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effective credit control

Effective Credit Control

I have read some quite shocking reports recently regarding just how much debt is written off by businesses. It does beg the question as to whether (OR NOT) businesses have an effective Credit Control procedure in place.

Credit Control is the life blood of any business

Credit Control isn’t considered by many to be important.  Most business will focus on producing the product or providing the service, which is important, of course.  That said,  Credit Control is the life-blood of any business and must be treated as paramount. If you give your customers/clients terms then you must have controls in place to ensure that monies owed to you are being paid in a timely fashion.

Too many businesses are reactive rather than proactive. Our top tip is to be ahead of the game – sending out a statement once a month as a reminder is simply not good enough. Get your credit controller making those calls and establish a rapport with your clients. They won’t mind getting a follow-up call regarding payment and when it might be received. You should not be embarrassed about asking for monies owed to you – you have earned it and your client will admire you for your Accounts Department’s efficiency.

Insolvency in the Construction Industry

Here’s some concerning information about insolvency in the construction industry from the team at Burton Sweet Corporate Recovery.

Interestingly, this industry has always contributed a disproportionate number of business failures. Graham Down, Director at Burton Sweet, says that according to the most recent figures produced by the Office of National Statistics, construction output has fallen for each of the last two quarters, meaning that it is technically in recession.  They offer a free initial consultation to any business in the construction industry who is facing difficulty.

So, what are the most common causes of the high failure rate? According to Burton Sweet, they are:

  • Retention

Companies are failing to keep track of, or even chase, retentions. A Retention is a sum (commonly 5%) held back from by a client from the contractor (or the contractor from sub-contractors) so as to ensure that the contractor completes all its contractual obligations.  Half of the retention is normally released on “practical completion” of the contract with the remainder paid over at the end of a “defects liability period”.

  • Housing Grants, Construction & Regeneration Act 1996 (HGCRA)

Companies are failing to apply their statutory rights when a client or main contractor pays less than it should. The HGCRA was set up to identify poor payment practices and extensive, expensive and time-consuming disputes as amongst the key problems besetting the construction industry

  • Record keeping

Not all contracts need to be in writing, believe it or not; an oral contract is usually just as binding on all parties.  In the past, they needed to be in writing to be protected by HGCRA (see above) but that has now changed.  Consequently, disputes over contracts are difficult to resolve if there is no paper trail.

  • Over-stretching

Over-stretching has been the downfall of many well-established construction businesses due to companies taking on work outside of their usual remit when times are hard, resulting in costly mistakes, delays and having to re-do work.

  • Supervision

Even the most experienced and well-qualified employees can get it wrong sometimes.  Tendering, estimates and contract documentation need to be checked rigorously; the buck always stops at the top.  Many companies in the industry have been brought to their knees because of administrative failures before a job started.

  • Over-exposure

The construction industry is disproportionately susceptible to insolvency.  When one company fails it can bring down suppliers and sub-contractors who are owed money – the so-called “domino effect”.  Because construction businesses are often involved in just a relatively small number of contracts at any one time, they are more vulnerable because they often have all their eggs in one basket.

  • HMRC

Due to the pressures of cash flow, money set aside to pay taxes as a lump sum, (PAYE/NIC, VAT and corporation tax (or schedule D for unincorporated businesses) & the Construction Industry Scheme (CIS)), it can be tempting to use it to ease the immediate situation, making it extraordinarily difficult to recoup and catch up.

Although these are examples from the construction industry, heeding issues such as record keeping, supervision and HMRC is good practice for any business.

