THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION HERE.
MONEY BOX LIVE Presenter: PAUL LEWIS 4th FEBRUARY 2008
TRANSMISSION: RADIO 4
3.00-3.30pm
LEWIS:
Hello.
Credit and debt are today’s topics.
Over the last
year, the amount owed on credit cards, loans and other consumer credit has grown by £11 billion, taking it to nearly £224 billion. And that’s just consumer credit.
Mortgages add another trillion pounds plus, which rose by £100 billion last year alone. Well not that all debt is bad - borrowing’s the way we afford expensive
necessities out of a limited income - but when debt controls us rather than us controlling it, then problems begin. Mainstream credit providers - the banks and
building societies - are getting more cautious about who they lend to and at what rate, so debt for many people is getting a lot more expensive. We saw some evidence for
that over the weekend when Egg told 161,000 credit card customers it was cancelling their card. And as house prices drift downwards and mortgage debts rise, there are
concerns that repossessions will grow and even the spectre of negative equity may soon be haunting some overstretched homebuyers. So whether you’re in debt
difficulty or just want to know the best credit card deals, why not call Money Box Live now - 08700 100 444. With me today to answer your debt and credit questions
are Martin Lewis, the founder of the website Moneysavingexpert.com and Nick Lord from Citizens Advice. question? Our first question is from Peter in Telford. Peter, your
PETER:
Oh good afternoon to you all.
I’m wondering whether
switching cards routinely to get 0% offers affects in any way my overall credit rating?
1
We’ve got a moderately small balance of credit, which from time to time we have switched over to 0% deals, and I’m just wondering in the long-term whether that affects anything?
LEWIS:
Right, Martin Lewis?
M. LEWIS: generally.
Well credit scoring is a short-term, not a long-term issue I mean the first thing to say - there’s no such thing as a credit rating,
there’s no such thing as a credit blacklist . When you apply for new credit, the lender makes a decision based on its own scoring procedures of whether you are going to make it money or not make it money. about profitability. It’s not the same as good or bad risk; it’s
They do that on three pieces of information: any previous
dealings you’ve had with them; what you’ve put on the application form; and, all importantly, those details on your credit reference files from the three agencies Equifax, Call Credit and Experian. Now when you apply for a card, whether you get Each search will in
the card or not you get a search bang that goes onto your file. general diminish your credit score for most companies. of them does it differently.
But, again, every single one
However, as long as you don’t do a lot in a small amount
of time, you spread them out and that you’re not completely over indebted, because that’s another big indicator, it shouldn’t be too much of a problem. balance transfers over the years. on radio. I’ve had 20, 30
I’ve not been rejected yet, fingers crossed, he says
It’s all going to go wrong now.
LEWIS:
His name’s Martin Lewis.
(Martin laughs)
Nick Lord?
LORD:
Well yes, clearly what Martin says is absolutely correct with I
regard to the footprint on the credit reference file when you make an application.
have to say what difference it makes to your credit score - the discussions we’ve always had with the credit reference agencies, they’ve told us it’s actually one of the more minor areas. But I think, Paul, the important point that I’d like to bring out
from this is that what Peter and actually everybody else should do - and far more important now with the so-called credit crunch - is get hold of a copy of your credit reference file every 6 months, so you can see what information is held on you.
2
PETER:
I have done that recently and my rating is okay.
M. LEWIS:
Well again you don’t have a rating …
PETER:
Oh, alright.
M. LEWIS:
… and even if you buy the rating from them, that’s a way of They sell these ratings. Did you buy a rating from
selling you a product, frankly. them or did you just …
PETER:
Erm … I paid a token sum for the official credit report.
LEWIS:
You paid the £2, Peter?
PETER:
That’s right.
