Just comments on the things I find interesting in life

Tuesday, November 18, 2014

Credit , the scourge of society and the socio-economic effect of debt

In my quest to alleviate the effects of relentless persecution of debtors by Creditors, Debt Collectors and the likes I have come to some conclusions that needs to be discussed and solutions found.

I have always said that my views on the payment of debt in some instances  are a bit radical but there are reasons for this.   Let me explain.   I have been there, felt the pain when you cannot pay for your daughters wedding. When you sit in a house with no electricity for 2 years. When you.......let me stop there.  I have been there................And only a small portion of that was my own fault.  The portion where banks finance you to the extend that you have to pay them R50 000 per month when you only have disposable income of R30 000. Why did I not stop it ?   When you have mouths to feed you will take any credit you can get.  That is why it is called reckless lending and not reckless borrowing.............

For the purpose of this discussion I am referring to banks in particular but this includes any other creditor.   A Bank makes an informed decision on who they lend money to and how much and for how long based on information supplied and proven  to them. Their decisions (should) also take into account the state of the economy, the ability of certain types of people to repay them and the industry in which they operate. They should not lend out money based on "reckless lending" principles.
Banks receive and approve home loans for a  sector of the market based on what I just said.  During a period roughly 7 years ago the property market had a rough time and so did the economy. Yet the banks did business and granted loans based on their criteria. Or no criteria at all.  This was a calculated risk. It still is.

Life goes its normal way. People loose their jobs. They loose their businesses. They get despondent and cannot pay their debts.  The government in its wisdom gave birth to a thing called Debt Counseling.  This is just another debt collection system and have nothing to do with counseling.

This is a dismal failure. It does not address the real problem of over indebtedness in any instance
It does not address the plight of those that lost their income due to losing their jobs or businesses.

What does debt counselors do ?  They just distribute the available money after living costs have been taken off as well as their fees (of course their fees)  to all the creditors.   This is just another debt collection system and have nothing to do with counseling.

The problem with the system is that nothing actually changes.  It is only available to people that have a job. These people should never have been given credit to the extent that they end up here in the first place.  A whole new industry has been created to no end at all. Creditors will now avoid you like the plague and they will sit like vultures to see when you are going to default again.  And you will. Because now the debt has increased with the fee of the so-called counselor !  And because you have not been counseled to apply more discipline you will default again.

Back to normal life : Those that did not get to hide behind a debt counselor in time and those that lost their jobs or businesses.

The banks start collection procedures and at  the end of the initial collection actions of the banks when the client has no way of paying anymore and the banks have either repossessed the property they financed or attached the other loose assets people need to survive  the debt is usually sold to unscrupulous debt collectors who make a living out of people's misery.  Let me state without blinking an eye. I have no feelings or respect for debt collectors. Full stop. If you ever thought I am going to give a hoot for their loss, sorry to disappoint you , I am not !

I think it is time that we have a total rethink on the question of old and sometimes  prescribed debt.

A debtor has to make decisions based on priorities - this is where the socio-economic issue comes in. You have to look after the well being of your family first and foremost.  But should you have unresolved debt the system will not allow you to do this.   This is why debtors resort to all sorts of methods to avoid the phone calls and other methods employed by the vultures.And this is also the reason why I wrote the guide to handle debt collectors - legally.(link here)

We already have the system where you could be sequestrated and it is not called the new beginnings law in the United states for nothing  It allows you a new beginning in life.  But that is only if you have assets that can be divided between the vultures.  Why can't we devise a system where a debtor can be measured as to his capacity to repay debt when he has no work , no business, no income.   And not pursue him again when he is able to find work  again ?

I am seriously pursuing ways and means to help people out of the corner they have been chased into .

To be continued...............................




Tuesday, October 14, 2014

That thing called Debt and why banks do that thing called reckless lending.



 A South African perspective - Calculations might differ with other currencies but the end result is the same - Income might be lower or higher but you live according to your income and the banks are just helping to compound the problem.............

