Thursday, September 10, 2009

Pleas unheard

No more second chances

Here is a tale for our times if ever I heard one. It is about a 27-year-old who earns £25,000 and has unsecured debts of £21,000. She is a friend of a friend and came asking me for help. I do not suspect her case is rare. She graduated with a science degree from a four-year course at a good university having had no financial help through her time there. She worked, but it was not enough. After graduating she had to move away from home to find a job, moving in to a cheap shared flat in London. She does not live extravagantly – she shares a flat with three other people her age. But she does live like a normal 20-something: going out on Saturday nights, taking one holiday a year. And yet in this time she has racked up this incredible amount of debt. Her monthly take-home pay is £1600.

Posted by jack c @ 07:44 PM (2712 views)
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17 thoughts on “Pleas unheard

  • Like a little kiddie who has right royally stuffed themselves with sweets and are now making themselves sick, this stupid b*tch is the absolute product of Gordon Browns Britain. Spend, borrow, forget about the future then go bankrupt and forget about it all.

    It has to end.

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  • I’m a voluntary debt advisor with a charity. This example is par for the course,

    As hpwatcher says, a product of Gordon Brown’s Britain. If the amount was a little less the 27 year old could opt for a Debt Relief Order (DRO) a kind of mini-bankruptcy introduced last April.

    Watch the DRO figures leap when they are next published !

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  • gone-to-colombia says:

    Banks exist to make a profit, and if idiots like this one cannot control their own spending it’s not the bank’s fault.
    She should be made to pay every penny back.

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  • I can’t read the whole article, I guess you lot have the way you’ve come down on her like a ton of bricks.

    It’s recent policy which has made students pay their way and leave with debt. I’m sure rents near Universities have increased since the BTLers moved in and entrants to Uni’s increased.

    So far as I can tell she borrowed just over £5k p/a during her 4 year course. I think £5k p/a to include rent food fees etc. is not excessive.

    I see (from the above paragraph at least) a typical situation of the 50 something generation stealing from their own children.

    Firstly getting them to pay for their own education (fair enough to a degree). Then stealing all their houses and renting them back to them.
    That is unacceptable.

    And frankly if I’d done a 4 yr science degree and was taking home £1600 p/month I’d be pretty pi55ed off. I guess this could go up failrly dramatically though.

    I don’t know her outgoings, but if she moved back home she could clear this down in a couple of years. Not very satisfying when after that you have to save for a house deposit, wedding (maybe) and at 27 she’ll be needing to start a family in 5-8 years time.

    What a crap society has been created.

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  • Here you go str2007

    I do not suspect her case is rare. She graduated with a science degree from a four-year course at a good university having had no financial help through her time there. She worked, but it was not enough. After graduating she had to move away from home to find a job, moving in to a cheap shared flat in London.

    She does not live extravagantly – she shares a flat with three other people her age. But she does live like a normal 20-something: going out on Saturday nights, taking one holiday a year.

    And yet in this time she has racked up this incredible amount of debt. Her monthly take-home pay is £1600.

    After paying her bills and the minimum repayment on her debts she has about £150 left a month.

    What’s incredible is the trail of debt that she has been allowed to accumulate. There is £2000 left on a loan with HSBC, with whom she also owes £2500 on a credit card. Incredibly, HSBC’s subsidiary M&S Money has also given her a credit card and she has the same debt with them.

    This obvioulsy is not the end of it. There are debts strewn across credit cards and I am going to name and shame them: Debenhams store card, Egg, Mint, Tesco, and Barclaycard.

    Let us clear this up – before I get any emails telling me how irresponsible she has been. She knows it.

    Her naivety allowed her debst to get on top of her. She has never sat down and done a budget, and she never realised how heavily in debt she was getting.

    She wishes that at some point someone had said no. She has a responsibility, but banks have some too.

    And that is my point. No-one did. Each of these banks would have credit-checked her. They would have seen someone getting bigger and bigger debts, and who was only ever repaying the minimum. And yet they were prepared to give her another credit card, and another. And another.

    She has never earned more than £25,000, and yet these banks were irresponsible enough to lend her the money. What she needed was one of them to say no.

    All of these banks should be thoroughly ashamed of themselves. It is no excuse to say they did not know how heavily indebted she was becoming. They kept giving her money. As a result they have created a credit culture that has left thousands in debt in this way.

    What is the solution? She is living beyond her means at the moment so overpaying is impossible – this will obviously leave paying back with this card debt for the next 25 years.

    Consolidate seems the best answer – but will she be given a personal loan.

    She is off to HSBC, with who she has been a customer for 15 years, to ask for a loan so that she can tear up her cards and repay the debt in five years. She is now being responsible and will be going in with all her statements, a budget plan, and a practical solution.

    What did HSBC say? They could not help. Suddenly the banks are getting on their high horse about responsible lending.

    I would argue that refusing her now is more irresponsible than ever as it will leave her saddled with debt for two decades.