M. LEWIS:
The other big thing I would say about the credit crunch right
now - and Egg is indicative of it - is most people, apart from the very, very best credit scorers, if you’ve got debts on credit cards should be looking towards shifting to long-term cheap credit, away from 0% deals. You don’t want to suddenly find Go for the life
yourself in 6 months time, if the scenario’s got worse, being told no. of balance deals like Citibank Platinum, Barclaycard Platinum. rates, so once you’ve moved the debt it lasts and it lasts cheaply.
Those long-term low
LEWIS:
And that rate, that low rate lasts until that debt is paid off?
M. LEWIS:
Yeah.
5.8% Citibank Platinum.
You move the debt to that, But don’t
and the cheap rate lasts until all the debt you’ve shifted has been repaid. spend on it. Never, ever, ever spend on it. Then they’ll get ya!
LEWIS: scissors.
The only thing you should put on the card is a sharp pair of Thank you, Martin. Thank you for your call, Peter. And we’ve got an She says she has
email actually, Martin, also up your street, I think, from Janet. £2,000 debt - quite modest, I suppose, by credit card terms.
3
She wants to move it to
a 0% interest deal. She’s over 60.
She’s currently with … I think she has a Morgan Stanley card.
M. LEWIS:
Well I don’t know what you’re earning, but I’m going to The most important thing to say is
assume you’re still earning a reasonable amount.
I’ll tell you the cheapest 0% card, but I hope you can pay it off within that time, back on the point of most people should be going for longer term deals. Barclaycard for new Barclaycard customers. My top pick is
But this is where it gets complicated.
It’s only if you apply on the Barclays.co.uk website - not via Barclaycard, not via comparison services, because there are different deals there. If you apply, then you
get 14 months 0% - not quite the longest 0% on the market - but with a 2.5% fee, which if you combine long 0% and low fee is the best card out there. If that doesn’t
work for you because you’ve already got a Barclaycard, I would suggest Virgin - 15 months 0% but with a higher 2.98% fee.
LEWIS: Barclaycard site?
Right.
And you go through the Barclays site, not the
M. LEWIS:
And not the comparison site.
Or you go through my website
because we always list the best ones obviously.
LEWIS:
(laughs)
A subtle distinction.
Thanks for that, Martin.
[EDITOR’S NOTE: On 6 February 2008 Barclaycard told Money Box that it intends to change the offer on www.barclays.co.uk so that all applicants for its ‘life of balance’ deal will pay the same 2.98% fee. However it confirmed that anyone who applied via the website while the fee was listed as 2.5% will pay the lower amount]
LEWIS: David?
Let’s move on to David now who’s calling us from Grimsby.
DAVID: debt.
Hi, good afternoon.
Basically I’ve got £29 to £30,000 of I’ve just rearranged my
My house is worth £85,000.
I owe £65,000 on it.
mortgage at a fixed rate for 10 years.
I was looking to borrow £30,000 for the next
4
10 years.
I’ve got three credit cards.
One of them is one I got off Martin’s web
page, so that I could take £3,000 off one of my cards, so that is a low interest rate.
LEWIS:
Right, so that’s a life of balance card.
M. LEWIS:
So that’s a good one, that’s a cheap rate.
Lovely.
DAVID: but we’re nearly there.
Yeah.
And basically we’re not quite up to the borderline yet,
LEWIS: Nick?
You’re getting there.
Let’s put that to Nick Lord first.
LORD:
David, I mean the first problem that you’re going to have is
who’s going to lend you £30,000 in order to pay off that debt? You’re saying your house is worth £85,000, you’ve just taken out a 10 year mortgage for £65,000. you thinking of taking out a secured loan? Were
DAVID:
Well I’m just looking at options, anything like that.
LORD:
You weren’t looking at one of these adverts on daytime TV
suggesting you put all your debts under one roof, were you?
DAVID:
No, no.
