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14.03.2018

Dealing With Creditors Yourself Is It Possible?

Can people self-negotiate with their creditors to repay their debts?  Recent research by Bristol University’s Personal Finance Research Centre (PFRC) suggest it may not be all plain sailing.  The process itself may sound simple, from contacting your creditors, drafting an income and expenditure, and negotiating a repayment plan based on what you can afford.  The reality, however, for many, is a lot different.

The PFRC suggests although it may work in “text book” situations, such ideal conditions rarely exist and where it is most successful, is when people are supported throughout the process by an advice service.

Text Book Self-Negotiation

The text book scenario is when people contact their creditors, are treated fairly, and agree on repayments that are acceptable to their lenders, whilst also being affordable to them. In such scenarios up-to-date information needs to be available and there are ideally no requirements for anyone else to get involved.

However, what the research by the PFRC found was that the textbook scenario rarely exists and there are three over-riding factors that often determine whether self-negotiation is an appropriate approach for borrowers to take.

Factors to consider about Self-Negotiation

The first of these is the character of the consumer’s debt portfolio itself.  The research found the more creditors there were, the more challenging it was for a borrower to self-negotiate with their creditors. This situation could also be exacerbated when debts had been sold on and often led to many finding the process overwhelming.

It also found even when there was only one debt, this didn’t mean the process was necessarily easy, particularly if there was a dispute about a debt, and that dispute related to an error on the creditor’s part.

The second was the availability of disposable income. Where consumers lacked sufficient disposable income, it found they struggled to offer and maintain repayment plans and this was made worse when they were dependant on fluctuating income or had unreliable sources of income from agency work. This they found created obstacles to self-negotiation and people struggled to propose any long-term repayment plans with their creditors.

Finally, they also found a critical factor was whether the consumer had the motivation and capability to self-negotiate with their creditors.  It found, even where people had the capability, if they lacked the motivation, they would struggle; whereas people suffering from mental health problems, sometimes struggled to find the personal resources to make the self-negotiation process a success.

The failure of the process also wasn’t just down to the borrowers.  Creditors, themselves, were often at fault, by not being reasonable and not offering different channels of communication that may have been more suitable for those doing the negotiation.

There is no perfect debtor

In conclusion, the PFRC, found that there was no “perfect person in debt” which creditors often wanted and often based their approach on assuming existed. Self-negotiators didn’t always have the knowledge to understand their debt situation, couldn’t always identify priority debts from non-priority debts and often had an insufficient knowledge of their rights as consumers. They also didn’t always appreciate the importance that medical evidence could have in any negotiations.

They also often lacked the confidence and feeling of empowerment that allowed them to deal with their creditors and their agents and to stand their ground in negotiations

Lenders also often refused to negotiate, continued charging fees and interest and often failed to signpost borrowers to other sources of advice and assistance.

Communication, the research found was also crucial. If communication was done well, there was more chance of reaching a sustainable agreement, but if it went badly, it often led to acrimony and the process becoming protracted.

Speaking about the research, Pearse Flynn of Creditfix, said:

“This research shows, although in an ideal situation people would be able to deal with their debts themselves, the reality is the ideal situation rarely exists.  As this research has shown, there are several significant factors that must be taken into consideration and include the approach and practices of the creditor industry, with the selling of debts and an unwillingness to negotiate with consumers themselves.  This makes the process of self-help often a non-starter for many. We see this daily at Creditfix with the profile of our client’s debt portfolios, where multiple debts are the norm.  This makes the whole process of self-help less likely to be a successful one.”

“At Creditfix, however, we believe a multi-channel approach of delivering advice to our clients gives them the experience of being in control and helps them feel empowered, whilst allowing ourselves to support them throughout the process. This includes allowing them to chat to us by telephone, online chat and through face to face services. It also includes ensuring the clients get the correct advice and have up-to-date information available to help them make informed decisions.”

“Self-negotiation, on its own, is not also always the appropriate route for people to take, as it is likely to result in repayment plans.  The importance of seeking advice first, is it ensure all options are explored, including solutions like trust deeds and individual voluntary arrangements.”

If you need help with your debts and want to speak to one of our advisers about your options, call 0808 2085 198 or chat with of our advisers online.