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Unsafe chip and pin must be overhauled to protect millions of bank customers

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Fri, 12 Feb 2010 15:13:00 +0000

UK banks' chip and pin technology must be overhauled after it emerged that one in seven people could have already been a victim of a "fatal flaw" in the system.

Experts at Cambridge University believe the system is "broken" after they tricked it into accepting transactions without using a valid personal identification number.

They say the flaw is so fundamental it threatens to undermine the entire security of the system.

Which? said that in a recent survey 14 per cent of people – one in seven – said they have had money taken from their bank account and 13 per cent from a credit card.

Of those around half did not get their money back from the bank, even though they insisted they did not use or authorise the "disputed withdrawal".

Professor Ross Anderson, a computer expert, claimed to have developed a way of bypassing security systems which renders chip and pin no longer "fit for purpose".

His team's "man in the middle" technique involves having a separate card reader in a back pack.

The fraudster puts the stolen credit or debit card into the shop's reader but then the second reader in his bag sends a "pin OK" signal to the shop terminal.

The shop terminal then sends back a transaction go-ahead signal to the terminal with the stolen card and money is taken off it.

They claim to have used it a number of times without the banks, who firmly deny it is a threat, being any the wiser.

Prof Anderson, who two years proved that cards could be cloned, accused the banks of lying when they said there was no problem.

"How would the banks know if the fraud has taken place?," he said. "We used it in our canteen and they have never contacted us to say that there was a fraud.

"We have many examples of people who have had their cards stolen and then purchases made using the chip and pin.

"They are adamant they didn't use it but if the banks say chip and pin has been used you have to pay.

"I think many of these people would have been victim of the kind of technique we have developed.

"The banks are wrong. All the banks are lying. They are maliciously and wilfully deceiving the customer. If there was any justice then the police would be looking into this. The system is not fit for purpose."

Stephen Mason, a barrister who specialises in cases of chip and pin fraud, said at the very least the potential breach of security should be investigated.

"There is clearly something wrong with the system," he said. "I have people who believe as much as £4,000 has been taken from their accounts.

"It is not right for the banks to say our systems are perfect. The banks need to realise there is reasonable doubt about how secure the system is."

But The UK Cards Association, which represents the banks' card operations, dismissed the claim, saying that while the research had shown what it was possible to do in theory, this did not mean it was practical or even possible to do in reality.

Figures for fraud committed on lost and stolen cards were down to the lowest figure for two decades, she added.

The Financial Ombudsman Service, which decides on any disputed claims, said any new methods of committing fraud would be taken into consideration in future disputes.

At present, the customer is accountable for the fraud as banks argue that PIN verified transactions are secure. Given this attack demonstrates a clear method of bypassing the PIN system, this assertion by the banks stands on shakier ground.

Loans Calculators Blog- loans rates blog for news about interest rates- unsecured and secured loans, mortgages, remortgages and refinancing including home loans, equity release and consolidate debt loans.

UK home repossessions reach 14 year high

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Thu, 11 Feb 2010 15:09:00 +0000

The number of people being evicted from their homes has climbed to a 14 year high, with an average of 126 repossessions every day in 2009.

As many as 46,000 people had their home repossessed last year, the highest level since 1995 and 15 per cent more than the previous year.

The figure from the Council of Mortgage Lenders is significantly below the group’s original forecast of 75,000, which was revised down twice to 48,000.

However, the CML predicts a sharp increase in repossessions and the number of people falling behind with their monthly mortgage payments this year.

It blamed uncertainty in the economy and possible interest rate rises putting additional pressure on households’ finances.

Charities and financial experts said it was “unacceptable” that so many people had lost their homes.

The Government claims schemes put in place to help borrowers in financial difficulty have helped 330,000 families stay in their homes. However, figures suggest only 92 families completed the Mortgage Rescue Scheme, where eligible families can either get an equity loan to reduce their mortgage, or sell their home and remain as tenants.

