Payday loans lenders face OFT penalties
Action is being taken against payday lenders who flouted rules on online advertising in the run up to Christmas.
The Office of Fair Trading (OFT) found some were not checking whether customers could afford to borrow or outlining charges for going into arrears.
A number were unclear about the loan terms and failed to explain the contract.
The OFT has not named the firms.
The businesses could be stripped of their consumer credit licences or simply be forced to change their practices.
The regulator has now started to check advertising on the websites of 50 further firms.
In a report sent to MPs on the Business, Innovations and Skills Committee, the OFT says that complaints about the lenders to helpline Consumer Direct rose to 1,535 in the first 11 months of this year, up from 700 in the whole of 2010.
Short-term payday loans have boomed. The market is worth at least £2 billion a year.
However, serious concerns have been raised about the business practices adopted by some players.
Top of the OFT’s list of worries is the misuse of continuous payment authority, which allows a lender to take funds from a borrower’s bank account even if the account is overdrawn.
Next comes the rolling over of loans which can result in debts escalating out of control.
But irresponsible advertising and selling tactics have also become a major worry.
Credit scores
Meanwhile, the OFT has also taken action against a company that offered to show people their credit score.
The regulator said that some people might have thought the service was free, but Adaptive Affinity Limited charged a monthly fee of up to £60.
The company, which was behind QuickCreditScore, HighCreditScore, CreditScoreMatters and High Street Max has promised to change its operations to make charges clear.
January 16, 2012
Tags: bad debts, bank lending, borrowing, consolidate debt loans, Credit Crunch, Debt Consolidation, debt management plans, sub prime loans, UK loans rates Posted in: Borrowing Costs, Credit Crunch, Debt Consolidation, Debt Management, Finance, Interest Rates, Lenders, Online Banking, Payday Loans, Sub Prime Loans, UK Loans Rates, Uncategorized 
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RBS failures caused by poor decisions, says FSA
The Royal Bank of Scotland (RBS) nearly collapsed in 2008 because of poor management decisions, inadequate regulation and a flawed supervisory system, a Financial Services Authority report says.
The FSA admits that its own supervision was “flawed” and “provided insufficient challenge” to RBS.
And it says RBS had too weak a capital position to proceed with the takeover of parts of the Dutch bank ABN Amro.
The £49 billion purchase took place at the height of the financial crisis in 2007.
RBS, which is now nationalised and 83% owned by the UK taxpayer, has cut 27,500 jobs since the beginning of the financial crisis.
The chairman of Royal Bank of Scotland, Sir Philip Hampton, admitted that it was “shocking” that the bank had to accept taxpayers’ money in order to avoid failing.
He said the approach of RBS’s previous management had been wrong, and huge changes had since been made.
He said the bank had restructured its finances “to get our financial platform where it should be, with strong capital and strong liquidity”.
Last month RBS reported pre-tax profits of £2 billion in the three months to 30 September, compared with a £1.6 billion loss in the same period last year.
The FSA report also says that in future regulators should be given greater powers to block takeovers.
Directors of banks should also put less emphasis on profit and more on risk management.
January 13, 2012
Tags: bad debts, bank lending, bankers, Bankrupcy, Credit Crunch, Loan calculator, nationalisation, sub prime loans, UK loans rates Posted in: Bankers, Bankrupcy, Banks, Finance, Sub Prime Loans, Uncategorized, nationalisation No Comments
Christmas will push third of UK into debt warns YouGov
Almost one in three people in the UK will go into debt over the Christmas period according to a YouGov survey.
The survey of 2,015 adults suggests 11% of Britons will lose track of spending, with 31% going into some form of debt to fund Christmas related costs.
Of these, it suggests 58% will rely more heavily on their credit cards and most of the remainder will cover their costs by using overdraft facilities.
Banking software company Intelligent Environments commissioned the survey.
It found that Britons aged between 25 and 34 struggled the most with money, with 64% facing debts or arrears of some kind.
The survey also found more than a quarter of people – 26% – now go into overdraft at least once a month.
YouGov carried out the online survey between 22 and 24 November 2011. Its figures have been rated to reflect Britain’s population aged 18 and over.
January 11, 2012
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Somerset debt firm goes bust and director arrested
A Somerset based debt management company went bust leaving its clients owed about £600,000 and a 42 year-old man has been arrested.
More than 80 people had given the money to DebtDr so it could arrange full and final settlements with their creditors.
Avon and Somerset Constabulary said a man was arrested on suspicion of fraud and has been released on bail.
DebtDr, based in South Petherton, was the trading name of Hermes Financial Solutions Ltd, which ceased trading in April.
For a fee, the company helped clients to pay off their creditors and, in many cases, took a lump sum from them to offer as a full and final settlement of their debts.
In many cases, clients borrowed the money to give to DebtDr to use in its negotiations with creditors.
