Govt sells old style SLC loans to Erudio [Arrow global DCA]

[Stigman]

The government said Erudio would have to adhere to Office of Fair Trading guidelines on the treatment of vulnerable borrowers and those in financial difficulty.

 

I cannot see Arrow worrying about anyone's vulnerability, financial status or even the status of the debt - as usua with a DCA,l lets just lie, bully, cheat, intimidate and harass the debtor into giving us their card or direct debit details.

 

Stigman

[Guest]

there is an epetition going on, but this epetition seems to be re '98-'12 loans only?

http://epetitions.direct.gov.uk/petitions/52145

Edited November 26, 2013 by Ford

[BRIGADIER2JCS]

(90 - 98) showing on some news bulletins

[dpick]

Hi as far as I know the terms and conditions of the loan do not change so if you are not delinquent on the loan (as in still deferred) then they will not have been sold on I believe this is just delinquent loans but of course the press never tell the complete story.

 

dpick

[count orlok]

Um, could be, but then why did they give the figures of 40% odd not paying 40% not earning enough (deferred?) and 20% paying is it is only the 40% delinquent sold?

 

Wonder how many of that 40% are SBed since it is well over 6 years since the last loan was set up.

[dpick]

Hi not sure with this but I believe that deferring the loan keeps the SB clock going as you would be acknowledging the debt so it would be 6 years from last deferment if SB applies to the old style student loans

 

dpick

[count orlok]

Yea, by deferring the loan I (and others who do the same) am acknowledging the loan but I know for a fact I'll never earn £28k a year so will always defer. I lay money though that many of the delinquent loans are SBed, especially considering even the most recent is well over 10 years old.

Edited November 25, 2013 by count orlok

[unclebulgaria67]

I just wonder how much info the DCA's will have on the student loan t&c's and history of the individual accounts. If they are not given all relevant information and the account are not handled properly, it is going to cause the DCA much work in dealing with correspondence.

[MrHat]

So 60% of the debtors have complied with the terms of their agreement (paying or deferred) yet they will now have to deal with Arrow Global. Charming.

 

The consortium have paid 18 pence in the pound for these accounts and 14% are currently paying. That figure may erode but will be counteracted and surpassed by loan accounts coming off deferment meaning that there is plenty of room to make a decent profit.

 

The icing on the cake will be what they can make from spoofing the statute barred lot to pay.

[dx100uk]

its the new style loans 98 onwards

the ones NOT covered by the CCA.

 

 

edit.......sri me knickers twisted...old style till 1998

 

 

dx

[Faustus]

Just repeatedly checked the news and they're all reporteding these to be old loans from 1990-98

 

Of which only 14% are making payments, 40% are under the threshold and 46% are making no payments at all........

 

So that's a face value of £860Mn, of which only £120.4Mn is being repaid. £344 mn is owed by people who are still earning under the threshold of £27K a year at least 15 to 23 years from taking out the loan and £395.6Mn owed that no action has been taken on for at least 15 years or longer

Edited November 26, 2013 by Faustus

[BRIGADIER2JCS]

Did the same check got the same result 1990 -1998.

[billy_79]

I am watching this unfold with trepidation as my student loans are with the old scheme, so must be part of the sell off. My repayments have been in deferment ever since graduating, and I can't see that changing any time soon.

 

What can I expect from this privatisation? I don't think they are allowed to change the terms, or interest rates, so I guess they just enforce them more stringently and employ bully boy tactics?

 

Just repeatedly checked the news and they're all reporteding these to be old loans from 1990-98

 

Of which only 14% are making payments, 40% are under the threshold and 46% are making no payments at all........

 

So that's a face value of £860Mn, of which only £120.4Mn is being repaid. £344 mn is owed by people who are still earning under the threshold of £27K a year at least 15 to 23 years from taking out the loan and £395.6Mn owed that no action has been taken on for at least 15 years or longer

 

Not totally correct - you are assuming that everyone borrowed the same amount for your straight proportion calculations. It's probably not far off when everything is averaged out, but there could be unknown factors that affect the figures.

 

Also, many of these loans are under 15 years old. I started university in 1997, so was the very last year to come under the old loan scheme. But throughout my course we continued to get loans under the old scheme each year - my last one was 2002, which is probably about the very end of the old scheme. I imagine a big proportion of the outstanding loans are from the last few years.

