I think many of us are in financial dire at the moment and wonder whether this would still be the case if we weren’t constantly told about recession and our poor loans situations (see article) all over the news.  So is it just me who thinks that the population will always react to what we are listening to? Take repossessions for example, last summer there was nothing major on the news, no real life scenarios about Mrs Smith having her property repossessed - why?

Well, I’d say because last year there was no sensationalism in that story whereas now there can be. We’ve been talked up into believing there will be a major increase in repossession (and indeed there is, and there will continue to be so), but I’m convinced as a society, we just conform and do as we are told to do by what’s being televised. Mrs Smith might well have been irresponsibly leant money to, but not all repossessions are down to irresponsible lending and instead might be due to a change in circumstance (with inadequate protection in place to cover these eventualities should they ever arise), and thus financial planning (in hindsight) is paramount.

The most vulnerable are obviously those who have had problems in the past, not minor historic defaults as many high street lenders will consider you a prime case on anything of a low amount and which can be genuinely explained. I’m referring to those who, when they took out their mortgage, had recently been subject to some form of adverse credit such as a CCJ, major default or some mortgage arrears. So is it a good time to start looking at mortgages if you fall into this category? Well the answer is ‘maybe’! Because if you’re paying the lenders variable rate then it could be that you are in fact being penalised, and if you’re on the bank’s LIBOR rate (the inter bank lending rate) then again this is higher than the Bank of England’s base rate (If you’re not sure then you can check your original mortgage paper work but most sub-prime lending was based upon the LIBOR rate). However, if you’re currently on a fixed rate scheme or if the mortgage you have is based on the Bank of England’s base rate then you are likely as well to stay as you are. I would however, consider your overall financial planning and any protection needs you might have. I have listed some links below to find out more about current mortgage schemes, rates and new products because of the latest interesst rate movements.

• Mortgage Quotes for ‘Prime’ Borrowers (ie No Adverse Credit History)
  CLICK HERE >>>
• Mortgage Quotes for ‘Sub-Prime’ Borrowers (Any sub-prime or adverse credit mortgage lender)
  CLICK HERE >>>
• Loan Quotes
  CLICK HERE >>>

Well as it’s Armistice Day I thought it appropriate to take time out to remember those that fought for us in those darker times. I for one will never forget what our soldiers did for each and every one of us and I would encourage you to take a moment to reflect upon the life you live.

However difficult the times are ahead financially, most of us have our health and are able to enjoy life on a daily basis. Without our ancestors we might not actually be so lucky.

Andy.

Base Rate down to 3% and VAT expected to reduce by 5.5% to 12%

So for me Gordon Brown has raised his profile and once again proved he’s the right man for the job during this recession. I’am not overly political nor I am I a staunch Labour, Conservative or Liberal voter, but I do like to read up on party manifesto when a general election nears.

Due to these interest rate and imminent tax cuts I am almost reminded of the Tory Government of the late eightees and early nineties where Government borrowing rose to record levels and the economy almost ground to a halt. Whilst I firmly believe that nothing like this will happen today I do have an air of scepticism over the reasons behind the new approach by a man whose leadership was in massive decline (Have you actually noticed how little we see of David Cameron on the TV right now?). It would of course be natural to assume the reasons behind all the changes are more likely to be because our leader is trying to poll extra votes and popularity in these tricky times.

I however, personally believe that Gordon Brown has took action, took the bull by the horns so to speak.

We all know that whilst Tony Blair was at Number 10 there were little chance of any real challenge to Party leadership and we further know that the man making important financial decisions behind the scenes was Gordon Brown. Could it be then that the new Chancellor is, dare I say, useless, and that Mr Brown himself has orchestrated these changes? I think so, and I’m now watching with anticipation to see how long it will take for a Cabinet re-shuffle.

So what about the rate cuts I hear you ask?

Well the biggest single problem in our housing market right now is the inability of First Time Buyers to get onto the property ladder due to a lack of deposit. I’m not advocating the return of 100% mortgages but I would like to see further reduction in house price values and a change in lending policy for the major banks and building societies that would allow more use of assisted deposit schemes (in that I’m referring to family gifts as opposed to negotiated reductions in the purchase price of a property).

