Jill Kerby

MONEYSAVING DAILY DEALS HAVE GOT US SPENDING Saving money has become as synonymous with the post Celtic Tiger Ireland and spending it was during the mad, bad decade. You can try and do it the conventional way – putting aside surplus income, or cutting down on your usual expenditure, or by working overtime or getting another job and saving that (heavily taxed) extra money. But since few of those options are easily come by now, many more of us are resorting to slightly less conventional ways of saving, and it involves a whole new industry that has sprung up in recent years: on-line discount vouchers and special deals that can provide huge once-off reductions on practically every retail opportunity you can image. We’re all familiar with grocery store cards that give you a cent or two of credit with every euro purchase you make. They’ve been around for many years and you can convert these savings into other goods by other suppliers than the grocer, or they’ll let you reduce your next food bill by the cash “points” that has built up. Like my mother before me, who used to get little pink stamps to lick and put into her grocery store booklet, I try to save up my points for expensive food shopping weeks at Christmas or Easter. A few years ago, the voucher market took an interesting turn – and it’s all down to the growth of the internet and our increasing comfort in shopping on-line. Voucher code or ‘daily deal’ companies started springing up (starting in the USA) acting as advertising agents and promoters for retailers and service companies willing to give huge cost discounts to anyone who was willing to pay up-front for a restaurant meal, hotel accommodation, beauty and health treatments, entertainment events. The retailer sees very, very little of this money since it is the discount agent who enjoys the biggest return, but most (who stick with the campaign) say it is the equivalent cost of advertising in the conventional media and worth it if the buyer returns and pays full price in the future. In Ireland, the best known voucher code companies include the likes of GroupOn.ie, LivingSocial.ie, Pigsback.com and many others. Last week some interesting data was produced by MyDealpage.ie, a company that allows users to coordinate all the daily deal sites that they subscribe to by receiving just one e-mail (I intend to sign up for this and declutter my inbox). It found that over the past six months, Irish consumers were spending an average of €150,000 a day on these sites or about €27 million so far this year, with the accommodation (23%), health and beauty items or services (21%) the two biggest categories of choice. The “savings” to consumers has amounted to €46 million, says MyDealpage.ie, which monitors all deals and spending and it should top €100 million by year end. The average saving per purchase is 51% of the actual retail and when I logged on I discovered I could get my teeth whitened, my dog vaccinated, book French language lessons and stay in any number of hotels for a night with dinner for the price of what would have normally been the cost of that hotel room.) Critics of the new discount deals say this represents a €100 million loss to the retail trade with the profits going to the mainly foreign owned deal sites, but that isn’t the total story. This new industry is encouraging people to spend what they otherwise would be only saving and many will give the retailed their return custom at the full price. What I believe is the downside of these tempting deals is that not everyone reads the terms and conditions carefully enough and might fail to notice the expiry date of the deal (very often it is three months) or other terms and conditions about the number of items you can order, the need for two people for accommodation etc. Organising refunds can sometimes be problematic since it nearly always has to be done on-line. That said, the use of these daily deal sites means that slowly but surely, more of our €3.7 billion worth of spending on-line will eventually translate into more knock-on sales that stay in the country. Retailers get a new source of advertising and promotion and benefit from the word of mouth advertising if the buyer is happy with the special, once-off deal. Smart shoppers, with lots of time to watch the deals as they appear, can also carefully plan how much they’ll spend over the course of a year taking advantage of one deal after another. I have a friend who says she does nearly all her Christmas shopping in advance this way, though the best deals, she says, are not done in the lead up to Christmas or, for cut price accommodation, just before the summer holidays when everyone is looking for a discount. “Every penny has to be justified these days. These sites can save you quite a lot of money,” she told me, “but I’ve also noticed that other shops and restaurants that don’t have offers are offering now giving loyalty discounts too.”