LORD:
Well the difficulty you’re going to have is … I mean certainly
you shouldn’t put your debts under one roof there because what you would be doing would be putting your house at risk. I mean I don’t think you’re going to find
anybody anyway who’s going to lend you £30,000 on a secure basis because you just don’t have the equity in the property. Therefore you’re going to be looking … if you Given that you’ve got
are going to consolidate, it has to be at an unsecured rate.
substantial parts of your debt at a very good, low rate at the moment, I’m not inclined to suggest that. Can you afford to maintain the payments that you are obliged to
make on the agreements at the moment?
5
DAVID:
Yeah, I can at the moment.
At the moment I’m paying about
£750 a month, which is the minimum payments.
LORD:
You’re just making the minimum payments, are you?
DAVID:
Yeah.
LORD:
Look, I would suggest to you actually what you’ve got there is
rather than a credit problem, I think you’ve got a debt problem, because if you’ve got not much equity in your property, you’ve got £30,000 worth of unsecured debt and all you can repay is the minimum payments, I’m afraid if you do the calculation … Even at a low rate of interest, you do a calculation as to how many years you’re going to end up repaying that debt, you are going to be really scared. I think what you need
to do is you need to sit down, you need to make a list of your income and expenditure and you need to consider whether your debt problem is such that you need … rather than trying to borrow some more, you need to think of some other way out whether it’s a debt management plan, perhaps even an Individual Voluntary Arrangement, and you need to see my colleagues at the Citizens Advice Bureau or other agency.
LEWIS:
Martin?
M. LEWIS:
I don’t disagree with Nick in general.
I mean I’m a big fan
of the debt crisis counselling, the non-profit ones anyway.
I’m questioning whether
you’re quite there and whether we couldn’t rescue you from it beforehand and it’s just a question of which side of the border you’re at. The first thing, have you applied to anybody else and been rejected?
DAVID: me because …
I’ve applied to about four up to now and they’ve all rejected
LEWIS:
What, four credit cards David?
DAVID:
No, for loans.
6
LEWIS:
Loans.
M. LEWIS:
Okay, my suspicion is from what you’re saying, you’re not The one option we do have here, and generally I’m not
going to get any more credit.
a fan of it, is to shift the stuff that isn’t cheap onto your mortgage if you’ve got a long-term cheap rate there - I know we’re spreading the loan - if your mortgage lender will allow to do so. Putting it onto your mortgage and trying to overpay, if you’re
allowed to, so that you then use the same money you’re paying off now to overpay your mortgage each month, so you’re going to clear that debt quite quickly. But I
mean the key to this is if you are prepared to do a detailed budget - and there’s a free one, automatic one on my website that you can go through that’ll take a couple of hours, I’m talking a proper budget here - you go through a budget to radically change your lifestyle so you’re not spending a penny and really try and force to pay this off, that’s one route, and putting it on your mortgage may well work. If that’s too much
of a hassle and you’re in a panic, I think you need to go to the non-profit debt counselling agencies, as Nick’s recommended, which I will say right now they’re good guys - Consumer Credit Counselling Service, National Debtline, Citizens Advice Bureau. If you can’t meet your minimum repayments - anybody listening
out there - go to those guys straightaway.
LEWIS:
It does sound, David - forgive me for putting it like this - but
you’ve been spending more than your income for some time and perhaps now is the time to stop. Do you think that might be true?
DAVID: her off.
Basically what it was was a broken relationship.
I had to pay
LEWIS:
And that’s always a very difficult time, I know.
DAVID:
And I have been to National Debtline and, like I say, they
can’t help me because we’re not over the line yet.
LORD:
I think the fact that you’re only able to afford the minimum
7
payments on your credit cards, I’d go back to National Debtline, I think, because I think you are getting very close to it and probably over it.
LEWIS:
And, David, just one quick question.
Are you managing to
make your mortgage repayments, so your house isn’t at risk from that at the moment?
DAVID: mortgage.
No, that’s the one thing me mother taught me - always pay the
LORD:
Good advice.
LEWIS:
(laughs)
Thank god for mothers, eh?
DAVID:
Always pay the mortgage. The mortgage is always paid.
LEWIS:
Indeed.
