The other day a letter from Capital One was handed to me and the story told about the background of the letter. It took a moment for it to sink in but once it did all I could do was laugh and bring it to your attention as a perfect reason why debt management companies charge fees.

So here is the background. Apparently this consumer was having money troubles and sought help. The debt management company, not Myvesta in this case, contacted Capital One and their other creditors to put together a fair and reasonable repayment plan. All of that sounds simply enough.

A written repayment proposal was sent to Capital One as always but in this case the kind folks at Capital One sent a letter back that contained some incorrect information. The debt management company (DMC) staff member called Capital One to correct the incorrect information and was greeted with a very terse lady on the other end of the phone.

The unhappy sounding Capital One employee stated that effective immediately Capital One would no longer speak to any debt management company by telephone and all communications now had to be sent in writing. When the DMC staff member protested the Capital One employee did not want any of that.

So now the debt management company is going to have to invest not only the initial call to Capital One to fix their error but invest time to draft, post and now track the written correspondence, the client will have to be informed and emailed or called, which just takes more time, the response from Capital One will have to be chased and before you know it a fix that would have taken 3 minutes is now taking 4 hours or more. And all of this is because of the actions by Capital One.

So here is what makes this particular letter and example so utterly ridiculous. If you look at the letter below you might be able to make out that the original balance is £365.21. Well Capital One wrote the DMC and said they would gladly accept monthly payments of £182.26 monthly for the next 6 months on this debt.

Obviously something is wrong with that position. As much as Capital One would like to be repaid £1093.56 on the £365.21 debt, I doubt they can spot their error. At the very least, their computers can’t.

I guess the silver lining here is that Capital One says that interest and charges will no longer be added to the account. Bonus!

So this is why DMCs charge fees, If we place the client first and serve the client to remedy their financial situation then time, energy, and effort must be invested by the debt management company to fix dumb and stupid mistakes.

One of my all time best creditor moments went like this on the telephone:

CREDITOR: “Steve we can’t accept this proposal unless we know exactly how much the client spends on stuff every month.”

ME: “OK, any stuff in particular?”

CREDITOR: “No, just what they spend their money on like milk and stuff.”

ME: “So you want me to ask the client how much they spend on food then?”

CREDITOR: “Yea, like milk and stuff.”

ME: “OK, I’ll ask the client to start tracking that for the next 30 days and I’ll get that to you.”

CREDITOR: “I need it now.”

ME: “OK, so you don’t want them to track how much they actually spend on milk but you want a figure that they spend on milk then, right?”

CREDITOR: “Yes, that’s what I asked for initially.”

ME: “How much do you spend on milk each month?”

CREDITOR: “I don’t know and what does that have to do with anything?”

ME: “Who in the world knows how much they spend on milk unless they track it.”

CREDITOR: “That’s not my problem.”

ME: “OK then. We’ll I’ll call the client right now so they can make up some bogus figure for you so you can plug it into whatever computer screen you are looking at right now.”

CREDITOR: “Thank you. Now was that so hard? Bye.”

At least you can say this about dealing with creditors, they sure can be frustrating, but very, very entertaining.

And Capital One, don’t hold your breath for the £1093.56 for the £365.21 debt. No matter how good you've been this year, you're not getting that for Christmas.

I bet the DMC and Capital One will collectively spend about £365.21 in staff and admin costs in simply trying to remedy the error.

Actual Letter From Capital One