It comes as lenders are criticized for continuing to offer the best deals to those with a significant deposit.

Figures by personal finance website Moneyfacts suggested borrowers with deposits of just 5 per cent pay £4,728 more on an average two year fixed rate deal compared to those with a 25 per cent deposit. This is based on borrowers looking for a mortgage of £150,000.

The CML also revealed a sharp decline in the number of mortgages for landlords.

It said 93,000 buy-to-loans were approved last year, down 58 per cent on the previous year’s 222,700 and the lowest annual figure since 2001.

UK home loans interest rates fall to new lows

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Wed, 10 Feb 2010 15:06:00 +0000

The cost of tracker mortgage rates fell to a record low during January as competition continued to return to the mortgage market, figures from the Bank of England show.

The average interest rate charged on one of the deals dropped to 3.63pc from 3.92pc during the month, the lowest level since Bank of England records on the product began in 1997.

There was also an improvement in the cost of fixed rate mortgages, with two-year loans falling to an average of 3.97pc, a level last seen in July 2003, while the cost of a five-year deal dropped by 0.12pc to 5.55pc.

Competition in the mortgage market has been steadily improving since the beginning of the year, with more than 300 new mortgage products launched during January, while a flurry of lenders also cut their rates on existing deals.

Significantly, there has been a big improvement in the number of deals available to people with only small deposits, with a 26pc jump in mortgage availability for people borrowing up to 90pc of their home's value during January.

Commentators said the move showed lenders were feeling increasingly optimistic about the housing market, following 12 months of rising house prices, while they were also more confident about pricing in risk.

This trend has continued into February, with Nationwide announcing that it was reducing the minimum deposit people needed to put down to qualify for its best rates from 40pc to 30pc on nearly half of its mortgage products.

Bank of England figures also showed that personal loan rates eased slightly during January.

The average interest charged on a £5,000 loan fell to 13.32pc after reaching a record high of 13.38pc in November, while the cost of a £10,000 loan dropped to an average of 10.91pc, down from 11.08pc the previous month.

But the cost of credit card borrowing continued to rise, increasing to 16.4pc in January, its highest level since July 2006.

UK housing market freezes up as Britain's suffers winter weather

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Tue, 09 Feb 2010 15:02:00 +0000

Snow and freezing temperatures almost brought the property market to a halt last month, according to estate agents.

The latest survey from the Royal Institution of Chartered Surveyors found a fifth more estate agents reported a fall rather than a rise in the number of new buyers during January.

It is in sharp contrast to the 18 per cent more estate agents who reported a rise rather than a fall in house hunters during the previous month.

But despite the slowdown in activity, house prices continued to rise, with 32pc more surveyors reporting price increases in January than those who saw falls, up from 30pc more in December.

Surveyors remain confident that the dip in activity is temporary, with the proportion who expect prices to continue rising doubling during the month from a balance of 12pc to 24pc.

Estate agents said the cold weather at the beginning of the year badly affected business.

More than 10,000 Britons declared insolvent every month

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Mon, 08 Feb 2010 14:58:00 +0000

More than 10,000 Britons are being declared insolvent every month, the highest level on record, new official figures have shown.

Although the recession maybe over, many households are still unable to live within their means.

And experts warned insolvency numbers will rise further once interest rates begin to head above their current low level of just 0.5 per cent.

The latest figures showed 134,142 people in England and Wales were declared insolvent last year, the highest level since records began in 1960 and a sharp increase on the previous record of 107,288 personal insolvencies in 2006.

The individual insolvencies consisted of 17,007 bankruptcies during the last three months of 2009, - which were up 24.9 per cent on the same period a year ago - and 13,219 of its less stringent form, Individual Voluntary Arrangements (IVAs) – which were up 26.3 per cent on the same period in 2008.

An IVA is an arrangement that is entered into with those owed money, while a bankruptcy involves a formal court order where assets are sold to pay off creditors.