 

My income has always been low enough to defer, and I can't see that changing in the near future. I am a bit surprised that only 46% of these remaining loans are in deferment. What they are selling off is just the dregs of the barrel of what is left - a high proportion from this era have already been repaid.

 

I guess the new owners will be most interested in 40% that are in default, that's where they stand to make some money back, potentially. My guess is that a lot of these 40% are no longer in the UK, either European students that went home after studying or people that have emigrated. Unless SLC haven't put much effort into tracking defaulters, but I think they've had a reasonable go judging by some of the posts in this section?

[Faustus]

Well..

 

If it's overseas students they're chasing they're going to have to be clever. This 2009 reports from the BBC indicates a 70% failure rate with no one getting in tocub with a Spanish student for 5 years !

 

http://news.bbc.co.uk/1/hi/7912548.stm

[billy_79]

Oh, and if you think these figures look bad, it'll be far, far worse in 20 years time. These old loans were a maximum of about £1800 per year - so most students graduated with under £10k of debt. With the introduction and increase of tuition fees, students are now able/required to borrow over £10k each year. The government are either delusional or hiding the fact that most of it will never get repaid. Like most things I suspect they are just trying to make the figures look good now, as they know they won't be around when it comes back to bite us all in the future.

[Stigman]

Arrow are not going to accept that the person who have deferred their loan are not earning enough.

 

Arrow are going to either demand to see the personal financial details or tell them to start paying the loan back at xx.xx per month regardless so the ex-burger flipper gets a commission at month's end.

 

Totally agree with the comments by unclebulgaria67, I was thinking exactly the same, only balance sheets with names, addresses, phone numbers etc. will be received so everyone will be assumed as a debtor.

 

Stigman

[unclebulgaria67]

Perhaps those people concerned should be raising this with their local MP.

 

 

If they receive enough queries, then I expect they will start to raise these issues with the government.

 

 

The more profile this issue receives, the more difficult it will be for Arrow and others dealing with this, not to follow a proper process.

[TheLion]

I noticed on the epetition that the 'relevant government department' has responded by stating with reference to the 1998-2012 loans:

 

"The Sale of Student Loans Act 2008 places a requirement on Government to ensure that borrowers whose loans have been sold are not in a worse position than would have been the case had the loans not been sold. "

 

Now I would presume that if you are below the repayment threshold then a DCA will not be able to force repayment.

[dpick]

I still wonder if these are just delinquent accounts that have not been deferred for some reason and then nothing paid. For the number of student loans that are made I don't think this can be other than loans that are defaulted.

 

dpick

[tomtubby]

After the Christmas period I would expect to see many enquiries being posted concerning debt recovery letters from a firm called Arrow Global chasing payment for student loans taken out between 1990 and 1998. These ancient debts valued at around £900 million have been SOLD on the cheap to a debt recovery firm.

 

Correct me if I am wrong but does the Limitation Act have any bearing here ????

 

A 'word' copy of the press article is below together with a link:

 

.

 

 

http://www.independent.co.uk/student/news/government-sells-900-million-in-student-loans-to-debt-collection-company-8961790.html

 

 

Some 300,000 former students could soon face a barrage of fresh debt demands after the Government announced it was flogging student loans worth £890m to a private company, renowned for its persistent debt recovery practice.

 

Erudio Student Loans has agreed to pay £160m for the loans, taken out by students between 1990 and 1998.

 

But it is the firms behind Erudio that are interesting. One is Arrow Global, a specialist debt recovery firm which buys loans that have gone sour from banks and credit card companies. Arrow – which floated on the Stock Exchange last month – is providing the expertise to manage the collection of these outstanding student debts.

 

The second is CarVal Investors. Like many private equity firms its business is pretty opaque, but it is known to have a very active arm in the UK focusing on buying distressed assets. It is in effect providing the money part of the deal, although Arrow invested £11m to buy the student loans portfolio sold yesterday.

 

The deal is a bit of a departure for Arrow. In the past it has focused on snapping up sour loans at a massive discount from banks and other finance firms.

 

The move into buying public sector loans could grow as the Government looks to get rid of more dodgy debt off its balance sheet. Tom Drury, the chief executive officer of Arrow Global, said: “This is an important step towards delivering this year’s financial goals and positioning the business for future growth.”