A lot has been written and spoken about the subject and various ideas and words have been added to it.  The fact is that Debt and the application thereof has been the undoing of people since time immemorial . 
Debt is like any addiction:  It is very hard to let it go or to get rid of.  There are all sorts of methods employed to rid you of the illness. But like everything else people get addicted and nothing helps.
The exception proofs the rule: The few that do eventually get out of it shows that the majority never will.  There is only one way to get rid of debt – permanently – and that is to never get into it.
It should be a compulsory subject in schools – “How to survive without debt” or “living life free of debt”.  A name for it is irrelevant – the outcome is all that matters.
Let us have a look at debt:  In today’s world it means to borrow money from a bank or other willing money lender. It is to be repaid over a specific period in the future and you will be charged a fee on it called “Interest” This can be  a specific amount or a percentage calculated on the original or outstanding amount – normally regulated by some law.    If you are late with payments or skip a payment additional interest is added and as a rule this accumulates.  (Or is compounded) That and the method applied initially to calculate the interest is why it is called compound interest.
Now enters the banks – They have to lend out money to survive – there is no other way.  They will lend you money based upon a set of rules which not even they understand – the following example is based on these rules.
It is absolutely essential that the reader understand the basics of this and I am going to explain it with a simple example.
Family of 3 – one child going to pre-school
So .......you earn a salary of R20 000 and clear after tax R 18000
The bank has decided to give you a home loan of R 600 000 over 20 years at an interest rate of 10.5% per annum. Your repayment is R 6000 per month of which R 5250 is interest 
They also finance a car for you costing R150 000 over a period of 60 months at an interest rate of 14.5%.  Your repayments are R 3526
Interest portion is R 1812.50
Total interest portion of these two purchases is R7062.00 (Month one)
This is just over 39% of your Nett monthly income after tax.
( Oh yes actually 41.5% if tax is calculated correctly)
So between the taxman and the bank you have spent 50% of your income on interest and tax.  And you still have to live.
Cash flow of course is another story – debt consists of capital and interest.
Your monthly debt repayment on these 2 debts alone amounts to R9526 per month which leaves you with on R8474 per month to live on.
What else do you have to pay for ?  That is the big question – and I am going to be very lenient in my calculations:
1.     Medical aid   R2000
2.     Telephone     R200
3.     Fuel              R 1200  (About 1200 kilometers per month or 40 per day)
4.     Clothing        R 300
5.     Food            R3474
6.     Gym             R 200
7.     Dstv              R800
8.     Eating out      R300
Total of   R 8474
The following has not been provided for :   Life assurance, Car insurance, Emergency fund , school fees, and a few others.  The only place where this can be deducted from is food – and a family of 3 will not be able to survive on R3474 per month. 
Corrections to be made : Tax for this bracket is R 2940 per month – oops another 
R 940 to be deducted somewhere
Medical aid : Chances are that this will be in the region of R 2500 Plus  - oops another R500 to be deducted somewhere. 
Pre-school fees R 500 per month – Oops Oops .............
Suddenly this family is left with less than R 1500 per month and no insurance has been paid for and there is no emergency fund and ...wait for it no food yet.
O yes and then there is rates and taxes, water and lights. 
The problem is that when the bank considers these loans they accept the figures clients give them and they recklessly approve the loans and will not have one sleepless night about the consequences.................
I dare any bank to differ with me.  And yet they will finance these people if they have a clean credit record to more than the amounts I am quoting here .
Here is my final verdict : No matter what banks say they are recklessly endangering the financial future of  consumers especially those that do not do their homework on their finances before signing on the dotted line.  And the wolf is waiting patiently – sometimes not so patiently.


















