Debt Doctors

Welcome to Debt Doctors! Designed to give you advice and guidance about any debt issues you may have, this facility will be your most useful tool when it comes to all you need to know about debt related concerns.

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Most Recent Questions:

Question: Hi I am currently with First Step Finance but had a call from Gregson and Brooke saying that First Step is under threat of closure. I have only been with them a few months. Should I be changing company and also should I change to Gregson and Brooke? I have considered them in the past but found no one had heard of them and so didn't trust them. I used to be with a debt management company called debtfixers who were quite good but I wanted to get out of debt faster, but to be on the safe side should I change back to them instead? There is not an awful lot we can afford at the moment and by the looks of it money will soon be getting tighter with my partner's job losing contracts. We also have 3 kids to care for and another on the way. I would appreciate any advice you could give me. Thank you.

Answer:

First Step Finance does have a Minded To Revoke (MTR) notice on its Consumer Credit Licence (610509), but this has been open since December 2010. This doesn’t mean that the business is being shutdown, but it does mean that you should be cautious. They are listed as a member of the Debt Resolution Forum (DRF). In the first instance I would suggest that you contact First Step Finance to put your mind at rest and to determine whether they have had any success in dealing with your creditors through their ‘debt resolution’ business model. Debt Management Today did cover their response to this matter in March 2011:

http://www.debtmanagementtoday.co.uk/newsstory?id=1143&type=newsfeature&title=debt_resolution_we_are%2C_debt_management_we_are_not_

Unlike a traditional Debt Management Company, who have to provide an estimate of the duration of your Debt Management Plan (DMP) under the OFT Debt Management Guidance, First Step Finance need to provide you with a clear outline of how you will become debt free. This is not readily apparent, as they are using a variety of techniques to negotiate with your creditors. If you have been with them several months then you should be receiving monthly statements and progress reports. The same points will apply to Gregson and Brooke, who operate a similar model to First Step Finance. My initial impression is that you received an unsolicited call from a competitor where the sales agent has acted unprofessionally. This is not the first contact you have had with them and are understandably cautious.

My feeling is that you need to work with First Step Finance, as switching providers can break the continuity of your debt solution and creditors can change their mind with regard to accepting proposals, including freezing of interest & charges. You should be contributing based upon what you can afford and your creditors need to be made aware of your current circumstances, especially if you are suffering increased financial hardship.

Should you remain dissatisfied then you should look at either using a free-to-consumer provider that is able to offer you an early appointment or a commercial debt solution provider that operates a recognised code of conduct and is a member of one of the primary trade associations. These are:

www.demsa.co.uk/members

http://www.debtresolutionforum.org.uk/members.php

If you elect to switch provider then you should look for a provider that does not charge you a new set-up when switching from another debt solution provider.

Question: I have a pension of £16k that I no longer pay into from an old company and would like to release 50%...

Answer:

“Pension release is a specialist area of financial advice and will depend on your age, as the products are primarily designed for those over 55 years of age. If you are using the funds for debt consolidation purposes then you will need to find a financial adviser that is both authorised by the Financial Services Authority in the provision of advice on pension release and licensed by the Office of Fair Trading for debt counselling. The risks of drawing down your pension early need to be fully explained.”

Question: I have been in contact with a debt management company and they have advised that I cancel my current bank account and open an account with another bank. Is this really necessary and how easy will it be to open another account? I currently have debts of £7000 with six lenders, one being the bank (overdraft).

Answer:

Where you have one or more debts with your bank, where you hold a current account, it is fairly common practice to recommend that you move banks to either a basic bank account or an account like the Secure Trust Bank current account, which will accept people who are on a DMP, IVA or are bankrupt. Most high street banks offer basic bank accounts, though they may want to offer you an account with credit facilities if they are unaware of your circumstances. Many Debt Management Companies offer a bank account through a reputable bank.

The main reason for switching accounts is to avoid your existing bank using their right of set-off, that is paying off the debts in their banking group from any funds, like your salary, that come into the account. You may find that you have a credit card or personal loan that is provided by the same bank. Switching your income and priority direct debits/standing orders to another current account means that the right parties get paid first, like your mortgage/rent, utility bills, council tax and essential insurance premiums. This can be done instantly when the account is set-up. Your overdraft account can then be added as a creditor to the Debt Management Plan (DMP) and a pro-rata contribution will be paid to them along with your other unsecured creditors. The sooner your income is secure then the sooner the Debt Management Plan can operate effectively. Take heed of the advice provided by your debt manager with regard to when to stop paying your existing unsecured creditors, if indeed, you are currently paying them.

If you choose to stay with your existing bank and have no other debts within the group then it is possible for you to reach a repayment agreement with them that allows you to keep the account fully active provided you do not become more indebted in doing so. Any repayments to the overdraft would still be taken account of in your statement-of-affairs that the debt manager prepares, as the other creditors will want to see that fair contributions are being made across board, as your overdraft is only an unsecured debt. Some consideration may need to be given if you have a secured debt with the bank, like a mortgage, second charge on the property or an HP agreement (e.g. on your car). In this situation the lender will expect full payment of the secured borrowing contractual payments.

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