Martin briefly?
M. LEWIS: a budget urgently.
David, best of luck to you.
Whatever you do, you need to do It sounds
You need to sort that out. And do some reading.
like you’re thinking in the right direction.
And what’s really interesting is people A lot of people with debt
always talk to me about debt being from spending.
problems is because of change of circumstance - breaking a relationship, a death, an illness. Those are the really big causes. Well done for trying to sort it out.
Fingers crossed you’ll get there. because you’re working at it.
One way or the other, you will in a few years
LEWIS:
Thanks very much for your call, David.
Let’s move onto
Jeanette now who’s calling us from Cornwall.
Jeanette, your question?
JEANETTE:
Good afternoon.
Nowadays when our kids are racking up
huge student loans, debts, most parents I know would do their utmost to help out before it got to be a problem, but of course with confidentiality clauses and everything it’s quite often that parents don’t realise it’s got to sort of mega proportions before it has. I might have got the wrong end of the stick, but friends of ours, this happened
8
to them, and I just wondered at what point does the liability - if ever - come back to the parents? Do we have any responsibility?
LORD:
Jeanette, the good news for you is no, you’re not liable for the
debts of your student sons and daughters, in the same way the general principle is that any one individual is not liable for debts of anybody else. The only way in which
you’re liable for the debts of anybody else is if you have a joint debt with them or if you sign a security for them; or there can be some cases, with husbands and wives and same sex partners, where they can be liable for things like council tax and water charges. But general rule of thumb: you are not liable for the debts of anybody else.
JEANETTE:
Oh that’s good.
LEWIS:
And Martin?
M. LEWIS:
Look, this is something that frustrates me when I hear this,
Jeanette, because I think you’re probably very well meaning and I can hear it in your voice. One of the problems we have in the UK is we are a nation educated into debt Student loans - and
when we go to university, but at no point educated about debt.
by that, I’m talking official student loan company loans - are not something parents should be worrying about or trying to pay off for their kids. of inflation, so there’s no real cost to them. They are set at the rate
Your kids won’t ever have to pay them
back until they’re earning £15,000, and then they will only pay them back 9% of everything they earn over £15,000, and it won’t go on their credit files, it won’t impact their ability to get a mortgage. So many parents out there, what we have to It’s happened in America for a long
do is understand that’s how society is set up. time: you get a college fund.
Now for your kids, the most important lesson to teach
your kids isn’t don’t borrow because they’re going to have to if they’re going to university. It’s that student loan debts are good debt - it’s never perfect debt; 0%
overdrafts are moderate debt and we should try and avoid them; and credit cards and other loans are bad debt. that debt isn’t bad. And if you don’t teach your kids anything else, teach them Avoid the bad debt. So Jeanette, if your kids
Bad debt is bad.
just have … And which debt do they have? If it’s just student loan debt, well they’re going to earn more when they leave university - I hope - and if they’re earning more,
9
they’ll repay the debt quickly; and if they’re not, they won’t pay it.
But we need to
get away from this fear of debt as a bad word and start realising that debt comes in many colours - some good, some bad.
LEWIS:
And Jeanette, just let me ask you.
Is it just student loan or
have your students - as many do, your children as many students do - taken on credit cards and bank loans as well?
JEANETTE:
They’ve been warned off credit cards and good for them …
M. LEWIS:
Good.
LEWIS:
Yes, but have they done that?
JEANETTE: me the truth. (laughs)
Yeah, to my knowledge, to my knowledge - if they’re telling
M. LEWIS:
Well done, good.
JEANETTE:
They’ve avoided …
Neither of them have got credit cards.
LEWIS:
Well I think you’re halfway there then.
So, as far as you
know, they don’t have huge debt problems, but they will obviously have a student debt as everyone does now.
JEANETTE:
And an overdraft.
LEWIS:
Oh and an overdraft.
M. LEWIS: problem out there.
A 0% overdraft can be used … This is a great message for anyone.
