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Sharks offering free 'advice' prey on desperate debtors
An unprecedented number of firms are targeting people in debt by claiming to offer free 'advice' on their money worries, say debt charities.
The Bankruptcy Advisory Service, a genuinely independent debt advice service, says it is seeing the 'sharks' emerging at a rate of about 10 a week. 'A lot are internet based and claim to offer people help with their money worries, when in fact they are pushing them into inappropriate and expensive debt solutions,' said Joanne McGillan of the BAS.
The Consumer Credit Counselling Service, another charity, said it is also seeing a huge increase in such companies. 'These organisations are clearly taking advantage of the credit crunch and preying on people at their lowest,' said a spokesman.
The companies often use publicly available information from the Insolvency Register to target those paying off their debts through an individual voluntary arrangement or IVA, a softer alternative to bankruptcy.
'We have seen one recent instance of a company that has written to everyone with an IVA informing them that they may have been missold that IVA and that, for a fee, it can help them go bankrupt instead,' said a CCCS spokesperson. 'The company is then charging the debtor £1,500 when the actual cost of bankruptcy is under £500.'
Another tactic is using automated dialling to call thousands of random numbers and try to track down debtors, said the spokesperson. When someone picks up the phone, they are greeted with a message telling them to press a button on their keypad if they need help with their debts.
'Someone at the end of the phone will then take their details and sell them on to a debt consolidation company,' said the CCCS spokesperson. 'We understand that these salespeople are getting up to a £100 for every debtor they find.'
Offshore money-lending companies that charge interest rates of more than 2,000 per cent are also targeting cash-strapped borrowers in the UK via the internet. The companies are offering 'payday loans' that provide desperate borrowers with up to £1,000 over 31 days, which then has to be paid back with hundreds of pounds added on in interest.
Some lenders operate from the United States, where payday loans have become big business. One, Pounds Till Payday, which is based in Malta, declares an annual interest rate of 2,225 per cent.
The Bankruptcy Advisory Service, a genuinely independent debt advice service, says it is seeing the 'sharks' emerging at a rate of about 10 a week. 'A lot are internet based and claim to offer people help with their money worries, when in fact they are pushing them into inappropriate and expensive debt solutions,' said Joanne McGillan of the BAS.
The Consumer Credit Counselling Service, another charity, said it is also seeing a huge increase in such companies. 'These organisations are clearly taking advantage of the credit crunch and preying on people at their lowest,' said a spokesman.
The companies often use publicly available information from the Insolvency Register to target those paying off their debts through an individual voluntary arrangement or IVA, a softer alternative to bankruptcy.
'We have seen one recent instance of a company that has written to everyone with an IVA informing them that they may have been missold that IVA and that, for a fee, it can help them go bankrupt instead,' said a CCCS spokesperson. 'The company is then charging the debtor £1,500 when the actual cost of bankruptcy is under £500.'
Another tactic is using automated dialling to call thousands of random numbers and try to track down debtors, said the spokesperson. When someone picks up the phone, they are greeted with a message telling them to press a button on their keypad if they need help with their debts.
'Someone at the end of the phone will then take their details and sell them on to a debt consolidation company,' said the CCCS spokesperson. 'We understand that these salespeople are getting up to a £100 for every debtor they find.'
Offshore money-lending companies that charge interest rates of more than 2,000 per cent are also targeting cash-strapped borrowers in the UK via the internet. The companies are offering 'payday loans' that provide desperate borrowers with up to £1,000 over 31 days, which then has to be paid back with hundreds of pounds added on in interest.
Some lenders operate from the United States, where payday loans have become big business. One, Pounds Till Payday, which is based in Malta, declares an annual interest rate of 2,225 per cent.
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