An alternative to bankruptcy – a debt relief order – was introduced last April, but various restrictions limit those who can apply, such as not owning your own home and having debts of less than £15,000. There were 5,348 of these orders during the final quarter, up from 4,505 in the previous quarter.

UK personal insolvency rates hit record high

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Fri, 05 Feb 2010 14:53:00 +0000

The number of people who were declared insolvent in England and Wales hit a record high in the last quarter of 2009.

The figures from the Insolvency Service marked the depth of the recession, with 35,574 people declared insolvent in the last three months of the year.

That was a rise of 25% on the same period a year earlier.

Over 2009 as a whole, there were 134,142 people declared insolvent in England and Wales. This was up 26% compared with 2008, and higher than the previous record - in 2006 - of 107,288. Records began in 1960.

However, the number of personal insolvencies only crept up by 332 in the final three months of the year, compared with the previous three months.

The quarterly total was made up of 17,007 bankruptcies - down 5.5% on the same quarter of the previous year, 13,219 Individual Voluntary Arrangements (IVAs) - up 26.3% on the corresponding quarter of the previous year, and 5,348 Debt Relief Orders (DROs) - which were introduced in April.

These DROs allow people with debts of less than £15,000 and relatively few assets to write off these debts without a full-blown bankruptcy.

Record low interest rates would have staved off insolvencies for some people, but long-term unemployment would make it difficult for others to avoid the situation.

IVAs could also have risen as people cutting hours instead of being made redundant had some funds to pay back debts instead of going bankrupt.

Many experts have suggested that there will be more pain to come despite the UK coming out of recession.

Compared with the last recession in the early 1990s, the latest figures show a very different picture.

The number of individual insolvencies has shot up in the past decade, and now far outstrip the numbers seen in 1992 and 1993 of about 37,000 each year, although it is easier now to be declared bankrupt.

Experts said this was because the amount of credit built up by individuals - especially on plastic - mushroomed in the last decade. Since 1993, the amount of personal debt in the UK - including mortgages - has risen from £398bn to £1.46 trillion.

IVAs were also in their infancy in 1992-3.

This means that 0.3% of the adult population was declared insolvent in 2009, a far higher rate than the 0.1% recorded in 1992 and 1993.

But the number of companies being wound up, via various forms of liquidation, still falls far short of those recorded in 1992.

Then, 24,000 companies were wound up, 2.6% of all companies in existence.

The current liquidation rate, which has increased in the past two years, is still less than 1%.

Debt advice service can't cope with leap in demand

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Thu, 04 Feb 2010 14:49:00 +0000

The Government's free debt advice service is being forced to turn people away after being unable to cope with a 28pc jump in demand, a report has warned.

MPs described the Government's approach to advising people in debt as a "triumph of bureaucracy over practicality" and urged it to "shake up" its strategy to meet the increasing demand for help in the current economic climate.

The Public Accounts Committee said the Department for Business, Innovation and Skills' approach to debt advice was "unnecessarily complex", with more than 50 different projects and a number of funding streams.

Edward Leigh, the chairman of the committee, said: "The whole thing is undermined by poor co-ordination and a lack of clarity about who is in control of it all."

Consumers owed £1.46 trillion in debt at the end of last year, with personal borrowing representing 160pc of household annual pre-tax income. The recession has caused demand for debt advice to soar, with research suggesting around one in 10 people are struggling to keep up with their borrowings.

But the Government's free face-to-face service struggled to cope with the 28pc rise in the number of people contacting it during the year to July 2009, leading to a quarter of agencies either turning consumers away or forcing them to wait for more than a month for help.

Richard Bacon, a member of the Public Accounts Committee, said: "At present, the Government is not always using the most cost-effective means of reaching people in need of help with their debts. It costs an average of £265 to provide face-to-face debt advice, but telephone advice costs just £51 and internet advice is cheaper still."