Extracts courtesy of Burton Sweet Corporate Recovery, E-brief August 2016

http://www.bscorprecovery.com/

Debt Recovery Protocol

Government Guidelines:-

1 INTRODUCTION 1.1 This Protocol applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader). The business will be referred to as the “creditor” and the individual will be referred to as the “debtor”. This Protocol does not apply to business-tobusiness debts unless the debtor is a sole trader. 1.2 The Protocol describes the conduct the court will normally expect of those parties prior to the start of proceedings. It includes a template Information Sheet and Reply Form to be provided to debtors in all cases. 1.3 The Protocol is intended to complement any regulatory regime to which the creditor is subject. To the extent that compliance with this Protocol is inconsistent with a specific regulatory obligation (such as a principle, rule or Civil Procedure Rule Committee Pre-Action Protocol for Debt Claims Consultation 2 November 2015 – 11 January 2016 – 2 – guidance contained in the Financial Conduct Authority’s Handbook) that regulatory obligation will take precedence. The Protocol should also be read in conjunction with industry and government guidance relating to good practice in the recovery of debt. 1.4 The Protocol does not apply where the debt is covered by another Pre-Action Protocol such as Construction and Engineering or Mortgage Arrears. 2 AIMS OF THE PROTOCOL 2.1 This Protocol’s aims are to – (a) enable the parties to resolve the matter without the need to start court proceedings, including considering using an Alternative Dispute Resolution (ADR) procedure or agreeing a reasonable repayment plan; (b) encourage early exchange of sufficient information about the matter to help clarify the issues in dispute; (c) encourage the parties to act in a reasonable and proportionate manner in all dealings with one another (which includes only incurring costs which bear a reasonable relationship to the sums in issue); (d) support the efficient management of proceedings that cannot be avoided. 3 INITIAL INFORMATION TO BE PROVIDED BY THE CREDITOR 3.1 The creditor should send a Letter of Claim to the debtor before proceedings are started. The Letter of Claim should – (a) contain the following information – (i) the amount of the debt; (ii) whether interest is continuing; (iii) where the debt arises from an oral agreement, who made the agreement, what was agreed (including, as far as possible, what words were used) and when and where it was agreed; Civil Procedure Rule Committee Pre-Action Protocol for Debt Claims Consultation 2 November 2015 – 11 January 2016 – 3 – (iv) where the debt has been assigned, the details of the original debt and creditor, when it was assigned and to whom; (v) if regular instalments are currently being offered by or on behalf of the debtor, or are being paid, an explanation of why a court claim is being considered; (vi) details of how the debt can be paid (for example, the method of and address for payment) and details of how to proceed if the debtor wishes to discuss payment options; (vii) the address to which the completed Reply Form should be sent; (b) do one of the following – (i) enclose an up-to-date statement of account for the debt; (ii) enclose the most recent statement of account for the debt and state in the Letter of Claim the amount of interest incurred and any administrative or other charges imposed since that statement of account was issued, sufficient to bring it up to date; or (iii) where no statements have been provided for the debt, state in the Letter of Claim the amount of interest incurred and any administrative or other charges imposed since the debt was incurred; (c) where the debt arises out of a written agreement, enclose a copy of that agreement, unless providing the agreement is disproportionately burdensome to the creditor; (d) enclose a copy of the Information Sheet and the Reply Form at Annex 1 to this Protocol; and (e) enclose a Statement of Means form (an example Statement of Means is provided in Annex 2 to this protocol). 3.2 The Letter of Claim should be clearly dated toward the top of the first page. It should be posted either on the day it is dated or, if that is not reasonably possible, the following day. Civil Procedure Rule Committee Pre-Action Protocol for Debt Claims Consultation 2 November 2015 – 11 January 2016 – 4 – 3.3 The Letter of Claim should be sent by post. If the creditor has additional contact details for the debtor, such as an email address, the creditor may also send the Letter of Claim using those details. If the debtor has made an explicit request that correspondence should not be sent by post, and has provided alternative contact details, the creditor should use those details when sending the Letter of Claim. (Note that a condition in a creditor’s standard terms does not constitute an explicit request.) 3.4 If the debtor does not reply to the Letter of Claim within 30 days the creditor may start court proceedings, subject to any remaining obligations the creditor may have to the debtor (for example, under the Financial Conduct Authority’s Handbook). Account should be taken of the possibility that a reply was posted towards the end of the 30-day period. 4 RESPONSE BY THE DEBTOR 4.1 The debtor should use the Reply Form in Annex 1 for their response. The debtor should request copies of any documents they wish to see and enclose copies of any documents they consider relevant, such as details of payments made but not taken into account in the creditor’s Letter of Claim. 4.2 If the debtor indicates that they are seeking debt advice, the creditor must allow the debtor a reasonable period for the advice to be obtained. In any event, the creditor should not start court proceedings less than 30 days from receipt of the completed Reply Form or 30 days from the creditor providing any documents requested by the debtor, whichever is the later. 