Only when First Time Buyers can access properties will we begin to see an upturn in the economy, which will in turn facilitate and ease the burden on the Buy to Let investor market. So will the rate cuts actually improve the property market? Well the answer is a firm no! But it will help existing tracker mortgage payers and those people coming off fixed or discounted rate schemes as the payment shock scenario has been massively aided. Actually, this does have a profound effect even on the Buy to Let market but the problems there are not necessarily to do with the credit crunch, and more to do with extremely poor decisions by the newbie landlord under even worse advice from the mortgage broker and or developer (anybody who bought a new build apartment on a no-deposit down and cash-back deal must have had alarm bells ringing, even moreso if they were having to contribute to the mortgage payment each month).

The tax cuts won’t as mentioned suddenly get the housing market moving but will improve it slightly. The rate cuts will however, for sure, reduce the number of repossessions and significantly aid the majority of mortgage payers coming off schemes. The reduction in VAT would, if implemented, help small businesses and contribute also to the purchase price of material goods (assuming of course that retailers themselves do not act like the banks and refuse to pass on these cuts (but that’s another story)).

Summary:

• Gordon Brown’s profile has been raised
• Country to be in HUGE debt
• Cabinet re-shuffle imminent
• Rate cuts do not help First Time Buyers chances of getting onto the property ladder
• Further reduction in house prices needed
• Payment shock ‘massively’ aided by Bank of England’s decision to cut rates to 3%
• Talk of VAT reductions to help small businesses and consumers

Resources:

• Speak to Mortgage Adviser (External Link)
• Speak to Debt Adviser

Further to my earlier note on Basil Rankine I thought I might offer an explanation as to why I feel there are no legs in any claims for compensation with regard to unenforceable contracts and the like.

A number of companies are now offering to help people write off credit card debts through legal technicalities. Let me offer an alternative opinion and back this up with some points of law.

First and foremost let us digest what these companies are offering - namely, to write off credit cards and credit agreements due to legal technicalities. These credit agreements must have been conducted under the regulations imposed by the Consumer Credit Act 1974 which was valid (for the purposes of these claims) until around April 2007 when new amended legislation was introduced.

The claims stem from a House of Lords decision in 2003 whereby it was held that any contractual agreement that was concluded incorrectly would be unenforceable in a court of law. For those of you who are unaware, a House of Lords decision is binding on all the lower courts and therefore a precedent is achieved.

Allow me to back-track slightly because I feel I need to clarify the legal status of contractual issues before I can carry on talking about this particular case.

There are 2 legal systems in operation which are:

• The Criminal Legal System; and
• The Civil Legal System

Criminal Law:

This is where you break the law, for example, the speeding limit is 30mph but you are travelling at 40mph. You are breaking the law and are therefore subject to the penalty imposed by the piece of legislation written to account for such a breach of law. Another example would be murder, there is written law that states you cannot commit murder - it is ‘illegal’ or ‘against the law’.

Civil Law:

This is where parties agree to something. For example, If I offer you £100 for cleaning my car and you accept my offer then we have an agreement (the agreement would be legally binding if concluded in the correct way). Therefore if you then clean my car and I only give you £20 I have materially breached my part of the deal and you could take me to court and sue me for the remaining £80. There is no written law for this and it isn’t a criminal act as there is no ‘peice’ of legislation that covers this event.

A civil agreement then, if disputed, would always need to be taken to court and decided on by a judge, and the evidence presented to him / her so that a decision can be made. If the decision itself is dubious then it can often be appealed to a higher court of law ( County Court -> High Court -> Civil Division -> Court of Appeal -> House of Lords -> ECHR (European Court on Human Rights) ).

As you can see, all Civil law cases begin life at the County Court and work their way up to the highest court which is the House of Lords (The ECHR is not a domestic court). All decisions from higher courts are binding on the lower courts, so a High Court decision would be binding on the County Court and so on.

Okay, so we can deduce from that, that when we took out our credit agreements they were Civil Agreements and are therefore not subject to any criminal proceedings? We can also deduce that any opinions expressed in the House of Lords will be binding on all lower courts, and this is why we now have these companies offering to write off our debts - because, in a House of Lords case it was said that if a regulated credit agreement has not been concluded in the correct way then it becomes ‘unenforceable’ in a court of law, in fact, if the discrepency is more than a minor breach then the entire contract itself may become ‘voidable’, which would mean that the parties should be put back into the position they would now be in, had the contract never have been in existence. (Note, this is the technicality that these companies are relying on in order to try and claim back any monies you’ve paid).

