Debt & Bankruptcy Issues in the UK

New laws in England and Wales may put debtors into the hands of unscrupulous bailiffs according to a warning issued by the Citizens Advice consumer charity. Under the new law, bailiffs could be granted legal permission to break into the homes of debtors in those areas. Citizens Advice feels the law will increase the number of cases of system abuse, but the government states that it plans to help protect vulnerable people by simplifying the laws that govern bailiffs.
The proposed changes are part of the Tribunals, Courts and Enforcement bill, which is in the midst of its second reading in the House of Commons. Presently only enforcement officers who deal with magistrates' court fines have the legal right to forcibly enter people's homes. The concern of Citizens Advice is that this bill will give bailiffs the right to do so in cases where a debtor owes on a credit card. The charity wants the provisions of the bill to indicate that it should be a last resort and one that will not be used on a vulnerable person. It also wants the bill to reflect that the power should only be used on those persons whose non-payment is the result of wilful neglect and not those who are financially unable to pay.

Because intimidation, harassment, and the charging of exorbitant fees are already abundant problems, Citizens Advice is also pushing for the legislation to include provisions for independent regulation of bailiffs. The charity analyzed 500 cases, which showed that two thirds of bailiffs were guilty of harassing and intimidating debtors, while forty per cent misrepresented their powers regarding entry into the debtor's home. In addition, nearly half of the bailiffs levied fees that were unfair and a quarter threatened to put the debtor into jail if he or she didn't pay.

Research shows that a minority of bailiffs have a long history of abusing their powers against vulnerable people, are often abusive and aggressive, and make threats of violence or prison terms in order to pressure people into paying large sums of money that they cannot afford.

"Instead it gives bailiffs greater powers without any proper regulation - a recipe for abuse on an unprecedented scale."

But the government says the bill will simplify the laws governing bailiffs, and will help protect vulnerable people by creating a framework for regulation.
It says it will be able to introduce a certification scheme for enforcement agents, which will cover issues like proper training, criminal records checks and references.

Make certain you know the reputation and stability of the clubs you join, or if they go out of business, you may find yourself shouldering some of their debt. The reason for this is because many of these clubs are unincorporated and as such, there is no legal entity to shoulder the cost. What this means for members is if the club closes owing money, a creditor can legally go to the individual members and not just the assets of the club itself.

Both the Working Men's Club and Institute Union have written to over 1,000 clubs urging them to incorporate so that their members cannot be personally sued in the event of a default. Individual members of the clubs are also working on their own, contacting their clubs and asking them to change their status. Whether it seems to be just or not, the truth is that if you join a club that is not incorporated, you and the other members can be held legally responsible for its debts. If you are an officer, as in the case of one woman who was treasurer and signatory on the loan, you can lose your home or part of its value to cover the club's debts.

The problem with this kind of arrangement is that unless the clubs choose to incorporate, they stand to lose their membership, and people will become very fearful of joining any club that is not incorporated. They wish to protect their own personal assets, and if that means not joining unincorporated clubs, that is the route they will take. It's important for a club operator to understand that unless he incorporates, he runs the risk of holding his entire membership personally responsible for any debt that the club incurs that it is unable to pay or in the event of closure.

People are beginning to understand what this means, and are urging their clubs to change its status so that members are not taking any risks when they join. Whether it's a sports club or a social club, it's important that the founders or owners set its status so that the club shoulders the responsibility of its debts and not its members. Members do not join clubs to go into debt for something they did not create, so it's unfair of any club operator to operate his or her club in such a way that it could jeopardize the financial and credit standing or its membership.

In order to protect your assets, make sure that the club you join, social or sports, is incorporated. Even if it has been in operation for many years, there is always the possibility of something happening, such as the owner becoming too ill to run it. If the club you are considering is not incorporated, find a club that is. If you own a club and aren't sure how to incorporate, check with your accountant or your lawyer for the proper paperwork and procedures for changing the status of your club.

In spite of an increase in the cost of unpaid loans by consumers trying to escape from their increasing debt loads, projections are that Britain's banks will announce profits of more than £40 billion. The announcement is expected to come with reports soon to be released.

Early projections are that HSBC, Britain's largest bank and the third largest in the world may exceed last year's record of £20.9 billion in profit in spite of problems within its United States division that is causing analysts to consider decreasing as much as 10% off their forecasts.

It is probable that Barclays will make profits of more than £7 billion even though it has been hit hard by the failure of customers to make credit card payments. There is a possibility that the country's third largest bank is looking at the possibility of reducing losses from riskier loans, and recently reported that it may sell its Monument operation, which targets those customers with lower incomes.

Banks reported a combined profit of £20 billion for the first half of 2006, which set the scene for their record tally of profits. The profits were in spite of them absorbing charges in excess of £2.5 billion as they covered the cost of customers who were struggling to repay loans.

Although bad debts will continue to be watched closely, it is believed that the end of "free" banking is very close at hand. With intervention by the competitive authorities into various areas that range from credit cards to payment protection, and most recently, the voluntary banking code itself, early forecasts are that banks will soon charge for even the basic bank services. First Direct, HSBC's phone bank, is beginning to charge for some services and others may follow later according to some sources.

The amount of bad debts is of the greatest concern for investors. Lloyds TSB and Barclays have felt the most pain in these areas, with Lloyds being the country’s largest unsecured lender. In spite of their concerns, reports issued before the reporting season closed are indicative of a trend toward stabilization. Forecasters will be watching for any new information that shows the impact of individual voluntary arrangements (IVA's) on bad debts. Analysts at Merrill Lynch believe the numbers are going to go up but then stabilize, but at the present time, there is no indication of the beginning of that trend.

Banking experts believe that most of the rapid growth in profits will come from outside of the United Kingdom. This will be shown as an increase in pedestrian growth in comparison to an increased expansion in the areas of investment banking, corporate markets, and investment management.

Some banks are even being scrutinized about their strategies concerning acquisitions and disposals. Some analysts question whether Barclays is considering a deal in the United States after it took out a £400 million sponsorship deal. There is also speculation that Standard Chartered may be planning some acquisitions.
All of the banks are facing scrutiny over their operations as more face an increase in bad debts while still increasing profits. Of course, it standards to reason that banks, like any other business, are there to make a profit, and if it means raising costs to customers in order to offset an increase in bad debt write-offs, then that is what they will be. It isn't much different than a department store raising the price of its goods in order to offset the cost of shoplifting incidents, but consumers are just more likely to feel directly affected by an increase in bank fees, especially interest rates and credit card annual fees. After all, consumers are more likely to give up credit cards than shopping in their favourite store, no matter what the cost may be.

It's too early to determine what the increase in bank fees may mean for the consumer, but if you base it on past performance, it's safe to assume that business will decline at first as consumers complain about an increase in fees but will stabilize as they realize there is little they can do but accept the inevitable.