This is a guest post by Sara Williams, a Citizens Advice Bureau advisor who also blogs about debt at the Debt Camel website.
Has someone called you saying you can get government help with your debts? Or that there is a law that means you can write off 80% of your debts? If you have problem debts, this may sound like just what you need, a welcome lifeline… but you have been cold-called by a commercial company who wants to make money out of you.
So are the calls a scam?
They aren’t a simple con trick – you aren’t being sold a worthless investment or being tricked into giving away your bank account details. But you are being deceived into thinking that the government is offering this debt help, it is definitely not the government phoning you.
Sometimes the caller can be very convincing. I saw a client last week who had been phoned and told she was about to be transferred onto Universal Benefit and the government wanted to help her sort out her debts before this happened. Now I knew none of this was true for many reasons: Universal Benefit doesn’t exist, the correct name is Universal Credit; our local area isn’t in the next set of areas to be moved over; only simple cases are being moved anyway this year, which hers wasn’t; and no-one is being offered debt help before the move to Universal Credit. But she had heard about future welfare benefit changes and so it all sounded plausible to her.
Do these “government schemes” exist?
If you can’t afford to make your debt repayments, there are eight possible alternatives in England and Wales: Debt Management Plan (DMP); Debt Relief Order (DRO); Individual Voluntary Arrangement (IVA); bankruptcy; administration order; asking a creditor to write off a debt; and offering a full and final settlement. These are covered by laws, regulations and codes of practice – so there is a grain of truth in saying that there are “government schemes to help with your debt”.
However, a firm cold-calling you is going to try to persuade you to sign up to one of two options: a DMP or an IVA. Those are the only options where they can charge fees. In a DMP they are hoping to charge you a monthly fee, often between £30 and £50, for many years – that adds up to a lot! In an IVA, there can be thousands of pounds in fees. Your caller may saying they are offering “free advice”, but that advice is going to be to choose a debt solution which charges a lot in fees.
The telephone caller may not even mention the other six debt options, or they may not properly explain them because they don’t want you to choose them. If you have money problems, the last thing you need is someone selling you something which isn’t what you need!
As Joanna Elsom, CEO of the debt charity Money Advice Trust says, “This kind of marketing only serves to make an already stressful situation more difficult, and can lead to financial problems becoming much worse thanks to the high fees and charges that these companies impose.”
Say NO to cold-callers and YES to free, unbiased debt advice!
One of the worst things about these unwanted calls is that if you give them any information about your debts, they are very likely to sell it on to multiple companies. You then get pestered by even more aggressive marketeers, which this newspaper article calls “an unattractive trade in people’s misery”. The best thing is to say you don’t want to talk to them and put the phone down. However sympathetic they seem, these people are not on your side.
To get free, unbiased advice without any hard sell about which debt solutions might work best for your family, look at the organisations listed here: Where to find help with debt. And if a DMP is the best option for you, they will help you set one up with no fees at all, so all your monthly payments go to reduce your debts.