Personal Finance: Why debtors continue battling

Creditors need to be more humane in their approach, write Theda Muller

Debtors are still battling to secure consensus to either consolidate and/or restructure their debt and are facing problems in meeting their EMIs.

Following are some of the key reasons why they are refused help:

  1. That they are regular and that the policy does not support such requests, only if they are delinquent from 3-4 months. We all know that this stage of delinquency exposes them to legal action which they are trying their hardest to prevent but with such responses, their fate is written on the wall so whom to turn to?
  2. Their DBR (Debt Burden Ratio) is too high -  exceeding the policy limit of 50-55 per cent, where most debtors are way over 100 per cent. Even after restructure, they are still over this mark so what is the most effective solution? The reason for this level of indebtedness is that the actual debt was incurred long before the new policies and regulations were enforced, hence trying to focus on the ‘how they got into debt of this magnitude’ is fruitless as the focus should be on reducing their DBR and fully supporting them to remain and repay their debt to banks, where it is a win-win situation for all parties.
  3. Limitations of restructure policies, i.e. minimum tenure of 18 months where most of the time once the restructure is offered, the EMI far exceeds the existing EMI regardless if it is restructured at zero per cent and other penalties waived. The ultimate objective in this exercise is to secure a reduced EMI, which in turn complements all EMIs to derive at the regulatory 50-55 per cent.
  4. In many cases ridiculous down payments are demanded rather than requested before the creditor can proceed with the restructure request. There are examples where the debtor paid the down payment and the restructure was never finalised. The creditors’ response to this was that it was not a commitment from their side, however the debtor has no written proof of this request because it was done telephonically. So it is really obvious that the only reason the debtor had to go and borrow this money in sheer desperation to secure their restructure, is only for the creditor to meet their monthly target. Playing games with debtors seem to be the norm.
  5. Sometimes, bank creditors respond to why the debtor is not trying to secure a buy-out for their liabilities and here are the facts:

a.      Not every debtor is employed in a listed company;

b.      Currently some SMEs are operating in a ‘restricted segment’ so they cannot secure any form of credit regardless if they hold sterling credit record;

c.       Most debtors have already exceeded their 20 salary multiples so the likelihood of securing an additional loan, even if only for buyout is impossible;

d.      The debtors’ current credit record does not afford them to secure additional credit regardless of the reason;

  1. The inevitable process delays:

a.      We have cases submitted from November 2015 that are not yet completed where the debtor is constantly being hounded by collections even if they stipulated they are currently suffering hardships when submitting these requests. Most times the process is not given any priority and it simply sits on someone’s desk unattended and once brought to their attention, it is then passed onto the next person whose actions are no different to that of the first person.

Meanwhile, the debtor receives site visits. At times, the HR is contacted, which means they could lose their job; spouses receive bad calls… the list continues. Where is human empathy? Yes, it is not the creditor’s fault. However, if this attitude continues then they too will end up not having a job. Why has the importance of rendering full support not being highlighted as it serves everyone including the country’s economy.

b.      After the application is received and held for 1 or 2 months, the debtor is finally informed that the policy has changed and they cannot be helped.

  1. Feedback received from debtors during this process:

a.      Even after the debtor is requested to go to the creditor, sign the application and issue a new cheque they are receive SMSs informing them that:

i.                    Cheques will be bounced;

ii.                  Legal action is being instituted;

iii.                That the creditor will come with legal officers to fetch them wherever they are;

iv.                 Recently one of our clients was told by a collection officer – “Do you wish to pay this once you are dead, however it’s better you are dead then we can collect our money from insurance.”

v.                   Creditors don’t care if debtors lose their jobs.

vi.                 Travel bans are being filed against them;

vii.               Threaten to file legal cases against them

These methods are old and reek of a bad attitude and your lack of support towards your debtors is bad.

When will we start acting like human beings and realize we are not immune to suffering the same situations in future as debt does not distinguish who it consumes and it could happen tomorrow morning when you step into your job you assumed was gold-plated for you.

In life, what you sow, you surely reap and while you the creditor is sitting in a position of strength, it is your moral obligation to extend a helping hand to any debtor who needs your help.

Your only job is to help debtors, in turn you are helping yourself, strengthening your organization, hence continually securing your job and then fully supporting the economy to grow, sustain itself and flourish so everyone is happy.

Serving is the best form of giving back you can do for yourself in life today and it doesn’t matter how badly debtors are in debt because there is always a way and it is your job to ensure that the path is cleared for those debtors to openly approach you for the help they need, nothing else.

 

[Note 1:  Theda Muller is a UAE-based author of two books: Embrace Financial Freedom Volume One: 10 Proven Ways To Release Debt And Emotional Fears In Today’s Economy, and Volume Two: Releasing Fear And Bouncing Back From A Debt Crisis. She also conducts webinars and workshops on debt recovery.]

[Note 2: The views expressed are the author’s own and do not reflect in any way, the views of Emirates 24|7. Readers are advised to carry out their own due diligence before taking any decision.]

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