4.3 If the debtor indicates in the Reply Form that they are seeking debt advice that cannot be obtained within 30 days of their reply, the debtor must provide details to the creditor as specified in the Reply Form, and the creditor must allow reasonable extra time for the debtor to obtain that advice. 4.4 Where a debtor indicates in the Reply Form that they require time to pay, the creditor and debtor should try to reach agreement for the debt to be paid by instalments, based on the debtor’s income and expenditure. In trying to agree affordable sums for repayment, the creditor should have regard where appropriate to the provisions of the [Common] / [Standard] Financial Statement or equivalent guidance. If the creditor does not agree to a debtor’s Civil Procedure Rule Committee Pre-Action Protocol for Debt Claims Consultation 2 November 2015 – 11 January 2016 – 5 – proposal for repayment of the debt, they should give the debtor reasons in writing. 5 DISCLOSURE OF DOCUMENTS 5.1 Early disclosure of documents and relevant information can help to clarify or resolve the issues in dispute. On that basis, where any aspect of the debt is disputed (including the amount, interest, charges, time for payment, or the creditor’s compliance with relevant statutes and regulations), the parties should exchange information and disclose documents sufficient to enable them to understand each other’s position. 5.2 If the debtor requests a document or information, the creditor must – (a) provide the document or information; or (b) explain why the document or information is unavailable, within 30 days. 6 TAKING STEPS TO SETTLE THE DISPUTE AND ALTERNATIVE DISPUTE RESOLUTION 6.1 If the parties still cannot agree about the existence, enforceability, amount or any other aspect of the debt, they should both take appropriate steps to resolve the dispute without starting court proceedings and, in particular, should consider the use of an appropriate form of Alternative Dispute Resolution (ADR). 6.2 ADR may simply take the form of discussion and negotiation, or it may involve some more formal process such as a complaint to the Financial Ombudsman Service where the dispute concerns a debt regulated under the Consumer Credit Act 1974. 6.3 In some cases, especially where the debt is large, mediation (a third party facilitating a resolution) might be appropriate. Details of registered mediation providers can be obtained from the Civil Mediation Provider Directory at www.civilmediation.justice.gov.uk. The potential costs of mediation should be considered in relation to the amount of the debt. Civil Procedure Rule Committee Pre-Action Protocol for Debt Claims Consultation 2 November 2015 – 11 January 2016 – 6 – 6.5 Where the parties reach agreement concerning the repayment of the debt, the creditor should not start court proceedings while the debtor complies with the agreement. 7 COMPLIANCE WITH THIS PROTOCOL 7.1 If a dispute proceeds to litigation, the court will expect the parties to have complied with this Protocol. The court will take into account non-compliance when giving directions for the management of proceedings. The court will consider whether all parties have complied in substance with the terms of the Protocol and is not likely to be concerned with minor or technical infringements, especially when the matter is urgent (for example an application for an injunction). 7.2 For further information about the court’s approach to compliance, see Practice Direction – Pre-Action Conduct and Protocols (paragraphs 13 to 16). 8 TAKING STOCK 8.1 Where the procedure set out in this Protocol has not resolved the dispute between the debtor and creditor, they should undertake a review of their respective positions to see if proceedings can be avoided and, at the least, to narrow the issues between them. 8.2 Where the debtor has responded to the Letter of Claim but agreement has not been reached, the creditor should give the debtor at least 14 days’ notice of their intention to start court proceedings, unless there are exceptional circumstances in which urgent action is required. Civil Procedure Rule Committee Pre-Action Protocol for Debt Claims Consultation 2 November 2015 – 11 January 2016 – 7 – ANNEX 1 INFORMATION SHEET You have received this notice because a business intends to take you to court in relation to a debt. This notice tells you about your rights and what to do next. Please read it carefully. Why have I received this notice? You have received this notice because a business believes you owe it money. The business intends to take you to court to make sure the money is paid. Before the business can take you to court, it must send you a letter along with this notice. What should the letter from the business say? The letter from the business should give you the following information:  The amount of money the business thinks you owe.  Information about interest and fees added to the debt. This might be shown in an updated account statement.  Details of how to pay the debt and how to discuss payment options. The letter from the business might give you the following extra information, depending on whether it is relevant to you:  If you have offered to make payments, an explanation of why the business still wants to take you to court.  If the debt has been passed from one business to another, details of your original debt and details of the debt’s transfer to the new business.  If your agreement to pay the debt was not written down, information about your spoken or “oral” agreement. The letter should also enclose a copy of a Reply Form for you to fill out. Finally, the business might have sent you a copy of your written contract that sets out your agreement to pay the debt. You should check that the letter from the business contains all the relevant information.