Hermes Financial Solutions at South Petherton, Taunton TA13 was wound up in July of this year and a liquidator appointed.
January 9, 2012
Tags: Credit Crunch, Debt Consolidation, debt management plans, Loan calculator, sub prime loans Posted in: Debt Consolidation, Debt Management, Finance, Financial Services, Independent Finance, Loans Calculators, Uncategorized No Comments
Barclays Bank basic current account customers face fee rise
Basic current account holders at Barclays Bank face more frequent charges if they fail to keep sufficient funds in their accounts.
Basic accounts, often opened by those with a chequered credit history, do not offer cheque books or overdrafts.
At present, there is a maximum charge of £8 a day if direct debit or standing order payments exceed the total funds in the account.
However, from March, this could increase to up to £24 a day.
That is because a limit of just one transaction charge occurs at present, but this will be extended to charges for each of up to three missed payments in a day.
Barclays’ move follows changes made by other High Street banks to cash machine access for customers with basic bank accounts.
Basic bank account customers at RBS and Lloyds Banking Group – which includes Halifax and Bank of Scotland – are being restricted in the number of cash machines they can use.
The banks blamed high costs for the changes.
These are simple accounts which allow customers to have their wages, benefits, and cheques paid in.
Customers can gain access to their money from some cash machines, or the Post Office.
Bills can be made by direct debit from the account, but these accounts offer no overdraft facility or access to credit – unlike most standard current accounts.
Those with basic bank accounts with Barclays will not have the same restrictions on ATMs. Instead, the bank has decided to cut costs by increasing the frequency of charges.
It will also save money by a default option of only sending out paper statements once every three months, rather than monthly, although customers can ask for a statement each month if they would like it.
However, a £2 a month charge for a text service to alert account holders that they are close to emptying their funds has been cancelled. The service is now available free.
A Barclays spokesman said: “We want to ensure this product remains financially sustainable so that we can continue to help those at risk of financial exclusion gain access to banking.”
“We also want to ensure the product continues to meet the needs of those it is designed for. The changes we are making are based on solid research of our customer base and Citizens Advice Bureau clients.”
January 5, 2012
Tags: bank lending, bankers, finances, Loan calculator, personal loans, sub prime loans Posted in: Bankers, Banks, Borrowing Costs, Credit Crunch, Finance, Lenders, Loans Calculators, Uncategorized No Comments
Loans Calculators wishes you a prosperous New Year 2012
Loans Calculators wishes you a prosperous New Year 2012
Loans Calculators wishes you a prosperous New Year 2012.
January 3, 2012
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Millions turn to payday loans claim insolvency experts
Millions of Britons are likely to take out a high interest loans in the next six months to last them until payday a group of insolvency experts claims.
R3, which represents “professionals working with financially troubled individuals and businesses”, bases its claim on interviews with 2,000 people.
Some 60% of those surveyed worried about their level of debt, and 45% struggled to make their money last till payday, R3 said.
R3 says the survey reveals money worries at the highest level it has ever recorded, and consumer bodies have called for tougher regulation around payday loans.
Payday loans are small, short term unsecured loans designed to tide people over until they get their salary.
The survey found 45% of those questioned struggled to make it to pay day, rising to 62% for 24-44 year olds.
One in six are so-called “zombie debtors”, who are only able to service the interest on their debts.
If the money is paid back promptly on the next pay day, this type of lending can be cheaper than paying an unauthorised overdraft or a credit card charge.
However, if the loans – some charging interest rates of more than 4,000% – are rolled over, debts can quickly escalate.
Last month the Citizens’ Advice Bureau warned the number of people running into debt through payday loans has quadrupled in two years.
It says it is too easy to obtain such credit and it is calling for tighter regulation, along with Consumer Focus, the UK’s official consumer watchdog.
But Consumer Minister Ed Davey said tougher measures could push people into the hands of illegal loan sharks.
Prime Minister David Cameron’s official spokesman said the government was working with the industry and consumer organisations on the issue.
He added: “You have to be careful when intervening in this kind of market that it doesn’t have the effect of reducing access to credit for some people, and you need to be careful that you don’t drive people towards loan sharks by introducing regulation.”
“It is important to get the balance right, but at the same time we are very seized of the importance of protecting vulnerable people.”
December 29, 2011
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One in four households face fuel poverty warns Consumer Focus
The proportion of homes in fuel poverty in England and Wales has risen from 18% to 24% in two years estimates suggest.
Consumer Focus calculated that nearly 5.7 million households are in fuel poverty – when more than 10% of their disposable income is spent on fuel.
The watchdog said the issue was particularly acute in Wales, where 41% of households were in fuel poverty.
A number of subsidies are available to householders to help them make homes more efficient and cut bills.
Consumer Focus called on the UK government to support a new energy efficiency programme in England.
