The companies of reunification of debts: a miracle that has trick

The companies of reunification of debts: a miracle that has trick

  • The high interest rates and the high level of indebtedness of Spaniards means that many families can no longer make ends meet.
  • When banks no longer respond, debt consolidation companies may seem like a good solution.
  • However, among them there are many differences and more than one bad apple.
  • In the end, the alleged miracle always represents a high surcharge for the consumer.
  • The government is preparing a law to regulate these entities and to protect the citizen more effectively.
Reunificación de deudas

Typical announcement of one of the companies of reunification of debts, in which it promises to reduce the nensual payments to less than half. 20MINUTOS.ES
"We reunified debts: before 1130 euros, then 500 euros".

This is one of the magical promises with which one of the many companies of debt reunification claims the attention of those who see them and want them to make ends meet.

These particularly vulnerable citizens are increasingly numerous, thanks to repeated increases in the cost of mortgages (at the end of August the Euribor rose for the twenty-third consecutive month) and the high volume of indebtedness of Spaniards, which has grown by 56, 1% between 1999 and 2005, according to Caixa Catalunya.

Like bees to honey

At the end of May of this year, bank customers had loans worth 725,659 million euros, and those of savings banks, 807,452, according to data published this week by the Spanish Banking Association.

According to the most recent data of the INE, the defaults of families and companies of the month of May reached the figure of 936 million euros , 23.3% more than in the same month of the previous year.

The high level of indebtedness is the best breeding ground for companies of debt reunification, whose number has multiplied exponentially

The dean of the courts of Madrid pointed out before the summer that the number of embargo procedures in the city of Madrid had increased by 67% so far this year .

At that point, citizens can not afford their payments and enter the delinquency records, being excluded from the traditional financing circuits.

This difficult juncture is an excellent breeding ground for debt consolidation companies .

Although its number is unknown, it is believed, as sources from the Association of Users of Banks, Savings Banks and Insurance (ADICAE) point out, that they can reach three thousand , thanks to the unstoppable expansion of franchises.

All of them offer, on paper, the same service: they help the indebted person to find a lender entity willing to take charge of his multiple payments (the car, the house, the computer and so on up to the 1,130 monthly euros mentioned above) in exchange for a single monthly payment, of a lower amount (500 euros). In order to make the monthly payment more reduced, a new mortgage loan is signed with the longest possible term or the existing mortgage is extended.

Not all that glitters is gold

However, among all these companies there are notable differences, and even a lot of bad apples, as revealed by Aitor Ibarra, a lawyer from Bilbao who represents fifty people who have lost their homes or who have an embargo order because of one of these companies. .

In almost all cases, intermediaries persuaded their victims to sign bridging loans with private lenders with which to pay their most pressing payments before finding a financial institution with which to reunify the total of their debts. That institution never arrived and the letters that the citizens had to sign, with abusive interests and impossible repayment terms, ended up with an embargo order and in many cases their own homes.

There are many differences between debt consolidation companies and also some bad apples

That was the case of Antonio Soto, a 34-year-old bricklayer who was evicted in Jerez (after signing a letter for 38,200 euros to be paid in six months in exchange for which the lenders liquidated 18,000 euros of their debts, that is, an interest of more than 200% per year ), or that of his countryman Fernando Sojo, also from Jerez, whose father, Antonio Sojo, had to take out a mortgage to be able to stop the seizure of his son's house.

The next could be Rafael Romero, a 38-year-old pizza maker from Rota whose house will be auctioned next Thursday.

Antonio González Cases like these, linked by the need and desperation of those who no longer have more resources, multiply throughout the Spanish geography, as revealed by Antonio González (pictured) , a neighbor from Vigo who fights in the courts to recover his home from 500 square meters located in a land of 10,000 square meters that were auctioned by lenders in July 2006 when it could not deal with two bills worth 44,000 euros.

Antonio founded last December along with other affected AFINES, an association that aims to raise awareness of the problem to the Administration and that according to him already meets about 1,000 victims.

In almost all these cases, as noted by the lawyer Aitor Ibarra, we can speak of usury , an activity prohibited by a law (also called Azcárate) of 1908 that is used precisely by the Bilbao lawyer to try to annul civil interests and achieve that their defendants only have to face the main one. In many of them, the criminal procedure is also resorted to, when incurring in falsification of documents.