Bankruptcy

The bankruptcy threshold will increase to £5,000 for creditors’ bankruptcy petitions presented after 1 October 2015 as set out in the Insolvency Act 1986 (Amendment) Order 2015. Should a bankruptcy petition be presented prior to this date, the current minimum bankruptcy level of £750 will apply. Whilst debtors will welcome the move, creditors wishing to enforce a debt which is less than £5,000 should act now in order to benefit from the current bankruptcy threshold.

Love is Pooling Resources – Article by Graham Down – Burton Sweet and worth a read!

Love is …. pooling finances?
A recent case has raised issues which may have far-reaching and important consequences on the finances of one spouse in the event of the bankruptcy of the other.
The question which arose in the recent case of Lemon & Wood v Chawda concerned a residential investment property jointly owned by Mr and Mrs Chawda since it was purchased in 1995. Both before and after Mr Chawda’s bankruptcy in November 2011, the rental income had been shared equally between them. In 1999 the property had been remortgaged in 1999 to raise £80,000 to enable Mr Chawda to buy a business premises jointly with his brother. Mrs Chawda claimed that she had no interest in either the business premises or the business (a mobile phone business) itself. Consequently she claimed that, under the principle of equity of exoneration, the £80,000 should have been repaid out of the husband’s share, leaving her with a greater share of the equity.
The leading case on exoneration was Re Pittortou, a 1995 case in which the judge said that exoneration depended on the intention of the parties. In essence, it applied in cases where a spouse joined in a charge over jointly-owned property for the purposes of the bankrupt, and the money was borrowed and used for the bankrupt’s sole benefit.
In the Chawda case, the Court found that, where a husband and wife had pooled their resources and enjoyed a prosperous lifestyle as a result of the bankrupt’s business, then it would be artificial for one spouse to take the benefits of that business whilst trying to enforce the individual right of exoneration. Mr and Mrs Chawda had administered their affairs jointly, which made it impossible to establish who had financed what. It followed that exoneration did not apply, and Mrs Chawda was not entitled to any more than a 50% interest.
This decision means that, in a modern society where husbands and wives tend to pool their resources and enjoy a lifestyle on the back of the other’s income, there are few circumstances where exoneration will apply.
At Burton Sweet Corporate Recovery we have experience of both sides. Earlier this year we successfully argued that exoneration applied, in a case where the husband and wife had kept their financial arrangements separate. Clearly this is a complex area, and advice should be taken on a case by case basis.
This publication is for general information only. It is not suitable for specific advice which should be sought for specific cases. Although we endeavour to provide accurate information, there is no guarantee that such information is accurate at the date it is provided, nor that it will continue to be accurate in the future. We cannot accept

CHANGE IN SMALL CLAIMS LIMIT

Posted by diane.bantten

For as long as I can remember the Small Claims limit or ceiling has been £5,000.00 – it is about to change.

From the 1st April 2013 the upper limit for claims in the small claims track will increase to £10,000.00.     The general rule for small claims is that even if you are successful if your claim it is not possible to get an order for the other party to pay your legal costs when you’ve gone to the expense of instructing a firm of Solicitors.

You should make sure that you have a clause in your terms and conditions of business that covers costs incurred in pursuing payment i.e. in the event that it is necessary to incur an agents fee in pursuance of payment then you will be entitled to add that amount to the claim.

For more information don’t hesitate to contact someone at Acquit who will be happy to go into more detail.

County Court Judgment some statistics!

Posted by diane.bantten

The number and value of county court judgments (CCJs) against businesses in England and Wales dropped in the first half of 2012, according to the Registry Trust.

The latest figures showed that the total value of debt judgments continued to decline, down 5.4%, or £15.8m lower than the total for the first half of 2011.

In the first six months of this year, businesses were ordered to repay debts worth £276.1m, compared with £291.9m in the same period the previous year.

The non-profit Registry Trust, which operates the register of judgments, orders and fines for England and Wales, revealed that a total of 65,022 judgments were issued against businesses in the first half of this year.Businesses faced 7,074, or 9.8% fewer CCJs in 2012, compared to the first six months of 2011, when there was a total of 72,096 judgments.

According to the organisation, the figures depict a longer term trend, with the number and value of CCJs against companies having been decreasing since 2009, when 116,633 CCJs worth £510.1m were recorded.