Tweet

INSOLVENCY PRACTITIONER REGISTER OPENS THIS WEEK SAYS INSOLVENCY SERVICE The first names of authorised intermediaries (AIs) and personal insolvency practitioners (PIPs) should be appearing on the intermediary registers of the Insolvency Service of Ireland (ISI) this week. About 90 applications for these posts from solicitors, accountants and people engaged in financial service have been received so far by the ISI, though not all will pass their “rigourous” qualification requirements. Nevertheless, people who are in serious debt who need such an intermediary to act on their behalf in preparing their insolvency application to their creditors, can now – finally – take the first step in what is still going to be a long journey of debt restructuring, repayment and discharge. (Go to www.isi.gov.ie/en/ISI/Pages/Registers ) The debtor with less than €20,000 worth of unsecured debt (credit cards, personal loans, HP, utility arrears) and limited means will be applying for a Debt Relief Notice (DRN) and will be supervised for three years by AI who may be a money, advice budgeting service (MABS) official. (Sorry about all the acronyms.) The people seeking, respectively, Debt Settlement or a Personal Insolvency Arrangements (DSAs and PIAs) for larger unsecured debts and debts up to €3 million including secured loans like mortgages will need to engage a PIP. And this is where difficulties may arise. While MABS has a 20 year track record of dealing with relatively low level of indebtedness, the PIP is an entirely new category of intermediary. Some will have legal backgrounds. Others will accountants, some with corporate consultancies. There will be tax advisers, qualified financial advisers and mortgage brokers. (Too many of the latter having reinvented themselves as totally unregulated personal debt managers.) Unfortunately, the new insolvency legislation is not specific about they way PIPs should be paid. The expectation is that PIPs will be remunerated - for preparing the credit application, arranging the creditor meetings and if accepted, the supervision of the debtor for the five or six years of the arrangements - from the pool of money that will repay all the creditors. Upfront fees, however, can and most likely will be demanded by some PIPs to cover their initial preparation of the creditor’s proposal during the 70 day ‘protective certificate’ period when your creditors cannot take any legal action against you. “There have been some ambiguous soundings…on the question of whether upfront fees [to PIPs] …will be allowed under the legislation,” says FLAC, the free legal aid centres. “Our reading…is that the question is not specifically addressed.” Instead the legislation only refers to the fact that the intermediaries preparatory work and on-going administration costs will be accounted for as part of the proposed debt arrangements. “The Personal Insolvency Act is silent on what might happen if the proposal is rejected at the creditor’s meeting” and the PIPs’ own proposal in relation to the payment of their costs and fees also becomes “redundant.” According to FLAC, “some practitioners plan to charge a consultation fee of several hundred euro and preparatory fees of thousands,” to ensure they are paid. Such PIPs may end up only taking on cases where the debtor can afford their fees, even without the assurance that the application will be accepted by the creditors. Even if upfront fees were to be banned, there is no assurance that small debtors, especially those whose efforts to renegotiate arrears another debts under the MARP or debt code of conduct process, would find a PIP to represent them. Instead, FLAC and MABs are calling on the ISI to set up a panel of insolvency intermediaries who will be directly employed by the service with remuneration paid directly to the ISI. Until then, says FLAC, “our long-awaited personal insolvency legislation may be in danger of falling at the first hurdle.” The names of AIs and PIPs should be available on the registers this week. If you contact one, check their background. A person with a good track record of dealing with informal personal insolvency is the best option. But you need a game plan of your own: - Be clear in your own mind about your financial situation. Are you insolvent or are you bankrupt? - Provide the prospective AI or PIP with a concise record of your assets and liabilities and any history of debt negotiation with your creditors. PIPs are more likely to take on better-organised clients than chaotic ones. - Ask about up-front fees. If they aren’t charged, ask why. Another concern is that the bank creditors may allow PIPs to take a higher share of the agreed pool of money to creditors in year one if they convince their client to agree to a one-size-fits-all debt consolidation model that mainly involves split mortgages, not debt write-down. - If you succeed in hiring an intermediary, you’ll need to pay the ISI €100 in for a DSN protective certificate, €250 for a DSA cert and €500 for a PIA cert.