Monday, October 6, 2014

Retrenchments - A solution for HR Managers



Redeployment, Restructuring and Lay-offs
One of the challenges facing companies when restructuring or during amalgamations is surplus staff that has to be accommodated, redeployed or given separation packages.    Most companies have strategies in place to assist affected staff members obtaining new employment.  Some of these strategies are to assist them in drafting professional CV’s.  Some are also assisted and given the options to start their own businesses.
These instances can come about through internal restructuring, mergers and acquisitions, affirmative action due to complying with laws like the employment equity act and BEE requirements.  No matter what the reasons are our offering might just be the solution the company might be looking for in those instances.
We have done extensive research into the latter group,  that is starting an own business and have found that they have a major drawback in that the programs we have seen all focuses on giving them some background on how to start a business and some do give them business ideas.   But once they have left  the company they are on their own.    And they invariably become part of the statistic that has been proven over and over again: More than 80% of new businesses fail in the first year.
We have developed a program that turns the probability of success around in that it contains all of the following elements:
1.        A Saqua aligned 10 day course that encompasses the following :

a.       Understanding the Entrepreneurial profile.
b.      Basic financial understanding.
c.       Choosing a business idea and doing viability /feasibility studies.
d.      Marketing.
e.      The Business plan.
f.        Roll out of the program.

2.       As part of the course up to 100 business ideas are discussed and the candidates are assisted in choosing one that he/she feels comfortable with and fit their profile.
3.       They are then assisted in drafting a business plan for the chosen business.
4.       They are matched with a mentor that will be available on an ongoing basis via telephone or email to assist with problems arising in the process.
5.       Part of the course is an accountability process where they have to report back to us on their progress.
6.       Follow up short courses encompassing fields like: cash flow management, management reports, human resource management and discipline, Legal and tax aspects of companies, the new companies act etc.  are presented on an ongoing (monthly) basis.

What makes our program so unique?  Because of steps 4 to 6 which is the core of a successful program like this.
Because there is a real live person available to Mentor and guide the new Entrepreneur.
              The accountability part creates a feeling of urgency in the candidate to start and succeed.
 Part of the Human resources strategist /Manager like you in any company is to manage the process of redeployment as seamlessly as possible. And helping affected staff still feel wanted.   We are offering you a very effective tool  to do this.
We would like to discuss the program with you should it fit anywhere in your plans for the foreseeable future. Give us one hour of your time – It might just be the most important one this year.
John Brandow  082 222 5002   - johnbrandow@mweb.co.za  -  owner Centurion study centre

Wednesday, October 1, 2014

Serious guide to handling Debt collectors



This is A  Serious guide to the handling of Debt collectors’  phone calls and subsequent actions .
South African perspective 

This is not tongue in cheek - this is totally legal and within all your rights 
Print this guide out and keep it handy. It can save you a lot of grieve.



No one says that you do not have to pay legal debt. We are not debating that point here.
This guide has the purpose of YOU taking  control of the situation and taking the control away from anyone calling you.  It also has the benefit of you determining whether the debt is legally yours and has not prescribed.
YOU MUST CHANGE YOUR ROLE FROM VICTIM TO AGGRESOR – YOU MUST TAKE CONTROL
Follow these instructions diligently and without wavering from the steps in any way.
Always keep paper and pen handy.  It is advisable that you keep a little notebook handy for this purpose.
 THE FOLLOWING IS CRITICAL :
MAKE SURE YOU ASK THE QUESTIONS IN THE ORDER IT IS GIVEN HERE !  THE REASON FOR THIS IS THAT SHOULD THE CALLER BECOME AWARE OF YOUR INTENTION TO TRAP THEM THEY MIGHT PUT THE PHONE DOWN.  IF YOU ASK YOUR QUESTIONS IN THIS ORDER YOU WILL BY THEN HAVE THEIR NAME AND COMPANY DETAILS FOR FURTHER ACTION.  ( SEE BOTTOM FOR ACTIONS YOU CAN TAKE*)  Once you get to the email status you will start to find backtracking – they don’t want to go there and might just put the phone down.
Note down the date and exact time...........this comes in handy when you lodge complaints.