Statistics from Northern Ireland showed that the total value of default and small claims judgments issued against businesses and consumers in the first half of the year was 4.7% lower than the same period in 2011, down from £11.5m to just under £11m.

Despite a three-year decline in the value of judgments for debt in Northern Ireland, the number of judgments increased by 5.6% to 4,975, from 4,713.

There were 387 high court judgments to the value of £29.1m issued in the first six months of 2012, slightly below the annual average value of £31.7m between 2008 and 2011.

Hurlston said that it was too early to draw conclusions about Northern Ireland’s “debt picture”.

Brian Havercroft, chairman of the Civil Court Users Association and high court services director at Marston Group, said that the reduction in judgments was a result of the “economic situation”.

“In addition, creditors are less inclined to use the courts due to the cost and delays which, coupled with the government’s policy of reducing the effectiveness of enforcement, will mean a reduction in the use of the courts.”

He added: “Creditors need to know that if they issue proceedings there is a reasonable chance of making recovery but sadly the government is doing little to reverse the trend that has occurred in protecting debtors to the detriment of the creditor.”

Mortgage Shortfall Debt

Posted by diane.bantten

MORTGAGE SHORTFALL DEBT

I am convinced that my purpose in life is to help people.   It’s pretty much the ethos behind Acquit Debt Recovery – for the most part we help companies that have not been paid and as a result their cash-flow is sticky!  It is what we do  – the fact that we get paid on our results is a bonus of course!

This said, we were recently contacted by a lovely lady – lets call her Jane as in doe although that’s not her real name of course.   She told us a sad story about having to hand back the keys to her old property, and after the property had been sold at an undervalue, the Estate Agents had taken their cut what had been a £30,000 loan turned into a debt of over £70,000.00.

She came to us for help.   It isn’t our thing of course, but we know people who are now in the process of helping Jane out of a tricky situation.

Anyway, why am I blogging about it …… I thought it would be helpful to explain just what a mortgage shortfall – I have taken a lot of this info from the Bankruptcy & Insolvency website – obviously it is for information and to point you in the right direction – it is not a substitute for taking your own independent legal advice.

What is a mortgage shortfall?

Many people find themselves being asked to pay large sums by their mortgage lender after they have been repossessed or have handed in the keys on their house. Often people think that once they have left the house their liability ends. However, this is not the case if the house is sold for less than the outstanding mortgage. The debt that remains is usually referred to as a mortgage shortfall. This also include s the monthly instalments and interest that has been added on to the debt until the house is sold, plus legal and estate agent’s costs. You can still be asked to pay back a shortfall a long time after you left the house as mortgage lenders may try to pursue a shortfall debt up to twelve years afterwards.

How long will this hang over me?

Lenders think that mortgages can be pursued for 12 years under the Limitations Act. Most other debts can only be pursued for 6 years. The time period starts running from the last time the lender contacted you and you agreed that you owed the money (“acknowledged” the debt ) or you made a payment to the lender (or someone who owned the house jointly with you made a payment).

  • Following the cases of Paragon v Banks and Halifax v Grant, The Court of Appeal has made a decision. They say the limitation period for mortgage lenders trying to recover mortgage shortfall debts is 12 years (Section 20 of the Limitation Act 1980).
  • This means the lender has 12 years from the last time a payment was made on the account or you acknowledged the debt to start action to recover the capital owed on the mortgage. It appears that the lender has 6 years to start action to recover interest added to the debt.
  • This decision means that you will not be able to argue that lenders should have started action within 6 years. You may need to contact us again for further advice on your situation. Phone the Bankruptcy & Insolvency advice line for advice 0800 074 6918.
  • From 31 st October 2004 the Financial Services Authority (FSA) has taken over the regulation of mortgage lending and problems with existing mortgages. The Mortgage Conduct of Business Rules say that if the lender decides to recover the mortgage shortfall debt they must make sure you are told about this. This must happen within six years of the date of sale. If the lender does not do this then you can complain to The Financial Ombudsman. The Council of Mortgage Lenders (CML) also follows this policy. See the section below.

Council of Mortgage Lenders Policy

Mortgage lenders who are members of the Council of Mortgage Lenders (CML) have not yet changed their policy on recovering mortgage shortfalls in light of The Court of Appeal decisions above. You can still argue the policy to your lender as a point of good practice.