Tweet

PIPS ARRIVE, BUT ARE WE SEEING AN IRISH VERSION OF THE BIBLICAL JUBILEE? This week is a historic one: it might even be the start of an Irish debt ‘Jubilee’. A few of you may know the reference. In the Old Testament’s Book of Leviticus it is noted that every 15 years, slaves and prisoners are freed and sins and debts are forgiven. The Jubilee. From 1300, the Catholic Church resurrected the Jubilee idea (this time every 50 years), but with the emphasis on the forgiveness of sin and the purchase of indulgences, rather than the forgiveness of debt. In our modern era, some prominent western thinkers and economists have resurrected the idea of a debt Jubilee, finally realising that current global debt crisis ‘solutions’ like forcing taxpayers to pay for the bailout of failed banks and indebted governments hasn’t worked. And so they suggest that a debt Jubilee, which would involve the forgiveness of trillions and trillions in unpayable, unstoppable debt could be the mutually beneficial answer to the developed world’s economic and increasingly, social problems. (The Millennium year 2000 saw such a jubilee for Africa.) The problem however, is that see a painless result. Central banks this time, they say, should print yet more money and distribute the cheques to the citizenry, even to those who are not in debt (to spend or invest). This time not only are the indebted liberated, but the prudent are rewarded, moral hazard is abolished and consumerism, on which the foundation of modern economies so depends, gets a much-needed kick-start! It’s all nonsense, of course. The post-Jubilee historic record doesn’t make for easy reading. A lot of creditors in the ancient world went bust, their businesses collapsed, even more people lost their jobs and starved. (For the lucky, this was a temporary condition. Today, intergenerational social welfare means “the lucky” face widespread permanent unemployment.) Today’s promoters of debt Jubilee just don’t want to accept the long term consequences of genuine debt forgiveness, the most significant in a world of endless deficit spending being that people and states will have to learn the forgotten virtue living within their means. Unfortunately, this new debt Jubilee proposal is just another circle to add to the spiral of debt hell. (That Venezuela’s 39% inflation rate now teeters on the brink of hyperinflation is a good example of how debt-based solution to a debt problem inevitably means a currency collapse. We ignore this at our peril.) Anyway, back to our version of a debt Jubilee. From this week, if all goes to plan, the Insolvency Service of Ireland (www.isi.ie) will begin posting registers of names of Approved Intermediaries who can act for people applying for Debt Relief Notices (for unsecured debts up to €20,000) and Personal Insolvency Practitioners (PIPs) for Debt Settlement Arrangements and Personal Insolvency Applications (the latter for up to €3 million worth of unsecured and secured, mainly mortgage debt). The entirely court-based bankruptcy procedure – a three year discharge period of all debts for people incapable of repaying their debts – is expected to be operational later this year. The Irish version of a debt jubilee doesn’t replicate the Biblical one of instant debt forgiveness, but it does involve partial or total debt forgiveness depending on your circumstances. The successful Debt Relief Notice applicant will have all their debt written off after three years in which their spending and expenditure will be carefully monitored and supervised. Ditto for the bankrupt, who will be entirely debt-free (and asset free, unfortunately) at the end of three years. The DSA and PIA applicants will ideally find, at the end of their five or six years of insolvency supervision that all or part of their untenable debts (like negative equity) are also written off and/or restructured. They may or may not even keep their home under such an arrangement, but their Jubilee will only happen if they win the approval of the majority of their creditors. There is little sign yet that mortgage creditors are willing to write off all or part of the unsustainable homeloan since the consequences of this honest solution could be catastrophic (to bank solvency). Your personal Jubilee isn’t going to come easily. But the immediate concern is whether PIPs - all private agents who should be paid for their work out of the pool of money the debtor agrees to pay creditors over the 5-6 year discharge period - will take on clients who the banks have already declined debt forgiveness under the existing MARP (mortgage arrears process). If an application is rejected, the PIP would not get paid. The fear is that small debtors will not have the upfront fees that PIPs can demand. If this happens, bankruptcy may be the only solution. For the moment, let’s assume the best and wish the new Insolvency Service good luck. We have a Jubilee …of sorts. It shouldn’t be wasted.