I tell you the biggest The problem always
comes … When you say to someone who’s working - Paul, play this with me - how much shouldn’t you as a working man spend more than? You shouldn’t spend more than you … ?
10
LEWIS:
Earn.
M. LEWIS: So here’s my lesson.
Easy, isn’t it? What do we say to students? No-one knows. Don’t spend more than your student loan, any grant you get, That’s what
any money that’s given to you by parents and any earnings you’ve got. you have to budget on. That’s the amount.
We never tell them what they shouldn’t spend more than.
LEWIS:
Jeanette, it sounds as if you’ve got less to worry about than
many parents, but thanks very much for your call.
M. LEWIS:
Well done, Jeanette, for not letting them have credit cards.
LEWIS:
Interesting issues raised.
Let’s go to an email now.
This is
an email from Richard.
He goes abroad with his debit card. The Liverpool & Then it’s been
Victoria card used to be free for withdrawing foreign currency.
transferred to Goldfish and he says it’s now charging him money and he wants to know where he can get foreign usage free cash cards.
M. LEWIS: Liverpool Victoria. Europe.
Yeah from memory they’ve added a 2.75% loading onto It did used to be free in Europe. It used to be 1% outside My top pick If you’ve
Same as the Saga card, which is co with Liverpool Victoria.
overseas card is the Post Office card, very narrowly beating Nationwide.
got a Nationwide card for spending abroad, don’t bother getting the Post Office, it’s not worth it; but if you’re about to get a new one, the Post Office - it’s no loading in Europe, outside Europe, cheapest cash withdrawals equal with Nationwide, but because if you withdraw cash abroad you will always peg interest on it, a smidgeon even if you pay it off in full, Post Office interest rate slightly lower than Nationwide, which is why it’s my top pick for spending abroad.
LEWIS:
And of course debit cards better than credit cards.
M. LEWIS:
No! No!
11
LEWIS:
Oh, I’ve got something badly wrong.
Martin?
M. LEWIS:
No, no, no.
I mean there are five cards from hell out there
that will charge you a fine …
LEWIS:
No, no, I mean Nationwide and … yes, yes.
M. LEWIS:
Oh yes, forgive me Paul, sorry.
LEWIS:
Not generally.
M. LEWIS: anything else.
Nationwide debit card is better for spending abroad than But beware spending on normal debit cards.
LEWIS:
Yes, absolutely.
M. LEWIS:
Debit cards are worse than credit cards.
There are some very
evil ones out there coming from the big banks that if you spend £5 on them, they might fine you £1.75 each £1 you spend. So be very careful!
LEWIS:
Yes, debit cards from the ones that don’t charge you foreign We’re going to move on now to Mary
usage loading, not from the others which do. who’s calling us from Wales. Mary?
MARY: Barclaycard recently.
Hello.
I’m calling on behalf of my son who applied for a
He got his card and in a separate envelope from Barclays
Insurance Dublin was a letter saying ‘thank you for applying for Barclaycard Plan B’. I phoned my son immediately because he was using a home address - he’s in London, I’m in North Wales - and asked him did he know anything about this Barclaycard Plan B. He said, “Never heard of it. What’s it all about?” The letter was dated 24th of January. I received it on 30th and it said, ‘We will assume if you do not reply
within seven days of receipt of this letter that you want to take up this policy.’
12
LEWIS:
Right, Mary, if I can just …
As I understand it, your son has
been sold Payment Protection Insurance with his Barclaycard and wasn’t really given the chance to cancel it. I think that’s the nub of it. Nick?
LORD:
Well I think most people now will be aware that the Financial
Services Authority and the OFT have been very active with regard to Payment Protection Insurance. Just last week, the FSA fined HFC, part of HBOS, a million So clearly I mean Mary …
pounds I think it was with regard to mis-selling.
LEWIS:
I think it’s part of HSBC, not HBOS.
LORD:
Sorry, beg your pardon.
