Bank's deal for worried debtors
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Your support makes all the difference.As the Consumers' Association was calling for tougher safeguards against so-called debt-management companies this week, Sainsbury's Bank says borrowers' need to consolidate their debts will fuel a dramatic increase in personal loan applications. Individuals owe a total of £158bn in unsecured credit, an average of £3,383 apiece and 52 per cent up on five years ago.
Through its magazine, Which?, the Consumers' Association said the debt-management industry was showing "a shocking contempt" for the code of conduct set out a year ago by John Vickers, director general of the Office of Fair Trading (OFT). Companies such as Baines & Ernst, Chiltern, Gregory Pennington and EuroDebt dominate day-time television advertising with their claims to make life easier for those at their wit's end with worry about their debts.
These companies act as a go-between for debtors, asking creditors to freeze interest and charges and accept a lower monthly payment. But they take the first month's payment as a set-up fee, do not touch mortgages, rent or utility bills, and often achieve lower payments simply by spreading the instalments over a longer periods, which is more expensive.
The OFT code says debt managers should be clear about fees, and the code is being reviewed to find how well it is working. Helen Parker, editor of Which?, says: "The OFT must take firm action against these companies now. The number of people struggling to manage their debts could jump if the economic climate changes."
She says debtors should try the Citizens' Advice Bureaux, the Consumer Credit Counselling Service, the National Debtline or CreditAction. There is also a Federation of Information Advice Centres.
Steven Baillie, Sainsbury's loans product manager, said: "Many people want to consolidate. We are offering our lowest personal loan interest rates, starting from 7.3 per cent for online applications. And we can get a cheque to customers in 24 hours."
The Consumers' Association did a free leaflet for the Legal Services Commission, Dealing with debt; your legal rights. Phone 0845 3000 343.
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