First time poster - ethics question

[ray26]

Hello CAGers.

 

I have been a regular reader of these debt collection forums for a few years now, but never posted. The reason I take a keen interest is that i am a consultant whose clients include various participants in the debt sale and purchase industry. (I know - you hate me already! - but please read on and let me know what you think about what i have to say and ask).

 

Here are some facts i readily acknowledge, followed by a couple of questions for the group.

 

Facts

 

1) The debt collection / purchase industry has rightfully received a very hard time in the press and from consumer groups because it has bent and/or broken the rules in pursuit of debts. Faced with declining profits in recent times, they have resorted to harder tactics sooner and more frequently than they should, and this is scary and threatening for lots of people in genuine financial difficulty. Regulation (and consumer eduction) is catching up but is not there yet - hence the importance of this website.

 

2) This ill feeling has been compounded by the fact that, given that these businesses are very high-volume and largely automated, in a minority of cases the wrong type of approach is made, or the wrong person is approached, or an approach is made where there is no legally valid debt (documentation issues / stat barred / debt previously extinguished etc.) This gives rise to some genuine PR horror stories for these businesses, like sending nasty letters to mentally ill people, or berating berieved families.

 

3) All over the world, but particularly in the UK, recent years have seen an alarming trend whereby banks (and particularly cc companies) have been willing to lend to people (and companies, by the way) who blatantly can't afford the debt. You can understand why people feel banks should not complain now, post credit-crunch, when no one is lending anymore, so people can't reborrow even more to pay back their existing overdue cards. Banks - you've only yourselves to blame, right?

 

The thing is, while all the above is by my reckoning true, so essentially i am saying these guys have a lot to be ashamed of, and a lot of work to do in trying to behave more ethically, there is never any mention in these pages about the responsibility of the individual.

 

Question

 

I just want to make a quick but really important distinction first : if you genuinely can't pay, then the mechanism exists so that the debt is evantually written down or off - an IVA. Every one of these is a lesson to the banks - they don't get their money and their free-wheeling lending (overseen blithley by our regulators, whose role in this i will not go into) has helped to ruin someone's life. Well done Bank. Bad lend, you got burned, the borrower has the big number taken away from their name and the chance to start over. Reasonably fair. It's not nice to do an IVA but no-one's going to jail. I should qualify this - if the process of reaching this stage has been made extremely unpleasant by constant phone calls and inappropriately threatening letters that is not fair - seeing as the borrower couldn't pay anyway. It's harassing someone in a hopeless position and is highly unethical.

 

OK, so that distinction made, what about the other people? What about those people who do have the means of repaying and keeping the promises they made when they signed up, as grown adults? Even if your debt is thousands, these companies will settle for a payment of 20 or 30 quid a month and freeze interest - i.e. already writing off the true terms of the contract you signed up to, adjusting things in your favour...

 

My question is, setting aside for a minute how regrettable and unpleasant the common collection methods seem to be, and how most of us would put these people first against the wall come the revolution, if you can afford to repay a debt, is it not unethical to refuse to honour your side of the deal?

 

For those of you in the first category - good luck turning things around. I was heavily in debt when i left uni - got all the letters and phone calls, lost sleep with worry and all the rest of it. I spent the next 5 very slowly years paying off the debts i racked up and eventually cleared my record. For those in the second, your responses are awaiting eagerly.

 

thanks,

 

Ray

[Belaflat]

It all depends on what you deem to be affordable.

According to guidelines from the insolvency service, I do not have any surplus to service my debts. According to DCA's, I can afford to pay them hundreds.

 

Ethics is a word not found in the dictionary of debt sales and purchasers so I like to offer the same approach to them as they would to me.

 

And another thing,

if you genuinely can't pay, then the mechanism exists so that the debt is evantually written down or off - an IVA.

 

IVA's on the whole are suitable only for the tiniest few and in a lot of cases are far more draconian than bankruptcy itself.

5 years of tight monetary controls followed by eventually having to sell your home if owned, at the end of it and the prospect of having paid far more in fees and repayments than if you had just paid up in the first place.

 

Bankruptcy itself is a far less painful option than an IVA in a lot of cases.