Gosh!
LEWIS:
You’ll be in big trouble.
LORD:
Just in case their lawyers are listening.
Mary, I guess the
first question is does your son want this Payment Protection Insurance?
MARY: for your application.
No he doesn’t and today we’ve got a letter saying ‘thank you It’s been accepted.’
LORD:
Okay, I think it’s going to be very straightforward because the What your son
companies are very sensitive with regard to this issue at the moment.
needs to do - and clearly it’s your son’s credit card - he needs to write to say that he doesn’t want this Payment Protection Insurance. He never wanted it, he never got
the opportunity to refuse it and he’d like an immediate refund of any money which has been paid.
M. LEWIS:
Has he used the card yet?
MARY:
I think he’s activating it today.
13
M. LEWIS:
Right, in that case he’s been charged nothing.
You can just
cancel it because Payment Protection Insurance on a card depends on the amount you spend. Nick said people will be aware about what the FSA and the OFT have done. I’ve had
The FSA hasn’t done anywhere near enough as far as I’m concerned.
nearly 200,000 template letters of PPI mis-selling reclaims going from the website. People are winning thousands of pounds at a time. All the FSA has done is do these Let me tell
fines of a million pounds to companies that make billions of pounds.
you, the way you kick these companies back for their nasty mis-selling is everyone who’s got a loan, everyone who’s got a credit card, check if you’ve got the Payment Protection Insurance. If you’ve got it, check if it’s suitable for you. If it isn’t, tell
them you want your money back and that’s going to hurt them a lot more than these piddly little fines that they sneeze off.
LEWIS:
Okay, I think the advice there is fairly clear, Mary. (laughs)
M. LEWIS:
Sorry for having a go, but this is the biggest campaigning There are up to 10 million policies, I believe, out
issue of the year - PPI reclaiming. there that have been mis-sold.
LEWIS: he has to do it.
Okay.
And, Mary, as Martin pointed out it’s your son’s card, It was very timely. Fred now
But thanks very much for your call.
from Lincolnshire.
FRED:
Hello.
Good afternoon. I’ve got about £8,000 worth of debt But I was just wondering if it’s worth
and I’m paying it back through Pay Plan.
going bankrupt. I don’t have any assets except a car and a parrot.
LEWIS: bankrupt?
Your assets are a car and a parrot.
Nick, is it worth going
LORD:
Did Pay Plan not discuss the option of bankruptcy with you,
Fred, when you first went down the debt management route?
14
FRED:
Very briefly, but not really in detail.
LORD: £8,000. plan?
I mean clearly the amount you owe is not particularly high at How many years are you going to pay it back on the debt management
FRED:
I think it’s probably going to take about 8 to 10 years.
LORD:
Okay.
Well look, the alternative of bankruptcy means that
you’ll be discharged from bankruptcy at the end of one year, so long as there’s no fraud or no other similar elements involved. You might be required to make So if you take a hardnosed
payments out of your income for a further 3 years.
financial approach, it’s hard to argue that bankruptcy is going to be a better financial option. However, you do need to consider what implications bankruptcy is going to So with bankruptcy somebody else
have because it’s a far more formal procedure. will step into your shoes. responsibilities.
A trustee in bankruptcy will take over your rights and your
Now one of your rights is to sell any items of value that you have.
Now you’re not a homeowner, is that right?
FRED:
Yes, that’s correct.
LORD:
Okay.
Do you need the car in the course of your work?
FRED: and milk.
Sometimes, but the nearest shop is 12 miles away to get bread There’s no transport.
LORD:
Okay and how much is the car worth, ball park?
FRED:
Sorry?
LORD:
How much is the car worth, ball park?
FRED:
About £400.
15
LORD: taken.
Right, in which case the car is almost certainly not going to be I find it’s unlikely I think the trustee is going to seek to take your parrot
unless it’s a particularly valuable parrot.
FRED:
Well it is actually.
LORD:
It is a very valuable parrot?
