to manage their debts. 

Change the way we live

Morally and socially we have been encouraged to spend and pay later through slick marketing and the easy availability of credit.  From this we have developed a culture of must have now. This now has to stop.

For many consumers they will have no other option other than to cut their expenditure if they want to survive, if you haven’t got it then you shouldn’t spend it. It’s as simple as that. There will be a lot of tightening of belts and some serious thought being given to “If you don't need it, can't afford it then don't buy it!” This won’t make me popular with any government because consumer spending drives economies, they need consumer debt!

One of my concerns is that individuals burdened with debts will not see any benefit from any future upturn. This is because debt levels will stay the same irrespective of any recession. Furthermore, if interest rates were to rise at some time in the future to combat inflation then this will put mortgage and credit card payments at a higher level.

The three ‘Cs’

The Spending Review along with job cuts will put a heavy strain on people’s finances which in turn drops our confidence to go out and purchase goods.

My marker for getting the economy going again would be the three ‘Cs’

Cash, Credit and Confidence. Cash is linked to Credit - get more Credit flowing in the economy and along comes the Cash. Then when consumers gain Confidence in their job status, they will have the Confidence to start spending again, as they buy goods and services, not forgetting use leisure facilities, and away we go!

Read more: Why the debt charities must escape the Spending Review cuts


As our dissatisfaction with the high street banks reaches boiling point, Mike Thomas introduces Credit Unions as a local, friendly and fair alternative. 

It’s Friday, the car has broken down, the washing machine has flooded the kitchen and the electric bill has to be paid next week. You need a quick loan to tide you over so where do you go? Your bank is a definite no no as you are maxed on your overdraft - how about a Doorstep lender, PayDay loan or even a Loan Shark? Er, no again!

When you are desperate you often do things you later regret: you forget to take in the interest rate being charged and how long the repayment period is - your main goal is to get some cash to get you through.

If this is you let me ask you one simple question - have you ever thought of going to a Credit Union?  I have to say I cannot find fault with them and this is why.

Credit Unions are financial co-operatives owned and controlled by their members. They offer savings and great value loans plus they are local, ethical and they know what their members want.

Membership numbers for Credit Unions have doubled since 2002 with them now boasting 524,000 members and savings circa £460 million.

How do credit unions work?

Unlike the High Street Banks, Credit Unions do not go to the money markets to raise money for loans; instead they attract savers by paying them a return, not interest, but a dividend on their savings. These savings provide a pool of funds from which loans can be made and which is ‘rented’ to other members, who in turn pay interest on their borrowing.

The interest received from loans is used to cover operating expenses and any surplus is put into reserves and goes towards paying a dividend to the savers.

All profits from a credit union go towards developing the business or are returned to members; the only shareholders in a credit union are the members who use its services.

Who runs the credit union?

A credit union is managed and controlled by a volunteer Board of Directors who are all members, with each member having only one vote irrespective of the amount of savings they may have.

How do you join one?

Every Credit Union has to have what is known as a "common bond” which determines who can join.

An example of a common bond would be people living or working in the same area, people working for the same employer such as the police service or people who belong to the same association, such as a trade union or even church.  If a credit union fails to limit membership in this way they risk losing their status as a Credit Union.

The services offered are mainly savings and loans but some unions will also offer a bank account, a ‘Credit Union Current Account’, which will come with direct debits and cash withdrawal facilities through ATM machines. Some also offer ISAs and Child Trust Funds.

Is borrowing from a Credit Union expensive?

Interest rates for loan repayments can vary between 1 - 2 per cent per month (12.7 - 26.8 per cent APR).This means that if you borrowed £1,000 at 1% per month over a year then you would pay back £1,067, i.e. £67 interest, just over £5 per month. You may find some unions vary the interest but it must not be more than 2% per month. Some will have their own loan calculator on their website which details exactly how much your payments are for your selected repayment period. It’s that flexible!

Credit Unions do not have penalties if you pay the loan off early and all loans will come with built in life insurance at no extra cost to the borrower, so if you were to die before the loan has been repaid then the life insurance would clear the debt. Tell me where that happens with a High Street bank!

A further upside of Credit Unions is that they often lend smaller amounts of money over flexible periods of time than your High Street bank would consider, for instance small loans of £50 to £3,000.

How much can I save with a Credit Union and will it be protected?

You can be flexible with the amount you wish to save on a weekly or monthly basis or whenever you have the spare cash.

All Credit Unions are regulated in the same way as UK banks and building societies by the Financial Services Authority (FSA) the City Watchdog.

A Credit Union is also required by law to maintain an insurance policy (fidelity bond) to protect the Credit Union against fraud or theft.

The key points about Credit Unions

  • They offer a friendly and local service
  • They have lower operating costs than the High Street banks which reflects in their products
  • Any profits are returned to their members and not shareholders
  • Their interest rates are on par or often lower than a High Street bank
  • They are flexible with their savings and repayment periods for their loans and will offer lower amounts than can be borrowed from High Street banks.

How to find a Credit Union

It is relatively simple to do - go to Find Me A Credit Union I did a quick search and found 42 in my ‘chapter’ alone, with memberships ranging from as low as 21, up to 6,473.

If you know of someone that a Credit Union would be useful to but who  does not have easy access to the internet, remember they can get this at their local library, then they can call The Association of British Credit Unions Limited (ABCUL) on 0161 832 3694 who will search for their nearest Credit Union.

Read more: Credit Unions, why they are so much better than banks



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