The Welsh government said it was committed to tackling fuel poverty, with schemes including Arbed, a £60m investment in improving energy efficiency in some of the most deprived areas of Wales.
“Our programmes also ensure that householders struggling to keep their homes warm can receive advice on debt and maximising their income, for example with benefit entitlement checks,” said a spokesman.
The estimates are based on the most recent official government figures on fuel poverty, which date from 2009.
Energy price rises, changes to household income and alterations to household energy efficiency were then factored in.
“Recent energy price rises have pushed many more people across the country into fuel poverty,” said Audrey Gallacher, director of energy at Consumer Focus.
“It is difficult to see how the government is going to meet its target to end fuel poverty by 2016. With so many people struggling to afford their energy bills, we urge the government to use the proceeds from new carbon taxes to support a national energy efficiency programme to give extra help to those who need it.”
December 22, 2011
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UK banks charging as much as 800,000% on overdrafts
Some High Street banks are charging “eye watering” rates of interest when their customers go over their overdraft limit.
A customer borrowing £100 for 28 days without the consent of Santander would repay £200, for example.
That is the equivalent annualised percentage rate, or APR, of 819,100%.
Comparisons between banks and so-called payday lenders showed that the annualised percentage rate charged for borrowing £100 over 28 days varied from 969% to 819,100%.
No payday loan lender charged an APR of more than 5,000% but two banks – Santander and Lloyds TSB – charged an equivalent APR of more than 300,000%.
Barclays would charge a customer using a personal reserve – a pre-agreed emergency borrowing facility – £22 for every five consecutive working days they were in it. This means customers would pay £88 on top of the £100 capital after 28 days – an equivalent APR of 366,000%
The payday loan market has expanded rapidly in the last decade.
Lenders typically lend amounts up to £1,000 for up to a month. Applications are processed quickly and the borrower can typically receive the money the same day. But the quick availability of credit comes at a cost, typically an APR of around 2,000%.
The Office of Fair Trading said the payday loan industry was worth about £115m in 2004. According to a report by consumers’ association Which? that figure was £1.9bn in 2010.
The maximum charged for borrowing £100 for 28 days from a payday loan company is £42.
That is compared to unauthorised borrowing charges of £100 with Santander, £88 with Barclays and £86 with Lloyds TSB for the same sum of money over the same period.
In 2009, UK banks won a Supreme Court case that had been brought to challenge the legality of large overdraft charges.
In explaining his ruling, the Supreme Court’s president, Lord Phillips, said that bank customers agreed to pay overdraft charges as part of the price of having a current account, so they fell outside the scope of the 1999 consumer contract regulations.
But in the aftermath of the ruling, most banks did agree to reduce the level of their charges. However, although the charges have been reduced in some cases the number of times a customer can be charged in one month has gone up.
The OFT said that under the Consumer Credit Regulations Act of 2010, businesses do not need to state an APR for “any charges payable due to non-compliance with commitments contained in the consumer credit agreement”.
December 20, 2011
Tags: bank lending, bankers, borrowing, Credit Crunch, Interest Rates, payday loans, UK loans rates Posted in: Bank Lending, Banks, Borrowing Costs, Finance, Lenders, Loans Calculators, Loans Rates, Payday Loans, Sub Prime Loans, UK Loans Rates, Uncategorized No Comments
Bank of England governor Sir Mervyn King warns of hard times ahead
UK economic growth will be “flat or close to zero” over the next six months Bank of England governor Sir Mervyn King has told MPs.
He told the Treasury Select Committee: “The outlook for output growth in the near term is considerably weaker than even three months ago.”
Sir Mervyn’s comments came on the day that the OECD warned that the eurozone and UK could be entering a recession.
Asked about the OECD report, Sir Mervyn said he had not yet read it.
As with the OECD’s analysis, Sir Mervyn blamed the eurozone’s debt crisis for contributing to the UK’s economic problems.
He said there could be a particular impact on export growth.
“I think it is very hard to give a worst case scenario from that (eurozone impact). Many things could happen and an awful lot will depend on the politics of it. What I would say more generally is that what we are facing is a situation in which some painful adjustments need to be made.”
“And those painful adjustments will need to be made both for creditors and debtor countries, and those painful adjustments will need to be made irrespective of how the euro crisis plays out and so there is no easy way out of this,” Sir Mervyn said.
Even if the eurozone crisis was resolved any time soon, it was Sir Mervyn’s prediction that UK growth for the whole of next year would not be “rapid”.
He did, however, repeat his belief, that factors that had led to the UK’s sharp rise in inflation this year “are diminishing”.
December 15, 2011
Tags: Bank of England, bankers, Credit Crunch, Mervyn King, Quantitative Easing, uk recession Posted in: Bank of England, Bankers, Credit Crunch, Interest Rates, Lenders, Quantitative Easing, Sovereign Debt, Uncategorized No Comments
