Pro-rated payments and CCCS

[smt37]

I wonder if anyone can help:

 

I've been on a DMP for nearly 3 years with the CCCS and about 5 months ago took over the plan myself because the CCCS refused to stop paying a couple of creditors when they started being difficult and didn't have any paperwork and eventually sold the disputed debts on (in the middle of an FOS investigation). That's another story, but anyway... my circumstances changed a little bit - basically, my outgoings increased (council tax, utilities etc.) leaving me about £30 a month less than I had before, so I wrote to all the creditors and explained that my income was the same as before, but my outgoings had increased, so I had less to go around.

 

I worked out that the CCCS had pro-rated my payment to the creditors based on the original monthly contractual payment rather than the usual pro-rated calculation where you weight each payment according to the outstanding amount. I followed what the CCCS had done and each creditor was offered an amount approximately £2-3 less a month than they were getting before.

 

[Just in case this isn't clear, as an example, I originally thought that if I owed the following amounts:

 

MBNA Credit Card: £1,000

Natwest Loan: £2,000

 

and I had

£30

a month to give them,

 

MBNA would get £10; and

Natwest would get £20

 

But this is not how the CCCS did it. They looked at the contractual payments so although the balances were the same, at the time of the DMP being set-up, originally the payments were, let's say...

 

MBNA Credit Card: £30 a month

(would take 18 years to pay off with this minimum payment)

Natwest Loan: £100 a month

(payable over 2 years)

 

The CCCS would work it out by saying that £30 available of £130 contractual payment is 23%, so...

 

MBNA would get £30 x 23% (£7)

Natwest would get £100 x 23% (£23).....]

In a way, this seems fair because if MBNA were willing to extend credit to me for 18 years, but Natwest only for 5 years, it should be only fair that Natwest should be paid back quicker in the event of a problem.

 

I've got less available, so I wrote to all the creditors and offered exactly the same information that the CCCS gave them (I copied what information they sent to one of the creditors from a SAR request) and some have agreed the new amounts and others have rejected it, saying that according to their figures, I can pay them more, These ones have clearly used the method which I always believed was used.

 

So for nearly 3 years, I've had little trouble, but now, the phone calls and letters are coming in thick and fast. I've tried explaining to a couple of them that I've got less available, so I'm offering them less and am following exactly the same methodology that the CCCS followed but they just won't accept that their computer is wrong... I can't change the methodology now otherwise the other creditors will start complaining then.

 

Anyone know how to tackle this one? I'm almost tempted to cook the books and tell the complainers that I made a mistake and the total amount of debt is bigger, so their pro-rated payment is right according to the method they are using, but I'd rather be fair about it. Has anyone else experienced this after leaving the CCCS? :-?

[brokebutnotbeatn]

it's done as a fair percentage across all debtors so they get the same percentage of the debt e.g. 1.16% for everyone; your calculation is correct - x = total debt, y = what you can afford, y/x = percentage payment to each. The government web sites have the calcualtions to use. However, stick to your guns. Write reaffirming its all you can afford and state that other creditors have accepted the payment. Continue to make the revised payments all the while. You'll get there in the end.

[smt37]

Thanks, but it seems I wasn't clear enough. What I am saying is that the CCCS do not calculate the pro-rated payments like the rest of the world... They calculate the payments as an equal portion of the original contractual amount payable each month.

 

Now I've taken over from them, I've used the same methodology as they did, otherwise it wouldn't be equitable. Now some are complaining, although it was good enough for them for 3 years, so why isn't it now?

[brokebutnotbeatn]

Buut it seems that CCCS do calculate correctly from what you described. Th way CCCS do it seems the same as the way my DMP company do it and the way gov website describe!

[smt37]

I disagree. Did you work through my example above? The CCCS do not consider the total amount of debt at all. They only consider what was originally meant to be paid.

 

Let's say I was paying £100 to two creditors and one was getting £10 a month for a debt of £2,000 and the other was getting £90 a month for a debt worth £180.

 

If I lost my job and could only afford to pay £10 a month, according to the CCCS, the one that was getting £10 a month would only get £1 a month and the one that was getting £90 a month would only get £9 a month - regardless of the amount outstanding. So assuming no further interest or charges, the one with £180 outstanding would be paid in full by 20 months @ £9 a month and the other one would, by this point, still have £1,980 outstanding, which would then be paid the full £10 a month for the remaining 198 months.

 

Does this help?

[brokebutnotbeatn]

I'm sure you're right but that wasn't the way they worked it out when I spoke to them and it isn't the way it is worked out in the industry nor is it what the creditors will accept...so it doesn't seem right to me. If you're doing it yourself now I suggest you start again with what you owe vs what you can afford to pay and offer that to the remaining creditors; if what you say is true then I'm not surprised some of them are kicking. of course, I wouldn't stir up those that aren't kicking unless it turns out you're paying them too much! Don't forget CCCS are funded by the creditors as they pay them a percentage of what they get from you, so perhaps something dogey went on in the past. Certainly I'd get it on the proper footing - incidentally a footing a judge will use in court should one of them ever take it that far (which is very unlikely)!

[brokebutnotbeatn]

i.e. your calculations are right. You have 3 creditors of a) £100, b) £50, c) £10. Total debt is £160. You can afford £25/month i.e. 15.63% of the total debt. Therefore creditor a) gets £15.63, b) £7.82 and c) £1.56. They will all be paid back in 6.4 years (assuming they all freeze interest and additional charges)...therefore they are all being treated fairly and equitably...your I&E statement will show you can only afford £25 so everyone will be happy, including a judge. Mind you, its unlikely any of your creditors will be able to legally enforce the debt - which is why they will all accept the payment after a bit of a sulk...

[smt37]

If I change the methodology, then of course the ones that were not complaining will start to complain because they will get less. They were getting too much...

 

The CCCS did this, not me. I questioned it a few times, but they fobbed me off saying that their computers calculated it in a way to pay the debt off quicker.... Something to do with contractual interest and non-revolving credit via loans compared to credit cards.

 

Their view was that if a credit card company was prepared to lend cash and accept a 3% minimum payment amount so that it would take 25 years to pay off a large balance, then they were taking a longer credit risk than a loan provider who was sure to get it all back within 5 years, so the loan provider should be paid quicker than the credit card provider.

 

None of my debts are enforceable in court, but I'm still paying them off anyway... for now.

[brokebutnotbeatn]

CCCS are funded by the banks - the more they get you to pay the more they get. Changer your methodology to the correct one; adjust your payments according to the outcome and write to all your creditors with your I&E, supporting bank sttement (one) and your new calculations. Then stick to your guns and refuse to talk to anyone on the phone. When they write to complain send one reply back reaffirming your position. This is why your plan was only accepted by some people - the people who were being paid disproportionately! Simples!!!!!