Okay so if a credit agreement hasn’t been drawn up exactly as the CCA1974 prescribes it should have been then it may become unenforceable or even voidable (as a result of a House of Lords decision). But lets consider this, was this the outcome that their Lordships would have intended? I’ll put one or two points to you:

1. Would a reasonable person know that when he signed up to his credit agreement that this was a facility being offered to him for which his part of the deal was to repay the credit?
2. Would it be morally right or wrong for a legal technicality be used to allow him to not pay it back?
3. Would it be right that the floodgates open up and every other person who ever took out the same line of credit be able to stop paying the debt?
4. Taking a credit card provider as an example, an obvious corporate entity, what might happen to the economy if it transpired that all their credit agreements were unenforceable?
5. Is this what you think their lordships intended when they said if the precribed terms of the CCA1974 have not been complied with the agreement becomes unenforceable?

Common sense would indicate that the case law opinions expressed by the House of Lords did not intend such an outcome. But, I hear you say, the law is the law and you have already stated that the House of Lords decision is binding on all lower courts! This is true and for exactly this reasion is why these companies are popping up all over the show, but let me consider one or two other legal methods which I believe will bring this whole situation to a halt.

Breach of Major & Minor Terms in Contract Law

If I agree that you should clean my car on Wednesday, but in fact you clean it on Tuesday then am I able to claim a material breach has occurred and therefore withold payment from you? You would certainly hope not and there is case law that supports it.

Equitable Law

The law of equity will prevail over case and common law where the intended outcome would be absurd. Equitable law takes what is know as a ‘reasonable man’s’ opinion into consideration when making decisions. It is often used where there is no similar history to the situation at hand.

Rules of Interpretation

The judiciary have a number of tools available to them in order to ply their trade. In addition to the above, they have the three rules of interpretation which are:

• The Mischief Rule;
• The Literal Rule; and
• The Golden Rule

I’m not going to discuss these rules in detail but can offer you THIS LINK to acquaint yourself with the rules. What I would like to briefly mention is the Golden Rule which lends itself to almost any situation and allows a judge to use his very own opinion, providing of course that there is justification for whatever opinion he gives.

Conclusion:

So can these companies really get my debts written off and get me back a whole load of compensation because the contracts are illegal?

Firsly, the agreements themselves are Civil Law agreements and can therefore never be ‘illegal’ so the very nature of any purported claims to be able to write off illegal contracts is factually incorrect. Compensation isn’t possible because the legal remedy for a breach of contract is to be put back into the financial position you would have been in had the contract never have taken place. Thirdly, the legal tools of the trade will be used to prevent unintended and absurd outcomes such as allowing the whole country to write off their credit agreements due to a minor technicality.

So what can we do about our debts?

The truth is, large credit organisations could either pursue you for the money you owe either through the legal system or by selling or passing the debt on to a debt collection agency. The former isn’t very common but if they take this approach and obtain a County Court Judgement then they can take further steps to recover the money you owe.

Where the creditor decides to pass the debt over to the debt collection agency then it is unlikely that they themselves have any ‘legal’ right to chase you for the debt and a standard template letter accompanied by a £1 postal order will usually get them off your back.

Remember that any credit agreements you have are based upon the Civil Law system and are therefore not subject to criminal proceedings (ie you cannot go to prison for any breach of this nature), and also that any adverse credit entries will be held on your credit file for six years. If you would like specialist debt advice for your individual circumstances then speak to an advisor.

Resources:

• Basil Rankine
  Watch this VIDEO from 2007 when he won his original cases. — BASIL RANKINE VIDEO
  Read his later JUDGEMENT where he lost some cases. — BASIL RANKINE JUDGEMENT

So we’re over a year into the credit crunch now and heading into what some are calling a full blown recession.

I agree with them!! Already we’ve seen many mortgage lenders close their doors forever or cease lending completely, and the interbank lending has all but ceased too. So what is likely to happen over the next couple of years?