Tweet

SUMMER HOLIDAY INSURANCE – DON’T LEAVE HOME WITHOUT IT A few years ago, friends of mine were all packed and ready to go off on their two week summer holiday to Portugal: the animals were boarded out, the fridge was emptied, plants watered, mail diverted, milk delivery cancelled, tickets and passports checked. The children, backpacks filled with toys and sandwiches and all were gathered at the door awaiting the taxi to take them to the airport…when the house alarm wouldn’t go on. They tried again, keyed in the alarm pin code and…nothing. Not a pip, not a squeak. They tried again and again. The debate between the mum and dad went something like this: “Do we call the alarm company?” “Yes.” “Do we wait for the alarm company and hope they arrive quickly? Or do we call our keyholder – a neighbour – and get them to wait for the alarm company rather than risk missing the plane?” “Yes,” “No! The neighbour is not home.” “What about your sister, my brother?” “Er, no. She’s coming on holiday with us, remember? He’s already away.” “Look at the time! Do we just bloody leave it and go?” That is exactly what they did, despite the fact that not only did the taxi-driver now know that the family was vacating the premises for two weeks, but so did the other neighbours and various passers-by, all of whom were peering out their doors and/or adding their two cents worth of advice. In the end, another set of keys were given to another not very well known neighbour who agreed to wait for the alarm company who would fix the alarm. Which is what happened, but not until the next day. For that 24 hours their home was uninsured and a sitting target. The main reason why this couple took the chance of leaving their house with a broken alarm –– is because they knew they hadn’t bothered to get travel insurance – on cost grounds. They had arranged the holiday themselves, rather than go through a package holiday company which automatically includes travel insurance. They got away with it – just about – but it could have been a very poor choice if they hadn’t sorted out the alarm and their home had been burgled. But even it they had the insurance and my friends had been forced to miss their plane to deal with the alarm emergency themselves, they would have still had to pay for a new set of very expensive tickets to Portugal the next day, say insurance brokers. Also their insurance policy (if, for example, it was purchased via one of the health insurance companies) may have included excess deductions not just on the total cost of the fares, but on every member of the family listed on the policy. To avoid this, you need to tick a box on the policy application form that stops the excess being applied to each person covered. Nor should travellers expect a full cancellation refund to be paid by their travel insurer: airline taxes and charges are categorically not refunded. Meanwhile, I was surprised to see a recent survey from AA Ireland that found in these hard times that just one in ten Irish people (9000 were surveyed) travel abroad without insurance. The AA survey focussed on the cost of accidents and injury abroad, especially in the United States where hospitalisation costs can run into the tens of thousands very quickly “and can be financially life-changing” if you do not have cover. At the other end of the scale, “Being without your luggage for a day or two can be very inconvenient and sometimes expensive if you have to buy temporary replacement items.” Single trip insurance for individuals and families is very cheap – at little as €5.46, says the AA. Annual family trip insurance can be had for as little as €100-€150 (depending on whether they include the US though winter and hazardous sports will increase the cost.) A good insurance broker can talk you through the option, excesses and any exclusions (including countries that will not be covered.) Comprehensive gap year insurance is can be very expensive. What no family should do, is count on any credit card offer of travel accident insurance as being sufficient to meet all the things that can go wrong or for the travel benefits on your private health insurance policy to also be sufficient to cover all medical emergency costs. Nor should you expect all related medical costs to be met in Europe by your European health insurance card. Just like the best separate travel policy (which inevitably include excess payments and restrictions for pre-existing health conditions) they all come with limitations and will inevitably require you to make a co-payment. Enjoy your holiday. Be prepared for the unexpected. And if you are travelling to Europe with a car this summer, you may want to take the extra time to read AA Ireland’s comprehensive guide: http://www.theaa.ie/AA/Motoring-advice/Driving-in-Europe.aspx