From 11 February 2000 the policy is as follows:

The CML says anyone whose property was repossessed and sold and who has not been contacted by their lender within six years from the date of the sale will not be asked to pay the shortfall.

If your lender has already contacted you before 11 February 2000 then it appears they will continue to try and recover the shortfall even if your house was repossessed and sold more than six years ago.

If this applies to you then you should read the factsheet for options to negotiate with the lender. You could try arguing that it is unfair for the lender to keep trying to recover the money from you if your house was sold over six years ago.

Point out they have already accepted that they have a “commitment to fair and sympathetic treatment for people for whom possession cannot be avoided” and have already limited the recovery period for new cases.

 

Jointly-owned debts

If your mortgage was in joint names, you need to check what the other borrower has done. If they acknowledge the debt it doesn’t affect you BUT if they have made a payment the limitation period starts running again for both of you from the date the last payment was made.

 

Ask for the details of the debt

If you are contacted by your lender or their agent, the first thing to do is to ask for a detailed breakdown of how they have worked out the amount they say you owe. This should allow you to check all the figures and give you a basis for deciding if the correct procedures have been followed.

Important: don’t acknowledge to the lender that you owe the debt at this stage.

You should ask for details of:

  • the exact sale price of the house
  • details of any valuations made on the property
  • how they have calculated the interest that has been added on up to the time of the sale and since the sale

and

  • any solicitors, estate agency fees or court costs that have been added on.

What if my lender does not reply?

If you lender is being awkward about supplying a breakdown of the mortgage shortfall account to you, then you should write to the lender and request they send you all information held by them on computer to do with the mortgage account. This request should be made under the Data Protection Acts 1984 and 1998 and refer to the “right of subject access” under the acts.

The lender can charge you up to £10.00 for supplying the information. They can also write back to you requesting you to be more specific or ask you for more information. You should be sent anything held on computer but not paper or microfiche files. (The Data Protection Act 1998 also covers paper and microfiche files but will only cover new cases).

If the lender does not comply with the request you should complain to the Information Commissioner who will take it up with the lender and can serve an Enforcement Notice if the information is not sent.

Mortgage Indemnity Insurance

You also need to check whether you had a Mortgage Indemnity Guarantee (MIG) on the house. This is an insurance that covers the mortgage lender against a loss. You would usually have paid it out as a lump sum when you first bought the house, or it could have been deducted from your mortgage advance at the time.

You need to check that your mortgage lender has made a claim on any insurance available. This could limit the amount you owe to the mortgage lender although the insurance company can ask you to pay back the amount they pay out to the mortgage lender. The insurance company sometimes asks the lender to collect their share for them. From 31st October 2004 your lender must inform you in writing if your mortgage shortfall debt may be pursued by another company.

Some people argue that the indemnity policy should cover the borrower for any shortfall as they paid for the insurance in the first place.

This is a complicated area of law .

Following a case called Woolwich v Brown 1995 the Court of Appeal has decided that generally mortgage indemnity insurance only covers the lender and not the borrower.

Can I dispute the amount being claimed?

Building societies have an obligation to find the ” best price which can be reasonably obtained” whilst banks have a ” duty of care” to a borrower. From 31st October 2004 the FSA mortgage rules say that all lenders must obtain the “best price that might reasonably be paid”. It is possible to dispute the amount being claimed by the mortgage lender in some cases.

  • If you can show that the house was sold for substantially below the proper market price taking into account the market conditions at the time of sale.
  • If the house was not marketed sufficiently to obtain a good sale price.
  • If you arranged a sale which was refused by the lender, but after repossession the house was sold by the lender for a much lower price.
  • If the house stood empty for a very long time you may be able to argue that the mortgage company should have rented it out and therefore offset possible rental income against the shortfall balance.
  • If the lender decides to leave the house empty and not sell it either , then you may have an argument for asking the court to order a sale .

Who do I complain to?

From October 31st October 2004 the Financial Services Authority (FSA) has taken over the regulation of mortgage lending and problems with existing mortgages. This applies to all mortgages where the lender had a first charge over the property and at least 40% of the property is occupied by you and/or your immediate family. It does not apply to secured loans regulated by the Consumer Credit Act. The new rules say that the lender must market the property as soon as possible and obtain the “best price that might reasonably be paid” taking into account factors such as market conditions and the increasing amount you owe on the mortgage debt.

If you are not happy with the way in which your lender has dealt with your mortgage shortfall, you can complain to The Financial Ombudsman.