Well I’m no authority on how the economy will evolve but I do suspect it will get worse before it gets better. Watching the news last night (or it may have been the one show I can’t remember exactly) it was suggested that the so called recession we are entering may be more akin to a ‘V’ rather than a ‘U’. By that they mean a very quick ‘in and out’ recession and nothing drawn out like other recessions. This might well be true but let’s remember then that the banks problems started over a year ago and consumer lending virtually came to a halt in or around March this year.

That was followed by the the knock on effect of building sites closing down and the employment sectors within the associated trades began to decline. As far as I know, I wasn’t aware that the retail sectors were really affected yet, which would kinda run true when you look at the latest inflation figures of over 5%, so as we hear of these rises in unemployment (currently at their highest levels since the mid nineties if I remember correctly) what will come in the ensuing months when people stop spending on the high street.

Well, it’s a snowball effect that hasn’t even started yet. As you’re reading this you probably haven’t given too much thought as to what will happen so let’s start with Christmas, where I’m sure we’ll all go out, as usual, and spend like crazy trying to make our loved ones happy. No doubt the majority of us will put this spending onto some form of plastic with a view to paying it back in the new year.

Come February, when all the bills are well and truly in we’re likely to stop spending on luxury items, which will include going to the pictures, going out drinking, buying new clothes, and generally having a life. This is when the high street and retail trades will be hit and as such when the recession begins to make its appearance.

It isn’t always the best thing to take out a consolidation loan or mortgage for such occurencies so if you have debts owing to a number of creditors then perhaps it would be wise to speak with a specialist debt adviser.

So is there any such thing as poor loans or is this just a euphemism for people who are looking for a loan and have a poor credit rating?

I’m often curious to know why people looking for loans, particularly those with a poor credit rating looking for poor loans, find themselves on price comparison websites and expecting some form of realistic indication as to what is likely to be offered to them. When in all probability the results proffered would be completely unavailable, out of date, non-existent or worse, completely fictitious!

Take for example one major price comparison website that often advertises on the TV. I’m not prepared to mention their name here for obvious reasons but there is a section on there website that asks about your credit history prior to showing a list of possible results as to what you might expect to be offered.

The credit history referred to however is not checked by the website so they have no idea about your likelihood of obtaining any form of poor loans from the institutions displayed. How can they? They themselves are nothing more than a comparison site, they have no idea as to what ‘criteria’ the lending institution might use and furthermore, they are relying on very limited information given to them by you, in regard to your credit history but neglecting to consider something much more important which is your ‘credit score’ (which, by the way, can be obtained free of charge from ‘Credit Expert‘).

Poor loans are complicated because there are many factors which are used to determine whether you will be offered the loan, particularly if you do have a poor credit history. Let’s take a look at some elements that might be considered when the lender is thinking about offering you a loan, or to be more specific, poor loans.

• Are you a homeowner?
  The starting point for many lenders offering poor loans will be with this question. In the last few years there have been some lenders willing to offer poor loans to non-homeowners but with the current financial status the likelihood for being offered poor loans is somewhat reduced.
• Do you have any equity in your home?
  With the right amount of equity it’s fairly certain that someone, somewhere will be willing to lend you the money you need. However, poor loans require more equity than a loan application from someone with a good clean credit rating. The reason is obvious when you think about it, the risk is much higher because the likelihood is that you have some adverse history when it comes to repaying credit (though not necessarily through any fault of your own).
• Are your problems historic?
  Some lenders will look sympathetically on people whose problems were through no fault of their own, were due to some form of circumstance such as a marriage breakdown or other tragic event, or simply where the problems are historic and not, it must be said, major adverse events.

The considerations above are not exhaustive and are not meant as any representation as to the citeria that lenders will use - but I’m not aware of any lender that does not use them. That said, the actual rate you will be offered for any poor loans application will vary from lender to lender and this is where different institutions come into their own.

A good example to give you in respect of lender’s criteria would be one application I received earlier this year where the client, who shall remain unnamed, had a mortgage with a subprime lender, an arrangement on a very large unsecured loan, and one or two smaller credit defaults more recently. Now many financial advisers’ would simply look at this and pass the case on to a sub prime specialist, or poor loans section within the lending institution chosen.

However, knowing the criteria well, and having established a great relationship with them I was able to place this application with the Abbey on their high street rates. Needless to say this client no longer needs to be pushed down the poor loans route anymore (providing of course that all payments are maintained).