Tweet

TIME IS RUNNING OUT FOR MORTGAGE BORROWERS The revised code of conduct on mortgage arrears – the CCMA – needs to work. As Yeats once noted ‘the centre cannot hold’, and that is now: over 54,000 homeowners are in two years of arrears; 95,000 haven’t made a payment for 90 days or more, more than 46,500 are under 90 days in arrears and there are 80,000 restructured loans (people mainly put on interest only), 25% of which are not performing. 30,000 buy to lets are in more than 90 days arrears. So precarious is the personal financial position of so many indebted borrowers that any significant rise in mortgage or other loan rates, another tax rise, or even a relatively minor financial event like an expensive home repair or other unexpected bill could cause thousands more to fall into arrears. The original code of conduct has been revised – again - because the last one wasn’t working. The numbers in arrears has gone up, there has been no big improvement from the “engagement” process and pitifully small numbers of “long term and sustainable solutions”. The psychological effect of mortgage distress has not been factored into the resolution process and could end up being worsened, say the critics of the new code. Something had to be done, cried the politicians, and the Central Bank will now require the banks - to have a written communication strategy in place for dealing with all its mortgage arrears customers; - to put in writing a timeline for engagement between itself and the customer who has gone into arrears, such as telling them exactly within what period they must return information to the bank, or that the customer now has 20 days to return this information or be classified as “non-cooperating” (which could lead to legal action and repossession starting in eight months); - to inform the customer in writing that they have been deemed to be not cooperating with the bank and now, what options are open to them – a right to appeal, or to consult a Personal Insolvency Practitioner about applying for legal insolvency. Unfortunately, the revised code means that the banks are no longer restricted to just three unsolicited calls per month and no longer have to show the same restraint tracking down people who have not been “engaging” with them. Also, tracker mortgage rates are no longer protected and can be lost if the banks offer what they claim is a more viable restructured loan arrangement like a split mortgage or a variable loan with debt write-down. However, without an impartial review and advice, few borrowers may fully understand the repercussions of agreeing such a deal, most likely a split mortgage, which postpones the payment of the untenable amount for a period, with or without interest payments. The other concern about losing a tracker is that a sharp rise in interest rates over the remaining term (which could be 20 years or more) could be prove untenable and so would be against their best interests. The biggest shortcoming of this new code is that it still doesn’t define exactly what a sustainable mortgage is in this economic climate nor does it commit the banks to the writing off of debt that can never be repaid. People with huge mortgages worth twice the market value of their home, earning ordinary salaries and facing higher taxation, levies and a rising cost of living are caught in a negative equity/arrears/overvalued asset trap. Our economy (and that of most western countries) is also overburdened by too much debt, high unemployment, unsustainable welfare and pension costs and here, emigration. So if you are in serious arrears, or just slipping into the great mortgage void, you need to a) engage with your mortgage lender, and all other creditors. Put all proposals and offers in writing. Keep receipts for letters you handdeliver or post; keep a paper log of all emails. Tape phone calls and meetings (tell the bank you are doing so) and ideally bring a reliable witness/adviser to all meetings. b) To qualify for MARP you need to fill out a Standard Financial Statement. With this picture of your financial position you need to seriously consider exactly what kind of mortgage is realistic and sustainable for you before you meet with the bank and they present you with what they believe is a sustainable deal. c) Contact MABS, New Beginning, the Irish Mortgage Holders Association, FLAC or another trusted adviser who can explain the consequences of the bank offers. From them, find out about Personal Insolvency Arrangements and the debt write-debt that may accompany a successful application. Debt write-down via an insolvency application is not something the banks want to have to concede. Should they reject such an application, the last option for the distressed borrower is to bankrupt with all their debts discharged after three years, but with the loss of their home. Can this new Code of Conduct avoid this most dramatic (and costly) outcome? Let’s hope so but the immediate reaction hasn’t been favourable …and time is running out.

Tweet