Prevention or cure, short term or long term, cheap or expensive, problem solving or problem postponement?

Which of the above statements would you associate with Government of our day? It could be all of them, some of them, and for some of you – none of them, and that is your right. But you also have a right to be protected by Government.  As their efforts are now being judged more closely than ever, we ask, re-arranging the famous quote by John F Kennedy, what your country can do for you?

The Government civil servants have been hard at work drawing up a new document “A better Deal for Consumers” which the Secretary of State for Business and Innovation…(oh and Skills) have presented to parliament. Hurray….they cried. No doubt they’re chuffed to bits to be seen to be doing something for the indebted British public.  Finally something positive to talk about.  But will this really help solve the problem? Is it the cure we’ve all been waiting for?  Is it a long term plan or a cheap headline winner for short term gain?  With all the political scandal of recent months, one can’t help but question the motivations behind this – genuine…or not?

Well they talk a good talk. I’ve been through the document and yes, there’s a great deal of good ideas being mooted about. Its all well and good but so many of these papers get created for good moral, and yet it’s months or years before the “action” sees any light of day.

One thing, however, which was visibly missing from the formula of their paper, is public education.

It’s clear to everyone that the public need re-educating in relation to financial products and services. The better informed they are, the more likely they’re able to spot the good deals form the bad. How many of your clients would have thought twice if they truly understood the terms and conditions of their loan or credit card agreements? This, in conjunction with a policy of financial product transparency, enforced by the FSA and the BBA would in a true market economy – cut the rogues out of the game.

Education at a core level would mean that less tax payer’s money was needed to clean up messes like the one we’re in now, so why wasn’t it in their paper?  Ah – I hear you say…the banks! Is it in their interest to deal with an uniformed public? Mmmm.  After all, they have made, and still make, a great deal of money out of the fact that the British public aren’t as informed as they should be regarding their financial rights and or the financial products they sign up to.

So where is that protection from Government?  Instead of trying to do it all for us, why don’t they empower the public with the right knowledge and back it up with clear and transparent regulation and policy?

Prevention or cure?  Education is prevention – providing a long term solution for everyone. Education may cost more but will save millions in the future, and it deals with the issue head on.

Whilst we wait with baited breath to see if Government will put money where their mouth is, I call to action Intermediaries – this is YOUR chance to educate your clients – teach them and encourage them to learn.  Empowering them will in turn, help build your relationship with them. With trust comes a mutually beneficial, long lasting commitment, where they would look to you for future guidance in their financial decisions.

Fact: It’s estimated 35,000 people will turn to illegal money lenders due to unavailable credit.

In what we class as the developed world with a moralistic society, how can it be ethical to force this many people in to the hands of financial hyenas? The sad thing is, that people turn to loan sharks for the simplest of reasons. Debt ridden consumers are cracking under pressure and as the bills continue to land on the doorstep, many see no way out other than to dip their toe in the water – proving to be easy prey for the Great Whites of the Ocean.

It’s clear that as the recession continues, many companies are adapting a heavy hand to maintaining cashflow, keeping their own heads above water.  With both parties feeling desperate situations call for desperate measures, such scenarios jest the beginning of something far more dangerous than unpaid bills and can often lead to violence and organised crime.

So whilst many hide behind their couches as the big guys come knocking on their door, I ask, “who’s to blame”? The consumer for over-spending? Maybe. The banks for creating this mess in the first place? Maybe. The companies that hound and pressurise people in to making these decisions? More likely.

Creditors need to look at the bigger picture – the long term solution.  Surely it’s better for them – as a brand as well as a company, to work with debtors and help them re-pay long term so that when the bad times are past and good times follow, they’ll have a loyal string of customers who remember their kindness when their purses weren’t so full.

With the heavy handed approach so many are now using, I question if this is forcing people to make choices they wouldn’t normally make; irrational choices that have been made out of desperation for a quick fix.

Is it not now time to introduce formal procedures for companies to follow – similar to traditional debt solution methods, where re-educating and re-habilitating debtors into intelligent money management whilst paying back creditors is common practice?  We know the recession is here to stay – at least for another year, so why aren’t we adapting our debt processes to reflect this?  Why aren’t debtors supported more readily?

A hyena preys on the leftovers of others…the dying and the weak. Is it not time we teamed together to outlaw this vermin of society?  Instead we can offer debtors real solutions which will make a significant difference to their life – free financial advice, monthly repayment schemas, financial education and rehabilitation.   Maybe rather than asking who’s to blame, we should be asking, who will lead?  Who will take our debtors to a brighter and cost effective future?  “Who” you, the creditor asks.  “You”, I say.

Question: When would you use a sledge hammer to crack a nut?

Answer: It’s hard to tell but maybe if you’re really desperate for what’s inside – a winning lottery ticket? Or maybe if you’ve finally lost it and after trying to politely crack the nut open with a traditional cracker, you decide to do it caveman style?

Or maybe….if you’re a particular type of lender or debt collector, you’ve been doing it for a while already and fail to realise the nut in front of you isn’t the only nut in the room!?