A kidney in interests

But even among the reunification entities in which there are no fraudulent intentions the differences are very significant and the hidden costs numerous .

The magic they promise is achieved on the basis of important commissions and expenses , including the commissions for early cancellation of debts, the opening of the new loan and intermediation, which can range between 1% and 7%, according to Antonino Joya, from the OCU.

All these commissions are added to the nominal value of the new loan; In the end, the client manages to pay less each month, but the savings do not exist: they pay for much longer and many more interests.

In the end, the longed-for savings do not exist: you pay for much more time and many more interests

ADICAE included a revealing example in an article related to the topic published in its magazine. Assuming a total fictitious debt of 138,774 euros, and using the costs and commissions advertised in the market, the consumer could go to one of these companies to reduce monthly payments from 1,512 euros to 707. The cost: 158,229 euros of interest, compared to 82,432 euros of debt before being reunified , that is, almost 100% more interest in exchange for living something more relaxed each month.

In the process of regulation

Thanks to the pressure from user associations and the action of other agents such as the Ombudsman, the Government is currently working on a bill, approved by the Council of Ministers, which will be presented to the Cortes shortly and which will regulate both these activities such as those of other businesses also on the rise, quick loans, also granted in some cases by entities not subject to any type of supervision (in other cases, as happens with entities linked to banking institutions or those that constitute financial institutions of credit, these fast credit companies are already subject to the regulation of the Bank of Spain)

The law will oblige debt-gathering companies (such as financial intermediaries) to register and be more transparent in the information they provide to the consumer and presumably will not be operational before 2008.

Some, such as Aitor Ibarra and organizations such as ASNEF or ADICAE, consider that the law should still undergo several modifications and that it would have been better for these companies to depend on the Ministry of Economy and not on Consumption .

ADICAE believes that it should also include an update of the Law of Repression of the Usury of 1908 , specifying exactly what types will be considered as usurious, as well as addressing the treatment of the over-indebtedness of Spaniards.

The law will not alleviate the debt of the Spaniards, nor diminish their appetite for consumption, but it will remind them that the reunification of debts is not an act of magic, but a change of debt that has a high extra cost and that should only be resorted to when all other options have been exhausted.

Communities of need receive too little money for electricity

Heidelberg – Electricity prices have only known the upward trend for years. This especially affects the needy in Germany. The state subsidies are far from sufficient to pay the above-average electricity prices. In addition, recipients of social benefits less often have the opportunity to change the electricity provider.

 

Picture: Hand puts 50 Euro bill in electricity meter 

In April 2011, according to the Federal Employment Agency, around 6.5 million people living in a total of 3.5 million households in need of assistance received unemployment benefits II or social benefits. The regular requirement for single people currently amounts to 364 euros per month. Of this 364 euros, legislators are planning to install 30.42 euros (8.36 percent) for electricity, cooking gas and housing maintenance.

Electricity costs exceed the standard rate by 45 percent

That the standard rate of 30.42 euros is set too low, shows a look at the Verivox consumer price index electricity. A single household with an annual electricity consumption of 2000 kWh will pay an average of 26.43 cents per kilowatt-hour in May 2011. This corresponds to monthly costs of 44.05 euros. Thus, the pure electricity costs already exceed the standard rate by 45 percent – the expenses for cooking gas and housing maintenance come even more.

“The calculation of the regulatory requirement is a complicated statistical and political process that we can not fully assess,” said Peter Reese, Head of Energy at Verivox. “However, for the household energy sector, we can clearly say that it was too optimistic.”

Higher costs and less choice

Anyone who receives state support is required by law to consciously handle the money and act economically. But the needy can only partially participate in the competition on the electricity market.

Most supraregional electricity providers check the creditworthiness of new customers in order to avoid possible payment defaults. This risk assessment takes into account financial difficulties in the past, but also softer factors such as age or place of residence. In practice, this means that many consumers who receive government support often can not switch to a cheaper electricity supplier.

The result is that the low-income households remain bound to the local electricity supplier. There, they are usually supplied to the conditions of the universal service. However, the local basic service tariff is by far the most expensive way to obtain electricity – so a household pays about 5 percent more than the German average.