Going back to the point in question, and in contemplation of the questions asked on the price comparison website (in relation to credit history)  it is clearly not the case that the Abbey would have been presented to my client had the adverse entries been disclosed. This is why I get confused about people with known credit problems, and therefore looking for poor loans, as to why they would ever seek information from a website that is unregulated, misleading and dare I say, incorrect.

If you are looking to obtain rates on financials then it is near on impossible to get accuracy directly from a website because the rate you will be offered is determined by the circumstances surrounding your application. If you are chasing the best rates then an adviser can often influence the lender, or simply present your application better than you could do yourself.

Resources:

• Obtain your Free Credit File from Credit Expert
• Loan Quotes for all applicant types including poor loans applicants.
• Mortgage Quotes for all applicant types including poor loans applicants.
• Specialist Debt Advice for people struggling to repay a number of debts.

Question

I have received a letter from a debt collection company claiming I owe them £1,827.74 for a credit card I defaulted on in January this year. My circumstances have not improved since then I was wondering if they might legally be required to accept my offer of £5 per week, which they are refusing point blank and insisting on a minimum of £50 per month?

Answer

Well first of all they are unlikely to be entitled to be chasing the debt in the first place as it is unlikely that they have taken a ‘legal assignment’ of the debt from the original creditor. When you originally entered into the credit agreement the ‘contract’ was between yourself and the credit card company, and at no point would there ever have been mention of a specific debt collection company.

In contract law, the only people with a legal right to claim are those who are privy to the original agreement unless there is an ‘assignment’ clause incorporated into the terms and conditions. It must be said that the assignment clause itself is not a rare event, but what is extremely unlikely is that a ‘legal assignment’ of the debt has actually occurred - as debts are usually either bought up in bulk by the debt collection agencies, or they are simply requested to try and recover monies owing for a commission perhaps.

Action

1. Record everything and remember that all dealings should be in writing and if possible, sent recorded delivery.
2. You should first request a copy of the legal assignment. I strongly suspect that this will get this specific debt collection agency off your back. Remember that the answer above is valid should the original creditor pass the debt over to a second debt collection agency.
3. Negotiate with the original creditor only. If you are genuinely only able to afford £5 per week then this should be accepted by them. If they refuse, or if they simply suggest that the debt has been passed on to a debt collection agency then you can either: a) cease all negotiations until you receive official court papers or b) send them £5 per week as per your offer.

Resources

• Letter to Debt Collection Agency - Request copy of legally assigned agreement.
• Letter to Original Creditor - Offer of Pro-Rata Payment.
• OFT Budget Planner - Send this with your pro-rata payment offer.

Well it really does depend on the nature of the judgement, but for the purposes of this note I’ll refer only to those civil agreements where a breach has occurred through non-payment of consumer credit debts. Such debts may include, but are not imited to, credit and store card agreements and / or personal loans.

Now that they’ve obtained judgement the creditor is quite within his right to seek to enforce the debt by asking the court to issue any one of the following:

• A Warrant of Execution;
• An Attachment of Earnings Order;
• A Third Party Debt Order; or
• A Charging Order

In addition to those items mentioned, on debts greater than £750 the creditor can also issue something called a Statutory Demand, which in essence is their own interim Order for the payment of any outstanding debt. The Statutory Demand is a formal notice that could lead to a petition for bankruptcy being made.

All of the above remedies (with exception to the Statutory Demand) require the seperate completion of an application form, and all require additional payment of fees.

Warrant of Execution:

This is where a court appointed bailiff will make attempts to seize goods from your home to the value of the debt (unless the debt is greater than £5,000 and NOT a regulated credit agreement under the Consumer Credit Act 1974). Any goods seized will be sold at auction for a mere fraction of the price you paid but there are important things that you might wish to know:

1. A bailiff cannot force entry into your home so under no circumstances should you invite him in.
2. If nobody is home then the bailiff CAN gain rightful and legal entry via an unlocked door or window.
3. Where a bailiff has previously gained legal entry, he is able to ‘force’ entry on his return.
4. A number of items cannot be seized which include ‘tools of your trade’ and essential household furniture items.
5. All but the most determined court appointed bailiff will almost certainly give up after 3-5 attempts.