 

Any more daft questions.

Edited December 2, 2009 by Belaflat

[ray26]

Sorry - substitute bankruptcy for IVA

[kurvaface]

Reading the OP has left a nasty taste in my mouth.

 

 

there is never any mention in these pages about the responsibility of the individual.

 

To justify the lies, dishonesty and immorality of the debt collection industry is totally creepy. Minimising the stress caused to people to something no more than the acceptable price of automation of the industry shows your inhumanity.

 

As the industry almost always has the upper hand in encounters with debtors, surely it is their responsibility to act in a decent manner. The responsibility of the "Individual" as you like to put it should start with the banks, the dca's etc. You never hear a debt collector standing up for the law. They are just like guards at death camps - cowards - and good for nothing else.

 

By the way....I could pay, wanted to pay and would have paid except the dca I dealt with was a thieving S**T and drove me here where I learnt a little bit. He blew his chance.

[craigers]

Virtually nobody on this site would disagree that it is unethical for those who can afford to pay not to pay. I have no desire not to pay my debts. I do however object to paying excessively high unlawful charges. I also start to think twice about paying when an organisation feels it can ruin my life for the next six years by trashing my credit file on a whim, and when they (particularly the dcas) make all manner of threats.

[ray26]

I was really trying to go to a great length to portay the practices of these companies as very bad. I'm not defending them, and i'm sorry if this quesiton makes people angry.

 

Actually I don't really disagree with the first reply - i.e. that consumers should not behave honourably to lenders who do not treat them honourably. That seems quite fair to me and the collectors have themselves to blame if the ill feeling they cause eventually makes even 'can pay' people feel that society owes these guys a kick in the goolies, and so don't co-operate.

 

As for 'affordability' (i know that theories differ), i guess it's only for each borrower to know what they can truly afford. My queston still stands - if you have the means to repay, shouldn't you?

[spamheed]

Mine own story is pretty familiar, I have a few sources of credit

My personal circumstances change (Divorce/rehousing/restructuring at work

I contact my creditors who show no empathy whatsoever, no compassion, no offers of £30 a month with interest frozen from ANY of them, certainly not the minority.

 

My creditors drop my accounts like hot stuff (now what was that you were saying about honouring agreements and acting responsibly?)

 

DCA 1 appears on the horizon and without any consultation takes a very aggressive standpoint, trying to threaten and cajole monies out of me, I enter into an agreement with them

 

a mere three weeks into the agreement they begin to harrass me for higher payments (remember your can't pay vs won't pay argument)

 

I become sick of their harrassment and become educated as to what they can and cannot do through forums like this and others just like it.

 

(Now would I be correct in believing that it is they who have changed my viewpoint? was I right to just sit and agree to their harrassing demands? or was I right to act within the remit of the law and make them comply with the laws of the land?)

 

Since then my attitude has changed, I no longer view my creditors as being in charge, because I am more aware of the law, not some obscure mystical force you call ethics.

 

I have followed UK law in everything I have done, I have seen My Mortgage lender bailed out in part by my taxes, yet I have obtained no recduction in my mortgage payment, nor has the balance on my property been reduced, is that ethical or moral?

 

Morality is a double edged sword, one should watch out one doesn't cut oneself when one waves it about

[Seminole]

I think your assertion of the ethical position is too simplistic but perhaps I can offer a simplistic solution.

 

There is no need for most of the threatening letters and telephone calls. If a creditor or a debt buyer believes that its customer has breached its agreement and doesn't respond to a polite opportunity to remedy the situation, take them to court and let a judge decide. If the agreement is valid the judge will give them a CCJ and set payments at an affordable level. Everything would be done a lot more efficiently and there wouldn't be any need for the nastiness and unlawful behavior that you admit occurs.

 

Unfortunately this won't happen for two reasons:

 

1) A lot of creditors and DCAs know that their cases won't stand up in court. There may be no valid agreement or the debt may be statute barred.

 

2) The court would only require an affordable payment which will almost always be less than the creditor would like. Here is the key point- creditors and DCAs prefer to avoid court because they believe that they can extract larger payments from debtors and don't have much regard to their affordability. That's hardly ethical is it?

