Question: How can they be so cruel? They not only tell people about my money problems, they also threaten me with court cases, visits from the barangay, publishing my name in the papers and a whole lot of other things. I do want to get out of debt. But their actions are not helping. How can I make them stop? —asked at “Ask a friend, ask Efren” free service available at www.personalfinance.ph, Facebook and SMS.
Answer: At Personal Finance Advisers Philippines Corp. or PFA, we characterize personal finance management as an elevator passing through four floors. The ground floor being cash management. Budgeting, including the provisioning for emergencies, is the foundation of personal finance.
The second floor is debt management. Debt is a positive thing that can be used to grow wealth if it is used to buy additional earning assets. The word additional is just as important as earning because while debt may serve as a catalyst for growth, it should never be the foundation of personal finance.
The third floor is risk management. We cannot predict the future. But we can at least provide protection against perils to our finances. This is where both life and non-life insurance come in.
The fourth or top floor is wealth management. It is at this level where finances are made to grow, preserved and eventually passed on.
All too often, the financial elevator is stuck on the second floor when there is mismanagement of debt in particular and finances in general. As of June 2018, there were P14.5 billion in non-performing credit card receivables and P9.7 billion in salary-based, general purpose consumption loans, according to the Bangko Sentral ng Pilipinas (BSP).
The good news is that general repairs to the financial elevator are within reach. Debt collectors are part of the solution and not the problem if you know how to deal with them. And when it comes to collection of past due credit card debts in particular, debt collectors are seemingly playing out script. Being aggressive is the way they are trained to effect collection of past dues. Remember that they are paid only on success basis. Creditors also use the tactic of replacing debt collectors every few months to wear you down.
So, the first thing to do is to melt collectors’ aggressiveness away by understanding where they are coming from. Do not let their actions fire up your emotions. Instead, calmly figure out how much you can truly afford to repay periodically over a given time after identifying the assets you can liquidate to raise cash for paying down debts. Then with transparency and all sincerity, send via courier a request in writing to have your debts restructured. Doing so documents a continuity of evidence that you are not running away from your debts.
Expect collectors to initially say no. But they are also practical; they will not waste resources collecting an amount that is not feasible. And if they start applying unfair collection practices, you can always report them to the FCPD (Financial Consumer Protection Department) of the BSP (consumeraffairs@bsp.gov.ph). It is with the FCPD that you will learn your rights as a borrower.
Get your financial elevator unstuck. The process may be long, but the tools are within your easy reach. Through it all, smile because even at the height of pessimism, you just need take the “h” in height, the “o” in of and the “pe” in pessimism to see that there is always HOPE!