FRED:
It is very valuable, yes.
LORD:
How much do you think it’s worth?
FRED:
About £800.
LORD:
Well, okay, again I think it’s unlikely the trustees are going to But what you do need to think about is that bankruptcy’s a It will involve a court hearing, it will involve you paying
particularly go for that.
far more formal procedure.
£475 to start it and it will potentially have more of an impact upon your credit rating some years down the line. So what you need to think about is this, I think: where do
I want to be in 5 years time, 8 years time? If I do go down the bankruptcy route, is that going to have any major detrimental effects? For example, you need to work on the basis that your employer will find out about the bankruptcy and your friends and relatives will find out about it. no. Now for some people, that would be an absolute no
I mean for example if you’re a bank manager with Barclays Bank, you know But other people are quite happy with that. So what
you do not go bankrupt. you’ve got to do …
FRED:
Can future employers find out?
LORD:
Sorry?
FRED:
Would future employers find out?
LORD:
Well you need to work on the basis they would because this is
16
public information.
Not necessarily they would, but you need to work this through.
LEWIS: to answer correctly.
And of course if it was asked on a job application, you’d have
LORD: act.
Absolutely.
So what you’ve got here is a bit of a balancing
Bankruptcy is going to lead to an earlier light at the end of the tunnel, but on the
other hand there are other implications and you need to know about the bad sides of bankruptcy as well as the good sides.
M. LEWIS:
For many people though bankruptcy is exactly what Nick What I
says: the light at the end of the tunnel; you wake up and you get a fresh start.
would do in your case is I would simply take your finances to one of those agencies I mentioned earlier - Consumer Credit Counselling Service, National Debtline, Citizens Advice Bureau - and go through exactly what the situation is with them, whether it’s worth you going bankrupt or not. We’re a radio programme, but they can give you a
good one on one hour going through your specific finances that we can’t come close to doing here even though Nick did do a wonderful job of explaining the differences.
FRED: it?
Can I ring fence the parrot to know for 100% they won’t take
LORD:
Well, look, strictly speaking the parrot is an asset and so if the
trustee in bankruptcy could give you a replacement parrot for £100, then that is theoretically the case. I think it would be a very hardnosed trustee in bankruptcy
which would want to take your parrot, but there are no guarantees.
LEWIS organisations.
But I think the important thing is get in touch with those If you’ve got web access, bbc.co.uk/moneybox will give you them
and there’s an action line I’ll give you at the end of the programme in a few minutes time who you can call and they will put you onto those debt counselling organisations. Going to move on now. Thanks very much for your call, Fred. David?
Moving on now to David from Croydon.
17
DAVID:
My question is that I’ve seen in the papers on a number of
occasions an ad that says ‘clear your debts with up to 70% written off’ and it has a sub-head which says ‘life is difficult enough without having to worry about your debts’. And also …
LEWIS:
So this is a kind of get out of jail free card?
DAVID:
Well it also says that ‘owing to a little known government
scheme, you can write off 70% of your debt’.
LEWIS: studio, David.
There are groans and I have to say sort of wry grins around the Martin?
M. LEWIS:
David, the first thing to say is that anyone who sells you an
IVA will probably make about 5 grand out of doing so, so …
DAVID:
Well first of all, can I make clear that I am not in debt but I am
very curious about these adverts.
M. LEWIS: grand for doing so.
Absolutely.
Anyone who sells you one will make around 5
There’s no surety that it’ll actually work for you and it is a very It’s effectively a cut down version of bankruptcy and I always remember a friend,
serious thing taking an IVA.
nothing upsets me more than when I see those ads too.
a very senior journalistic colleague I used to work with calling me up and saying, “Hey, I’ve heard about these. the debt.” I’ve got 6 grand on 0% cards. Thought I’d get rid of
I was like, “What are you talking about? You earn a lot of money and It’s not a loophole. It’s a bit like going bankrupt
this is a small amount of debt.” but not quite all the way.