[spidey41]

why dont you ask mp's that one , those that made false claims for items and houses they did not own and now say they wont pay it back , the same mp's that have shares in dca's THATS UNETHICAL

[Belaflat]

My queston still stands - if you have the means to repay, shouldn't you?

 

Had my means remained the same, I would still be paying.

My circumstances changed and thus my ability to meet repayments.

I would love to be in the same financial position now as I was before my problems started and had I the means, i would happily repay the ORIGINAL LENDER.

Once the debt has been sold for a few pennies in the pound and tax breaks, then DCA's who make money from misery will have to fight for every penny.

 

To justify my last sentence, when my problems started, I did contact creditors. A couple allowed reduced payments and one..a major bank, refused point blank and then excercised its right to offset effectively taking all my money and leaving me unable to meet any commitments.

Once I had changed banks and got my wages untouched, I resumed the reduced payments only to have them sold on to DCA's shortly afterwards with no explanation.

 

Now tell me again why ethically, if I had more money, I should just cough up to the new owners of the debt, who expect to profit from me 10 fold.

[ray26]

I contact my creditors who show no empathy whatsoever, no compassion, no offers of £30 a month with interest frozen from ANY of them, certainly not the minority.

 

The original creditors are sort of stuck aren't they, because while in truth they would rather have a reduced payment from you than nothing, if it becomes known that such reductions are available (even if for the most deserving and genuine reasons such as redundancy or divorce) then lots of people will pitch up asking for one. It's not til the debt is sold that these offers come on the table, because then the original lender is out the picture. They are scared that if they modify terms frequently people will expect it and won't make full efforts to pay.

 

By the way, i'm not saying this is fair.

[MorganaNK]

I agree, DCAs have absolutely no interest in what circumstances have brought you to your current financial situation - to them it is just you owe the money and you are going to pay it, end of story.

 

They threaten, bully, abuse, ridicule and use underhand tactics. If anyone plays them at their own game they "spit the dummy". I don't feel any sympathy for them. If they were to show responsibility and compassion then maybe people would be more inclined to cooperate with them. As long as they continue to use the bully boy tactics then they are getting in return exactly what they deserve!

[ray26]

So if the original lender held onto the debt and didn't sell it, and worked with the borrower to freeze additions and reduce payment, borrowers would (a) feel more inclined to pay(assuming they can) and (b) approve of, rather than resent their original lender. Maybe some bank sellers are reading this...

[ray26]

Seminole - thanks. I think the other reason they often avoid court is because it's not worth the effort for a small balance - say under 1,000. There's loads of paperwork and they have a pay a lawyer a few hundred quid. Not much profit when the result is likely to be a tenner a month for 50 years.

[MorganaNK]

Yes Ray26, maybe they would. Banks etc are all sweetness and light when they are throwing money at you... but they show their true selves when you get to the unfortunate stage that you can't pay it back.

 

There needs to be more understanding - 99% of people don't stop paying on a whim; they stop paying because something has happened in their lives that means that they can't. I can think of no one who would willingly put themselves through the stress and anguish just for the hell of it. Common sense and compassion is something these DCAs are sadly lacking.

[cerberusalert]

The original creditors would never keep bad debts which are viewed as 'toxic', it doesn't look good on their books nor their shareholders reports. Far better in their view to offload them at a percentage & claim tax relief + it doesn't tarnish their corporate image.

[ray26]

Interesting - yes i aware of the capital treatment of 'toxic' loans for banks. this is a major reason they are driven to sell, absolutely. maybe if the tax, accountancy and capital rules actually encouraged lenders to work with people rather than shipping them off asap it would solve a great deal...

[Seminole]

Seminole - thanks. I think the other reason they often avoid court is because it's not worth the effort for a small balance - say under 1,000. There's loads of paperwork and they have a pay a lawyer a few hundred quid. Not much profit when the result is likely to be a tenner a month for 50 years.

 

They could do it themselves. I have no legal training but I've successfully sued three banks (getting a CCJ against one of them) as well as bringing an action under the DPA.