    Do the maths

    Sometimes the logic behind some marketing material doesn’t seem fully thought out. Take Abbey’s Stamp Duty Mortgages. They cap the maximum loan you can have at £150,000 and are designed to give a low rate to those who want to get on the ladder before the stamp duty window closes.

    But what no-one at Abbey seems to have thought through is this: if you take out the maximum loan-to-value on both the 75 per cent and 85 per cent rates then you will end up paying stamp duty.

    So why call them Stamp Duty Mortgages at all? Because it makes a better headline than ‘small loan mortgages’, even if you do end up paying the tax.

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  • It seems fairly obvious that she could have budgeted better and fairly obvious that the banks should not have lent her more money to protect themselves. A two-way deal, as it used to be. The idea that one side has all the responsibility is preposterous, only made possible by the lunacy whereby banks believed that they didn’t have to worry about how their debt was being payed back anymore an so could adopt a predatory attitude. That was a bad thing, wasn’t it?
    When did it suddenly become acceptable or good that we are are all fair game for predatory marketers who should be able to operate without responsibility?

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  • @str2007
    “And frankly if I’d done a 4 yr science degree and was taking home £1600 p/month I’d be pretty pi55ed off.”
    I think that sums up the feelings of most scientists and engineers in the UK.

    “I guess this could go up fairly dramatically though.”
    Unlikely.

    @shipbuilder
    Very true.

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  • Thanks Jack

    I guess she’s actually been working for 4-5 years and she’s still beenn racking up debt.

    Re : the earlier thread, I probably will wait for further falls, it will depend largely how the money flows in to me I guess.

    What I could have bought in April this year has gone up about £50-60k which is quite a junk, so regretting not buying at the moment. Having said that in the short term I have no financial worries as I still have my cash.

    Lets hope the madness gets reigned in soon.

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  • phd
    Sorry that was incencitive of me. I’m making less than that myself this year if it helps. (But I haven’t got a degree).

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  • str2007
    cheers – not quite as badly off as the example above but I do have more than a couple of degrees!

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  • inflation is eating my savings says:

    What happens if she just refuses to pay?

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  • £1600 pcm is actually pretty good for a graduate scientist. Scientists are not generally well paid apart from the sexy ones you see in adverts for shampoo.

    I really feel bad for this girl but she should have known better at the time. If she won’t/can’t pay her debt I believe the revenue or courts can take money directly from your wages. She needs to get herself a good pro-bono or legal aid lawyer and fast.

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  • There are some things in life that depend on those of feebler mind being coaxed to do what is not good for them.

    But it is also a duty of government to make provisons that ensure that human weaknesses are not unreasonably exploited.

    So, can anyone give me a compelling argument why credit cards should not be phased out, (debit cards excluded) – or why premium phone lines should not be made illegal?

    They are not the only exploitative institutions that could be removed to advantage, but they are the most visible..

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  • Eternal Sceptic says:

    The first line ” a tale of our times” sums it up succinctly. If everyone of that age group is doing the same thing, it is taken for granted everything will pan out ok. Until everything crashed these people would probably have muddled through, with only a small percentage being made bankrupt. However since Gordo’s brave new world has ended in a crock of s*****!, a new reality of being responsible has dawned. The game plan has changed. I feel sorry for the younger generation, they were taught to believe that banks, building societys, and TV drivel meant what they said. It was never pointed out that the downside is well hidden in the small print. The government was equally responsible- they should have jumped on the irresponsible lending at the outset. Is this not what the toothless wonder of the FSA in existance for?
    We have encouraged an entire generation into financial irresposibility and now we are bleating at their debt load. We have taken away many of the rights that my generation had, such as free higher education. To get on they have to accumulate debt and now the world has changed totally and debt is a no no. They deserve help- not abuse.

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  • What I could have bought in April this year has gone up about £50-60k which is quite a junk

    All through the banking crisis I found that vendors were simply not prepared to drop their asking prices in the belief that the house market would ”bottom out”. Now it seems there is an incentive to actually start increasing the prices.

    Just wait till the QE madness is over…..house prices have no where to go.

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  • “But she does live like a normal 20-something: going out on Saturday nights, taking one holiday a year” ….. and lives in London

    …No wonder she is skint!

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  • I read the article and am in despair at the FT writer’s depiction of the young women as a ‘victim’ of irresponsible banks. This ‘victim’ went to a good university and was lucky enough to have a job for – I guess – around 5 years or so. She thought that she was entitled to live a life that she couldn’t afford. Foreign holidays, expensive nights out, regular new clothes and all the rest. Probably also taking a Starbucks latte to work each morning and buying sandwiches at Pret a Manger. And then wondering where it all went wrong. The FT writer would have given her more help by examing where she is spending money and telling her in no uncertain terms that it is possible to live in London on take home pay of £1600 AND pay off debt. But you flat share in Colliers Wood, not Clapham, stop buying new clothes and dont take foreign holidays.

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