That’s what everyone has to understand about it.
LEWIS:
Nick?
LORD:
I absolutely agree with Martin.
But, on the other hand, an
IVA can be entirely appropriate as an alternative to bankruptcy.
18
LEWIS:
Yes, I think Martin was agreeing with that.
LORD: of jail free card.
Yes, that’s right.
But the important thing is it’s not a get out
You need to go and speak to a reputable insolvency practitioner via
people like Citizens Advice Bureau.
M. LEWIS:
Absolutely.
LEWIS:
And/or Consumer Credit Counselling and National Debtline.
Thanks for your call, David.
DAVID:
Can I ask one more thing?
LEWIS:
Yes, very briefly if you would because I’ve other calls.
DAVID:
So what is this ’unknown government scheme’?
M. LEWIS:
It’s an IVA.
LEWIS:
It’s the law.
That’s why they call it a government scheme.
M. LEWIS:
Basically they negotiate with your creditors and say alright, We’re going to pay a certain amount back over a That’s
we’re going to sort all this out.
certain amount of years and it’s a bit like going bankrupt, but not all the way. the easiest way to describe it.
LEWIS:
Okay, thanks for your call, David.
Paul in Plymouth now.
Briefly if you would, Paul.
PAUL:
Good afternoon.
Could the panel please tell me what
happens to credit and store card debt when the debtor dies?
LEWIS:
Okay.
Martin?
19
M. LEWIS:
Yeah, people say the debt dies with you.
It doesn’t.
What
happens is the debt comes out of the estate.
So if there’s a mortgage and there’s a
house asset - all the assets, all the liabilities are taken off the assets and what’s left is passed on. If the liabilities are bigger than the assets, well you don’t have to take it But it certainly doesn’t disappear, I’m afraid. It comes out
and have it passed on. of the estate.
LEWIS:
Nick?
LORD:
Absolutely correct, but do be aware of companies which will
try and persuade relatives to take responsibility when there’s no legal responsibility.
LEWIS:
Yes.
So let the executors sort it out.
And very briefly
we’ve had an email about Egg. Egg card or have been told.
As we’ve been hearing, 160,000 customers lost their
And Chris has said, ’What if I want to apply for another
card? Will the fact I’ve lost my Egg card count against me’?
M. LEWIS:
I wouldn’t think so at all.
LORD:
No, but the important thing is you get hold of your credit
reference file to see exactly what information is held on you to make sure it’s accurate and correct.
LEWIS:
Right.
And Experian have said to us that the cancellation
will not adversely affect credit rating because they can’t actually see which cards you have …
M. LEWIS:
Absolutely.
LEWIS:
… on the credit record, so it shouldn’t do so. Though of And, Martin, if you do
course there has been a lot of controversy about Egg cards. lose your Egg card, where should you go?
M. LEWIS:
Depends what reason you’ve lost it for.
20
If you’re in bad
debt, it’s going to be difficult to get a new card; but, as we know, many people are losing their Egg cards and they pay off in full each month, which I say for most people, unless you’re on the Egg Money card, is a blessing because it doesn’t give you very much cash back. You’d be far better off going to something like the
American Express Platinum card or the Capital One cash back card, which will give you a lot of cash back, pay it off in full. raspberry) to Egg. You’ll be quids in and go …. (blows
LEWIS:
Thank you very much, Martin.
That’s all we have time for.
My thanks to Martin Lewis from Moneysavingexpert.com, Nick Lord from Citizens Advice, and of course thanks to all of you for your calls and emails. More about
credit and debt, as I said, on the BBC Action Line - 0800 044 044, calls are free - our website, bbc.co.uk/moneybox. You can listen to the programme again there,
download a copy, subscribe to our podcast, and in a couple of days read a transcript for all those details you didn’t quite note down. I’m back at noon on Saturday with Money Box and I’m here to take more of your calls on Money Box Live next Monday afternoon.
21