 

A tenner a month for 50 years equates to £6,000- hardly the £1,000 you mention. I take your point though. However, if that is all the court assesses the debtor can afford, is this not what the creditor/ DCA should be seeking. Before you argue that people hide resources, don't forget the oral examination process.

[spamheed]

Seminole - thanks. I think the other reason they often avoid court is because it's not worth the effort for a small balance - say under 1,000. There's loads of paperwork and they have a pay a lawyer a few hundred quid. Not much profit when the result is likely to be a tenner a month for 50 years.

 

sorry to be pedantic but a moment ago you were asking where ethics and morality came into debt management/avoidance and then make a statement like this?

 

If the banks didn't sell their debts they would have to deal with THEIR customers and not sell THEIR customers into some debt fuelled slavery.

 

I would have begged stolen and borrowed the money to settle for 10 to 20% of their value, why wasn't I given a right to settle for the same amount? would that not have been ethical or moral?

[spamheed]

My queston still stands - if you have the means to repay, shouldn't you?

 

 

Another way of putting it is if you have the means to do so, would you feed a dog that has already bitten you?

[dcakiller]

When considering ethics remeber this if a bank of finance house could use the law to avoid debt or tax they would and are not the quickest to pay there own bills yet cry when it is done back to them

[palomino]

Ray, I think you will find that ethics play little part in this business.

 

In my wife's case a major high street bank has -

- breached the Consumer Credit Act

- breached the Data Protection Act

- breached the Administration of Justice Act

- regard compliance with the Protection from Harassment Act as 'goodwill'

- breached the provisions of the OFT's Guidance on Debt Collection

- breached the Banking Code

- lied in writing on several occasions

[think I've missed something]

When this was pointed out to them their attitude was one of sublime indifference.

 

 

The bank has caused my wife a considerable amount of grief and stress. She tried to hide this from me but I found out eventually. I then spent some time searching the internet to find out how to handle this. It transpired that the bank had no agreement, and is not getting paid.

 

If they had been civil and had not refused every single offer my wife made they would have been receiving monthly payments of £200 for more than a year. Instead they are receiving nothing.

Their brain is so addled that even when my wife asked for a bank account number into which she could make payments they automatically refused.

 

Because of their stupidity, aggression, harassment and hostility they will receive nothing. Neither my wife or I feel in any way bad about this. We felt guilty for months last year while we trying to sort this out but we don't now.

 

Ethics? What ethics?

[dcakiller]

You should also take into account the the vast majority where paying something to the bank only to see the bank sell the debt on and sponge of the tax payer, the dca then bullys,lies and trys to intimadate the person into paying more and more.

[Bazooka Boo]

I had a sizeable 'unsecured' loan with a High Street bank, whom I had been a customer of for almost two decades, whilst my regular four figure monthly wage was going into my account, the Bank couldn't do enough for me, extending my OD occasionally, giving me small loans here and there, and giving me a platinum CC, which was paid off in full each month.

Everything was extremely platonic and professional, and I was extremely pleased to be banking with them..........until I had a near fatal accident, it was three months before I left hospital and then a further three before I had learnt to talk again.

 

Knowing that I was soon to be made unemployed and that I had responsibilities to the bank, I felt 'ethically' obliged to go into the bank and inform them that I would be made redundant by the end of that year, with no prospect of ever being able to work again, that I had 5 figure loan, plus CC with them, and what did they suggest I do?

 

The 'ethical financial advisor'() turned round and said, "We can give you another loan for 25K to pay off your old loan and CC"

 

I don't feel at all obligated to pay them the money back, I went to them asking them for help, at a time when I would have been able to pay 'something' rather than what they get now, which is nothing.

 

All I have done is mirror their ethical views, as it was very clear at the time that my ethics far outweighed any of the banking industries.

 

The 'Financila

[cashins]

My queston still stands - if you have the means to repay, shouldn't you?

Give me a break.

Which of the following situations is morally reprehensible.

(A) A company finds a flaw in a contract with another business and

uses it to their advantage, tough, just a 'commercial decision'

(B) A private individual finds a flaw in a contract with another business

and uses it to their advantage, tough, just a 'commercial decision'

Answers on a postcard please.

David