Help on interest charges

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Dee59 | 00:27 Sun 19th Feb 2012 | Civil
5 Answers
I was in debt management with a company called Three Spires who totally messed up my finances and caused me so much stress. After nearly two years, I was still owing more than the orginal debts so I contacted all the creditors and they were happy to deal with me directly so I came out of debt management. My problem - all creditors have been happy with the agreed monthly payments but then HSBC have started taking from my £35 - £26.00 as interest!!! I have contacted them and the customer advisor I spoke to is on my side, but they are saying I have to accept this. what can I do? I have paid consistently and they will get their money which was an overdraft debt.


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HSBC are within their legal rights to continue charging interest on the debt. However it's certainly unusual. (If Mint, Monument and Santander start doing that my own financial problems will be far worse than they already are!).

You've already learnt the hard way that commercial 'debt advisers' can simply make matters worse. However there are genuine (free!) debt advice services who can assist you. In particular, CCCS is a registered charity which is dedicated solely to helping people like you (and me!). I strongly suggest that you seek their advice:

These debt management companies are in it for their own good, just to make money.

They can do nothing that you cannot do yourself (as you have found out by contacting the creditors yourself)
There are good debt management companies around and there are some very bad ones who expect to take “up front” high fees or sharp practices, which get everyone a bad name, it is difficult to know which are which and personal recommendation is important. I assume you had a debt management agreement with your creditors through a debt management company who were charging large fees and you have now come to an agreement directly with your creditors thus saving the fees, but one creditor is being difficult and taking your payment as interest, therefore the capital sum remains the same and may even be growing. This is the problem with informal agreements they are not legally binding.

Have you considered an individual voluntary arrangement (IVA)? This has to be dealt with through an insolvency practitioner (IP) and is often what companies are talking about when they advertise saying such things as “write most of your debts off in 5 years or the government will reduce your debts etc”.
The advantage of an IVA is that if you own a property or do not wish to enter bankruptcy it can sometimes be the answer to your debt problems as it can write off a considerable amount of your debt without putting your property at risk. The IP draws up a proposal for the creditors on a pro-rata basis, and if creditors holding 75% of the amount of debt agree the other 25% are included. The IVA does not usually provide for payment of the full amount of debts and are usually for no longer than 5 years, once agreed the agreement is legally binding. An IVA may not be right for everyone but it certainly has its place in the right conditions, your county court may give you a list of local insolvency practioners, it may be worth talking to some of them
Before you get involved in talking to Insolvency Practitioners you should get truly independent advice from either CCCS or your local CAB. You may well find an IVA is far from being the best option for you. A lot depends on the total amount you owe, whether you own property etc.
As mentioned an IVA may not be right for everyone but it certainly has its place in debt management and should be considered, as should all other options.

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