A report from the Citizens Advice Bureau (CAB) shows that applications for charging orders has risen by 722% in just two years (since 2007)! It appears that this particular court action is becoming massively over used against an unprepared public. Causing stress and despair, consumers are being threatened with charging orders left, right and centre by companies forcing them on many cases, to pay more than they can afford for unsecured debt commitments.

Some companies have even gone so far as to request the courts to approve charging orders through an order of sale. This is not only unjust for those who are contributing to their creditors as much as they can already, but also to other creditors who may have agreements in place with the same individual.

David Harker Citizens Advice Chief Executive said: “The law as it stands leaves debtors far too exposed to unfair treatment and the risk of losing their homes from unsecured creditors.” The CAB has now called for both the Office of Fair Trading (OFT) and Ministry Of Justice (MOJ) to step in and review into the use of charging orders – looking at the law and restricting access to enforcement when debtors are genuinely doing all they can.

I wonder whether this form of debt chasing crosses the line between ethical and unethical? Between respecting the long term benefits of being paid back debt over a period of time, or taking what you can now and leaving the debtor and their family with nothing but a cardboard box.  Is that what we have really come to?  It seems, sadly, for some it is.

So going back to my original question, when would you use a sledge hammer to crack a nut? With the options first pointed out in mind, to do so,  you’re either slightly mad, desperate, or just plain stupid with no sense of ethics on drawing that ever so thin line between right or wrong…I guess, the ones falling into this category would excuse themselves with the rationale…it’s just business.

I ask…is it really? I add…not  for me, not for my contemporaries and not for those I respect.

You would have thought the banking fraternity would want to do UK tax payers a good turn after the bail outs we’ve done for them, but alas it seems the greed machine is hard at work.

The banks are starting to open up on fixed rate mortgage deals and as you can imagine there are probably a number of us looking to grab a good deal while rates are low. But, is the deal as good as it looks? The amount you pay is dependent on the current LTV (Loan To Value) so the higher the LTV, the higher the cost to borrow.  However, now it seems lenders are adding a large premium to people that fall out of the 75% LTV mark.

What this means is that for people who have suffered a loss in property value (let’s be honest, who hasn’t), the cost of borrowing an extra 10% is now going to be a great deal more, not only on the standard interest side of things but also with regards to interest loading for the higher LTV mortgage, which (on a Nationwide product) proves to be an approximately £107.19 per month.

Well done guys we’re glad to see you working on giving something back!

Lenders are also abstracting the Michael on their SVRs (Standard Variable Rates).

As ever, the banks are not passing down cuts that can make things that little bit easier for their customers.  Nothing new there I hear you say! Well they are now also increasing their SVRs. In or around the second quarter of 2008 the average mortgage SVR was 1.9%: now the average is a massive 4.66%. Just an increase of 407%. It’s unprecedented. SVRs are not normally more than one or two percent above the base rate; some today are as high as 5.99%.

So – not only do the banks move like lightning to cut savings rates to an average of 0.58% but they make a tidy profit from those unfortunate homeowners who fail to qualify for a new product once their initial rate expires.

You would have thought the banks could give the general public some respect instead of treating us like cash machines. I think there is a small but obvious gap here for some honest, ethical, banking….any takers?

What a feeling… to do something that you feel is right and truly helpful; It’s not often people can say they do that, from the comfort of their desks, during the working day.  But for anyone in the debt industry, helping people is what we do best.

Sometimes, the help needed though, isn’t just to the consumer who is in debt, but to those who she/he turns to for support and advice…in other words, you or your contemporaries.

As Uncle Ben said to Peter Parker, “With great power, comes great responsibility”.  You too, as trusted advisors, share the same burden of the masked superhero.  When looking for the right network to support you in assisting your clients, it truly is a minefield out there!  Researching the debt solution market as best you can, trying to find partners who are ethical and responsible, as well as being geared up to work with intermediaries is not an easy task.

So when we (the Debt Advice Portal and the ClearDebt Group) heard some debt companies were telling consumers they could sell their credit card debt for a pound, and then be free of any legal obligations to pay back their creditors, we nearly fell off our chairs! Once back and seated comfortably, I thought it was time to share and shame with the information.

After some mystery shopping and a collective effort of research, we decided to call the big guns in and the OFT set to work to see what they thought of it all.  The rest, as they say, is now history in the making!

This week sees the OFT taking strong action against these types of companies.  Companies we have brought to their attention in a campaign to clean up the industry to ensure you’re getting the right support, from the right people.

For more information see the ClearDebt Group’s press release http://www.cleardebt.co.uk/cd_press_1.php .

I’m pleased to see ethics and honesty stand up for something in our sector and…for those who choose not to conduct themselves in this way…a word of warning… what goes around, comes around.

Choosing your business partners is something that needs careful research and planning.  I hope the above proves my point that you should never judge a book by it’s cover but get to know your support network thoroughly before placing your full trust in them and what they say.  At the end of the day, they represent your brand too.  If they are brought down due to unethical trading…they will bring you down with them.

Ethics don’t cost anything, a bit like manners, so make sure whoever you work with have both in abundance.