 

Yesterday’s sale involved the remaining rump – 17 per cent – of the mortgage-style student loans on the Government’s books. Two previous sales in 1998 and 1999 passed a combined £2bn of the loans to the private sector. About a million borrowers were retained by the Government’s Student Loans Company after the earlier sales and 69 per cent of those have subsequently fully repaid their debt.

 

That suggests there remain around 300,000 borrowers still to repay student loans from more than 15 years ago, and it is these that will be targeted by Arrow-backed Erudio.

 

Traditional bailiffs and similar firms are debt collectors that are charged with finding debtors and getting cash from them.

Debt purchase firms such as Arrow operate differently in that they bid for chunks of debt put on sale by finance firms who may have given up chasing the loans and are happy to get any kind of returns from them.

 

Typically debt purchase firms pay just a few pence in the pound for these dodgy debts and then carpet bomb potential debtors. In the past that has led to many complaints about innocent people receiving threatening letters, phone calls or even visits simply because they have the same number as a debtor, or used to live at the same address as them.

 

As the debt purchase firms own the debts, they only make money if they can collect on them, so some tend use whatever methods at their disposal to do so.

 

However the industry has come under the scrutiny of the Office of Fair Trading and responsibility for its regulation will in April pass to the Financial Conduct Authority.

 

Most debt purchase firms took an enormous hit in the credit crunch when they were left saddled with too much uncollectable debt.

 

Arrow’s woes led it to be sold to the RBS Special Opportunities Fund in 2009. The Scottish bank – which is facing a fresh inquiry by banking regulators into allegations that it drove firms to collapse so it could buy back their assets at rock-bottom prices – still retains a third of the business after last month’s IPO, which saw shares debut at 205p. The shares topped 265p earlier this month but yesterday fell 6.5p to238p.

 

Universities and Science Minister David Willetts ignored the implications for former students when he announced the sale yesterday morning.*

 

Instead he said: “The sale of the remaining mortgage-style student loan book represents good value for money, helping to reduce public sector net debt by £160m. The private sector is well placed to maximise returns from the book which has a deteriorating value.”

[brassnecked]

I wonder if Arrow will be chasing student loans from that period that are deferred, as in debtor is on benefits or too low an income to repay, I wonder if these will include many that are written off as the student has passed 60 years old, or 40 years old. The rules changed post 1998, as the old style SL could be killed off by a bankruptcy. However the loans since 1998 cannot be included in a bankruptcy.

 

Some of these old loans are administered by Thesis Servicing, a part ol Link Financial. Will Arrow be assuming responsibility for these?

 

More questions than answers here with the potential for a complete mess if they go after the lawfully written off loans.

Edited December 12, 2013 by brassnecked
typo

[silverfox1961]

I am expecting a slew of people on old style student loans who have correctly deferred them each year to start being chased for these loans.

 

Are Arrow going to be continuing the deferment? Will they know who has deferred or not?

[tomtubby]

What we do know is that the low price that has been paid (20% of the value) is reflected by the fact that approx 45% of the borrowers are

currently earning below the repayment threshold, 15% of borrowers are still repaying and 40% are not repaying in accordance with the terms of the loan.

 

I am expecting a slew of people on old style student loans who have correctly deferred them each year to start being chased for these loans.

 

Are Arrow going to be continuing the deferment? Will they know who has deferred or not?

 

 

.

Interesting question and in particular given that the Government have stated that the terms and conditions for borrowers who took out the last of these mortgage-style student loans will not change as a result of the sale.

 

Under the current terms of the loans sold, borrowers are required to repay fixed monthly instalments over a set period of five or seven years with interest charged at a rate equivalent to the retail prices index.

 

Repayments can be deferred for a year at a time if a borrower’s income is below a threshold of 85 per cent of national average earnings. National average earnings are currently at £28,775.

 

But the move will lead to fears that the private firm will be much less sensitive in chasing debts and could hound those facing financial problems to pay up – even more than two decades after they went to university.

 

An astonishing 15,000 people have already signed an online petition against the plans, saying it will simply allow private companies to profit at the expense of poor former students.

 

However, it is too late for any petitions given that the sale has now gone ahead.

[Annie71]

Is this really any different to the other debts being managed by Link. No one knows what if anything that is different will happen and I think someone is just looking for a headline. It reads more like a daily mail article than an Indi one.

[dx100uk]

sev threads on same issue merged.

 

dx