Only Finance.com - Why We Should Avoid Adding to Our Debt Burden

Debt - Why We Should Avoid Adding to Our Debt Burden

Consumers, especially those hooked to the internet, are not new to unsolicited mails. Often referred to as spam, online, or junk mails, most people receive several of such messages almost on daily basis. While many may brush them aside and take no further action than dumping them in the trash or recycling bin, where they rightly belong, a few others may be adventurous enough to want to open and read and possibly act on the contents.

“On a few occasions I have had to read unsolicited mails, out of curiosity, and have sometimes acted on some, leading to a few positive results,” Richard Okwo, a friend once confessed. But the irony is that there were occasions that such adventure had led him into uncomfortable situations like being pressured by sales people after responding to their letter. This Mr Okwo said got him really frustrated until he finally cut off the link.

While some people may be lucky to get away with only the sort of harassment my friend went through, many others are not so fortunate. Often people who respond to unsolicited e-mails or mails end up being exposed to sale staff whose unfair techniques con them into signing up to a contract they are not in need of. Telephone calls become endless and the pressure gets so overwhelming until they get people to final fall in and consent to a costly mistake.

The warning this week by the Office of Fair Trading (OFT) that borrowers who have genuinely signed up to the individual voluntary arrangements (IVA) are being targeted by fraudulent sales staff and companies reminds one of the scenario painted above. It also calls for a serious caution in dealing with unsolicited mails or e-mails and their architects.

The big issue here is that people who target others with such intent often give them little or no space to consider the implication of the contract they enter into, and after signing up there is usually a very slim chance of opting out.

One of the allegations the OFT made against the businesses, apart from the fact that the offers and advice are misleading, is that they don’t even explain to customers the implications of cancelling an existing IVA or declaring bankruptcy.

The offer of an alternative to IVA is usually not made in good faith and there is a possibility of a rip-off. The purpose of opting for an IVA in the first place is to enable borrowers who are unable to pay-off their debt to continue making payments under more relaxed conditions. It also helps see the debt decrease even though there is a fee to be paid while signing up.

But the OFT warned that by cancelling the agreement the debtor is exposed to such risks as losing the insolvency fee paid and not having the debt reduced, which they still have to pay-off.

In the case of declaring bankruptcy, which the businesses allegedly advice people to decide on as a better solution, the OFT warned that doing that would make the debtor lose control of their property, and have business and credit restrictions imposed on them. These are some of the likely consequences.

People counselled into terminating their existing IVA and declaring they are bankrupt are hardly told these. But they need to understand the far-reaching implications of the decision.

Even as the consumer group moves to bring the activities of these businesses under control, the best thing people struggling with debt need to do for themselves is to avoid adding more burden to their debt problem. Understandably, debt is usually very crippling and one would want to do anything within their power to get rid of it. Nonetheless, they need to do the right thing at the right time.

Critically considering the action one takes before it is taken and even seeking expert advice is very essential.