THE CALL
1.       You answer the call.
2.       Caller asks you to identify yourself. NEVER DO THIS.  Your answer “  You called me, first identify yourself by giving me the following information. : ( Write all this down diligently)  If during this initial discussion the party on the other  side wants to say or ask anything insist on them giving you the details – if this fails JUST PUT THE PHONE DOWN ! – They will soon get the message. )
a.       Give me your full name – spell it for me.
b.      Give me  your telephone number. Repeat to make sure you have it correct
c.       Give me the full name and location of your firm – spell it for me.
d.      Give me  your email address – spell it for me.
e.      Thank them and say : I will send you an email ( I will give you the full details of how you go about this afterwards)
f.        At this point kill the conversation and put the phone down.  Any future calls you handle it as per point “d”
g.       Do not waver from this in any way – no matter how insistent they are. You now have their details and you can now lodge a complaint with the council for debt collectors  if applicable.(A guide to how to do this a bit later)
THE FOLLOW UP EMAIL
Draft and send the debt collector an email – Again keep diligently to these guidelines. Do not volunteer any information. – NEVER.  Do not imply that you know of any debt quoted and do not admit liability – NEVER ! ( I use this template in all instances- Debt collectors’ systems are call centre driven and it is going to take time for them to answer this properly.  By sending them an email you are creating proof of interaction and you will have a paper trail.
1.        Subject :  “Your telephone call to me today refers”   - NOTHING ELSE
2.       Do not quote account numbers or ID numbers – The person who phoned you should have all those details.  Do not acknowledge the correctness of ID numbers or account numbers. 
3.       Make sure your email contain the following words in the first instance : “Without prejudice and all rights reserved”
4.       “You phoned me regarding something  and I would like you to give me  full details as follows :
a.       Your company’s  registration number with the council for debt collectors
b.      Your personal registration number with the council for debt collectors.
(You can now verify this live on the website of the council)
c.        Details of the alleged debt.
d.      A copy of the latest statement regarding this from the company claiming ownership of the alleged debt.
e.       As far as I am concerned this alleged debt has prescribed. If you claim otherwise please supply proof of this.  ( If it is the bank phoning you about your recent p ayment of your car and you know you are in arrears this will not be applicable) If it is anything that MIGHT  have prescribed use these words. – Remember you should not yet know  what it is if you followed the instruction about the call above – but you might suspect what it is)

You can now send this off or you can ask for the following – or you can do this in a follow up email –( Remember the “Without prejudice and all rights reserved clause in ALL emails)
f.         If you did not already asked them ask them for their Council for debt collectors registration number. ( you should be able to look this up on the website here:   
g.       Ask the addressee of the email for his/her personal debt collectors registration number. At the same link.  Chances are 99.9% that the writer is not registered and you can point this out to him/her stating that they have no right to engage with you and request that all future communication be done by someone WHO is registered.
h.      Ask them for a copy of their mandate to collect on the alleged debt _ this is where you will find out whether they or anyone else has bought the debt.
i.         Ask them for a copy of the original signed instrument of debt of the alleged debt.  Not a copy of such an instrument – a copy of the actual one you allegedly signed,

Chances are that this is the last you will hear from them – Their systems are 99% not geared to handle this type of query.  And just stick to the rules about telephone calls. DO NOT ANSWER ANY QUESTIONS OR RESPOND TO ANYTHING ON THE PHONE .  DO NOT BE DRAWN INTO ANY TYPE OF DISCUSSION ON THE PHONE – You do not have access to the recording and they will try and use it against you.
Complaints against debt collectors:
There is a comprehensive guide on this on the website of the Council for debt collectors here :

·         Steps to be taken afterwards:
If you followed the steps handling a call from a debt collector diligently you should have at least the name and contact details of the caller and the company.   If you need more details you can just look them up on the internet.
 Now go onto the website and check if the company is registered and if the caller is registered.
Chances are that the company will be registered but not the person. – As a rule of thumb these companies only register the directors and one or two managers.
You now have the upper hand – They have committed a crime by allowing an unregistered employee engage with you.  You can (if you feel that way inclined) lay such a charge with the police.  I would just send them an email and tell them you intend doing that and request them to stay away from them
As I Said before: Change your role from victim to aggressor !


(An open invitation to anyone still having serious problems with a debt collector to email me personally at johnbrandow@mweb.co.za)