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Money Times - December 1, 2015

Posted by Jill Kerby on December 01 2015 @ 09:00

 

AFTER ‘BLACK FRIDAY’, A NEW DEBT SOLUTION?

Just as ‘Black Friday’ ads were everywhere last week, extolling us with the idea of joining in on this most American of retail phenomena that takes place the day after their Thanksgiving Day holiday, I couldn’t also but help notice the appearance of some very prominent ads from StepChange, the British debt charity reminding readers that it’s doors are now open and ready to bring their debt-busting magic to Irish debtors.

Black Friday will have no doubt been enthusiastically embraced by anyone keen to get a big discount on an expensive item they covet or need.  If you are willing to queue early, move quickly and accept what might be last season’s model, those BF discounts can be significant. For many people on really tight budgets, who really need that fridge or washing machine or new coat or sport gear for their children, it could even be a (retail) god send.   

However, for an even greater number of us, the Black Friday (and Saturday and Sunday) retail rush in many participating retailers is just another version of what was once the Great January Sale of long ago or, more recently, the Stephen’s Day/Boxing Day sales that entice some people queue outside the big electrical retailers and department stores within hours of their finishing their Christmas dinners.

But the Black Friday migration to these shores is also an indicator of the weakening of the retail sector in the United States, and increasingly here and in the UK:  fewer people are spending less money via the conventional store-based route.  On-line shopping, which happens 24/7, has not just cut into the profits of conventional retail, but it is changing the entire industry. 

Black Friday might work this year and next, but can it keep the novelty going, especially as it consumes itself from within by making the same dramatic discounts available on-line?  What’s to stop every on-line retailer from having an occasional Black Tuesday or Thursday by discounting any number of choice items by 75% or 80%?

Shopping with credit instead of income or savings is what got a great many Irish people in trouble, whether it was on St Stephen’s Day, a wet Wednesday in July or last weekend’s Black sales days.  

Property debt has made the biggest contribution to our nearly €160 billion worth of household debt, but unsecured personal debt in the form of expensive credit card, hire purchase, moneylenders’ and personal bank and credit card loans is also a heavy burden for thousands of individuals and families.

Reaching a debt settlement with creditors – whether mortgage lenders or credit card providers – has been far too slow to date despite the best efforts of the Insolvency Service of Ireland to simplify, speed up and make less expensive the process for the most serious and intractable debtors.  

Which leads us back to the arrival here of an Irish version of the UK debt charity, StepChange and why the five main banks – AIB, Bank of Ireland, KBC, Permanent TSB and Ulster Bank - are now providing it with €6 million worth of funding over the next three years to help clear, in a speedier fashion, the large backlog of debtors here.

Just two weeks in operation, StepChange Ireland (Freefone 1 800 937 434 or  www.stepchangedebtcharity.ie ) is a telephone and on-line based operation. Their two new dedicated teams of 12 debt advisers and administrators for Irish borrowers in trouble are based in their Leeds centre and take calls Monday to Friday during working hours (9am-5pm).

The entirely process is free and involves – mostly online - establishing the size and nature of the debt and the caller’s personal financial circumstances. From this information and data it will then make – where possible - a repayment/restructuring proposal that will then be put to the creditor.

Where a satisfactory solution isn’t possible the StepChange adviser can then recommend an insolvency solution (via the ISI) and identify a personal insolvency practitioner for the borrower to contact.

Over €3.5 billion of debt has now been discharged through insolvency arrangements and bankruptcy. The debt limit for a Debt Relief Notice for secured debts has been increased from under €20,000 to under €35,000; legislation will soon be passed to reduce the discharge of a bankruptcy from three years to one year.

StepChange, which has been in operation in the UK for 20 years, has eight offices and dealt with 600,000 debtors last year alone and has over €540 million worth of debt solutions. It has a long track record of impartiality and in coming up with debt solutions that both sides can live with.

It may not be the right process for everyone needing debt assistance, but home based debt assistance groups and charities like MABS and the ISI, New Beginning and the IMHO are still available to meet directly. 

The next step…is to pick up the phone to one of them.

 

Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie

 

 

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