Attachment of Earnings Order:

This must be the enforcement option of choice for aggrieved creditors but there are circumstances where an Attachment of Earnings Order will not be suitable or even available:

1. You must be ‘Employed’ by someone.
2. You must not be Self Employed, Unemployed or Employed by the Armed Forces.
3. Your living expenses must be less than your earnings.

Third Party Debt Order:

This is an Order made and presented to your bank or building society to freeze your account and make payments under the judgement. In order for the creditor to seek this remedy he must be aware of any savings you might have in your ‘known’ accounts. This is very unlikely because I know of no institution that might disclose such information in contravention of the Data Protection Act.

Also, as you would know well in advance about such an Order it is likely that you would cease any payments to your account and instead open up or utilise a different account.

Charging Order:

A Charging Order is a legal document that prevents the sale of an asset such as your home, until the debt has been paid. In extremely limited circumstances the creditor can apply to have a forced sale but in truth this is seldom sought and even rarer given.

If you are a homeowner then this is the one to watch out for.

Statutory Demand:

This is where it gets serious for both sides and is often used by Debt Collection Agencies to call your bluff. A statutory demand gives the recipient 18 days to apply to have the demand set aside, or 21 days to pay the debt in full.

The demand must be served upon the debtor so lets think about this for a moment:

1. Who served the statutory demand?
2. If posted, was the demand signed for (i.e. recorded / special delivery)?
3. Can the creditor ‘prove’ that the demand was indeed served upon you?
4. Are all the details of the Statutory Demand ‘factual’?

Interestingly, more and more debt collection company’s are using this as a scare tactic to force you into agreeing some form of payment. However, there are certain ’stringent’ requirements that must be adhered to in order for there to be any chance of the creditor succeeding in making you bankrupt.

My experience to date with statutory demands is that they are simply being used as the latest form of scare mongering tactics. In order for the creditor to make you bankrupt there must be an underlying reason for doing so because, once made bankrupt, the whole of the debt (along with all the costs of enforcing your bankruptcy) will die. As you can see then, this is merely a form of ’spite’ reaction to an unpaid debt, one which is seldom acted upon in reality, and one that should be treated with the contempt it deserves.

Also, consider this.

The creditor going for bankruptcy would be turned down his application if another remedy might have been available. So, would it be possible for the creditor to obtain judgement first? If this is the case, and let’s be realistic here, if you have failed to pay a debt under your contractual agreement then it is likely that the creditor WOULD get some form of judgement for non-payment of said debt, then an application to make you bankrupt is highly unlikely to have any chance in court.

So why would a creditor wish to do this?

Well, I’ll say in the main it is to call your bluff, but there are certain legitimate reasons for going down this route which include:

1. Preventing you from running your own limited company.
2. Preventing you from trading in certain occupations such as Estate Agency and Pub Licensee.

I hope to have cleared one or two things up there and as always, if you have any questions then please complete the relevant enquiry forms.

Andy.

Mortgage Self Certification is the process of an individual, or couple for that matter, who needs to self certify their income due to any one of a number of reasons which may include, but are not limited to the following:

• Mortgage Self Certification - is needed because you are self employed and your business accounts do not reflect your true earnings. This may be because your business is involved in cash transactions which are often difficult to prove.
• Mortgage Self Certification - is needed because you are under time pressures imposed by a vendor of a property you wish to buy. Sometimes, particularly when buying properties up at auction or those that have been repossessed the agent or lender in possession will insist on a 28 day exchange of contracts. When this occurs it is quite justifiable to apply for a Mortgage Self Certification in order to speed up the mortgage application process.
• Mortgage Self Certification - has been recommended by your mortgage adviser for a particular reason. Again, when taking advice from a suitably qualified professional who is regulated by the Financial Service Authority a Mortgage Self Certification method may be recommended because the lender may have different criteria than on the mainstream application process. For example, a lender may be willing to lend up to four times the income and only half of any overtime and bonuses earned, whereas they may allow 100% of the overtime and bonuses to be included when applying for the mortgage self certification.
• Mortgage Self Certification - is needed because your income is encompassed from numerous different sources such as tax credits, employment, second jobs and so on. Not all lenders will allow the use of all types and sources of income but many mortgage self certification applications will allow it.