Yesterday I took part in Radio 4 You & Yours to discuss the ongoing issues affecting victims of Compass Debt Counsellors recent collapse.
This is the second time You & Yours has featured the Compass matter in recent weeks. The first broadcast focused on the direct impact of the collapse and the fact that victims had amassed large ‘savings pots’ with Compass to offer as full and final settlements at the conclusion of their debt plan.
Sounds logical? No, not at all. Debt management companies are not meant to accrue large ‘savings’ of client money, it should just transit through their accounts, have fees deducted and then be paid to the creditors monthly. In ordinary circumstances, the collapse of a debt manager would cause loss of perhaps a few months money but never sums of £25,000 in some cases.
If such sums had been held in a bank account, then the money would have been protected had the bank ‘folded’ but with the Compass model, there is no such protection or compensation because Compass were operating outside of the FCA regulatory framework and no one, except Compass, their staff and clients knew about it. Close examination of the Compass client contract reveals no mention of savings accounts at all. Seemingly they were sold and discussed only by telephone.
Radio 4 decided to revisit the Compass subject after I contacted them after the last broadcast to enquire whether they were aware of the Abbey Solicitors connection to the victims. This led to them asking me to discuss my opinion of the services offered by Abbey Solicitors to this group of Compass ex clients.
If you have entered into a debt management plan, you are trying to repay the debt slowly, steadily and responsibly. If you handle it yourself or use the free charities Payplan or Stepchange you will get there eventually. You will need to give up some luxuries and make some changes but you will become debt free with the right advice. I struggle to comprehend how switching from a debt repayment programme to a legal challenge to the enforceability of your various credit agreements is sensible.
By all means send off for a copy of your CCA agreement if you want to have some good negotiation tools, but for goodness sake maintain sensible payments until you have some idea what you are facing. A debt that has been sold onto a debt purchaser from your original bank or credit card provider will have changed hands for around 10% of its original value. Of course the debt purchaser has costs on top of that but it gives you a good idea of the range of settlement offers you could consider.
Most debt purchasers will happily take a lump sum settlement for a small percentage of the original debt rather than years of payments at £5 per month. All it takes is negotiation and a bit of determination. Many of the Compass victims who have joined LegalBeagles in recent weeks have delighted us with tales of their new found determination to tackle their debts them selves rather than trust any third party to handle their affairs ever again. I don’t blame them!
The Abbey Solicitors deal required their new clients to pay them exactly what they were paying Compass for 12 months while they examined enforceability arguments. This means that those clients would no longer be able to pay their creditors anything monthly; which could trigger court and bankruptcy proceedings in some cases.
So hopefully now the message is reaching everyone concerned that the switch to Abbey Solicitors is a very bad idea indeed.
Perhaps more so after events of recent days.
Two days ago, I wrote to the CEO’s of the major debt purchase companies to whom the £2million missing Compass funds was actually owed.
The letter sets out a request for them to show compassion and support to the victims and to consider ‘not profiting’ from these people and to potentially write off large chunks of the debt which the victims believed they had already paid.
The response I have received thus far from Lowell Portfolio and 1st Credit was heart warming. Both have agreed to show just such compassion and to look at each individual case and to take into consideration amounts paid to Compass. This extraordinary gesture by the debt purchase major players is very significant for the victims. In itself it could negate a major part of the damage caused by this financial fraud against them. I await a response from Cabot as yet but I am confident there is no reason for them not to show the compassion and concern displayed clearly by Lowell and 1st Credit.
Tomorrow I am going to send the same letter to CEO’s of other debt purchasers to try and deliver maximum benefit to the victims. I will keep you updated of progress.