Negotiating Repayments

The debt owed to either the mortgage lender or the insurance company can be treated in the same way as any other unsecured credit debt. One of the following options may be possible.

  • We suggest you read through the Money Advice Direct information pack “Dealing with your Debts” and prepare a detailed personal budget. Work out your current income and essential outgoings. If you can afford to make payments, one option is to contact the lender in writing, enclose a copy of your personal budget and make an offer of payment.
  • Be careful: lenders may ask you to fill in their own budgeting form. It may ask you for extra details you do not wish to provide . If they have not been to court you do not have to give employers/tax/bank details, but your lender may be less likely to help if you refuse.
  • If your house has been repossessed and you are now in rented accommodation, you need to explain to them that you no longer have any assets such as a house and outline your exact financial position. This should help persuade your lender that there is little point in pursuing you for the debt.
  • If you can afford only a small offer of payment per month and have no assets then you might want to suggest that they don’t pursue the debt as you are never going to be able to pay it back. Mortgage and insurance companies do not always take action to recover the debt when they can see it is pointless for them to do so. ( e.g. write off the debt).

Warning: you should make sure that your full and final settlement offer has dealt with the whole shortfall and you do not still owe money to an insurance company for the amount paid out under any mortgage indemnity insurance .

  • Do not pay any sort of part payment until you have the creditor’s written agreement that they have accepted your offer in “full and final settlement”. It is a good idea to send the payment via a third party as this makes the deal more legally binding. Never make a payment until the offer has been accepted in writing by the lender . If someone else is to make the payment on your behalf then they should only provide the money on condition that the offer has been accepted.

Log Book Loans

Posted by diane.bantten

I make no apology for posting direct from the OFT website – this is important news for consumers.  Acquit of course specialises in Commercial Debt but felt it important to put this out there!

OFT welcomes Tribunal’s decision to strike out logbook loans’ appeal

125/11    18 November 2011The OFT has welcomed a Tribunal’s decision to strike out appeals by the UK’s biggest logbook loan businesses against the removal of their consumer credit licences.The First-tier Tribunal’s ruling to strike out the appeals of Nine Regions Limited (‘NRL’) and Log Book Loans Limited (together ‘Log Book Loans’) follows the OFT’s original decision that Log Book Loans were unfit to hold consumer credit licences.Logbook loans are secured on vehicles such as cars and motorbikes. If the borrower defaults, the loan company can seize the vehicle without going to court. Even after the vehicle is sold the borrower can still be pursued for any shortfall.The OFT asked the Tribunal to strike out Log Book Loans’ appeals because of evidence that emerged during the appeal hearing. Log Book Loans admitted that thousands of letters had been sent to borrowers in the name of a firm called Adams Spencer & Phillips (Legal Services) Limited (‘ASP’) falsely threatening to take legal action on behalf of NRL.The First-tier Tribunal found that:

  • the letters were sent to give borrowers a false impression that ASP was a body authorised to carry on activities as if it were a firm of solicitors, such as the conduct of litigation
  • ASP actually had no employees and was not a body or individual duly authorised to bring legal action on behalf of NRL
  • deceptive practices included that between September 2009 and April 2010, employees of NRL called customers pretending to be employees of ASP
  • the ASP letters were part of a deliberate deceit
  • the deception was played out, not simply in front of customers but also with third parties such as solicitors acting for borrowers, as well as the Financial Ombudsman Service.

David Fisher, Director of the OFT’s Consumer Credit Group said:

‘The OFT welcomes the Tribunal’s decision to strike out the companies’ appeals. The decision confirms our view that these companies are unfit to hold their consumer credit licences.

‘Intentionally deceiving debtors as part of a debt collection policy is an extremely serious matter, which calls into question a licensee’s fitness. We expect businesses licensed by the OFT to treat all their customers, including those in arrears, fairly and transparently.’

NOTES

  1. A copy of the decision is on the First-tier Tribunal’s website.
  2. Log Book Loans can seek permission to appeal the decision of the First-tier Tribunal to the Upper Tribunal (Administrative Appeals Chamber) on the grounds that there has been an error of law. If the appeal period were to be extended in this way Log Book Loans would be able to trade under their licences until the end of the appeal period.
  3. The Consumer Credit Act 1974 requires most businesses offering credit, lending money or involved in activities relating to credit or hire to be licensed by the OFT.