He said one in four people who saw a debt adviser face to face said they would actually have preferred to have been given advice over the telephone or through the internet.

He said: "The Department for Business, Innovation and Skills needs to use the money it deploys more effectively in order to address the gap between the demand for debt advice and the Department's current capacity to provide it."

Money is the root of all evil for Britons

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Wed, 03 Feb 2010 20:09:00 +0000

Money may make the world go round but money is also the nation's biggest worry.

More than eight out of 10 people said they are experiencing some kind of worry, consumer analysts Mintel found.

And one in five admit to turning to drink when stressed, while more than one in 10 light up a cigarette, the survey of 2,000 people found.

The top five concerns were money (40 per cent), problems with friends and family members (25 per cent), health (24 per cent), stress at work (22 per cent) and job security (21 per cent).

And the top five ways of dealing with stress were socialising with friends and family (54 per cent), listening to music or reading a book (40 per cent), exercise (33 per cent), talking to people about how they feel (32 per cent) and spending one-on-one time with a partner (22 per cent).

'The fact that over half of us turns to our family and friends in times of trouble, compared to just 6 per cent who go to a professional, highlights the extent of the stigma attached to seeking professional help to deal with stress.

While one in four men turn to drink in times of worry, less than one in five women drown their sorrows in alcohol.

But women are more likely to turn to comfort foods than men.

And on the whole, it is the fairer sex that is likely to be more stressed out, with more than one in 10 saying they had five or more worries, compared to just one in 14 men.

Demand for UK credit increases again

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Tue, 02 Feb 2010 10:09:00 +0000

New borrowing on credit cards, loans and overdrafts has outstripped the amount being paid back by UK consumers for the first time since June last year.

Unsecured consumer credit rose £52m in December, driven by credit card borrowing, the Bank of England said.

The number of mortgages approved for house purchases dipped slightly compared with November, to 59,023.

This was still higher than the average of the past six months, when the housing and mortgage markets picked up.

The trend during the downturn has been for consumers to pay off debts, often instead of saving when interest rates are so low.

For five consecutive months, repayments outstripped new unsecured consumer credit. However, in December, the trend reversed, the Bank of England's figures show.

This was primarily the result of borrowing on credit cards, which rose by £195m. Demand for personal loans and overdrafts remained low, with repayments outstripping new borrowing by £143m.

Total net lending to individuals rose by £1.2bn in December, double the average of the previous six months. The vast majority of lending is in the form of mortgages.

The number of people remortgaging rose slightly - to 27,276. This was still a traditionally low level as people chose to benefit from low interest rates by staying on their mortgage provider's variable rate when their fixed-rate deal came to an end.

The Bank rate is widely expected to remain at record lows for some months.

UK loans interest rates hit a 9 year peak

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Mon, 01 Feb 2010 10:03:00 +0000

UK bank personal loan rates have climbed to a nine year high because of a rise in bad debts as borrowers fail to meet their loans repayments.

Experts said banks are increasing rates to recoup the losses stemming from defaults on loans.

Rising unemployment during the recession saw households struggling to meet the repayments on their debt.

The best rate currently available on a three year loan of £5,000 is almost 9 per cent – or nearly £160 – a month, according to personal finance website Moneyfacts.

It is in sharp contrast to rates of almost half that amount before the beginning of the credit crisis in 2007.

The rise comes despite the Bank of England keeping interest rates at a historic low of 0.5 per cent for the past year.

Rates were last at their current level nine years ago when the Bank Rate was a much higher 6 per cent, meaning banks have significantly increased their profit margins on personal loans.

The average rate today on a personal loan is even higher at 12.4 per cent.

Britain may be out of recession at last – but are you?

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Fri, 29 Jan 2010 09:55:00 +0000

While the UK’s output of goods and services grew in the final quarter of 2009, according to the latest official statistics, many people are wondering whether their own finances are actually in any better shape.

Recovery can bring its own problems; for a start, rising demand tends to stoke inflation, which could prompt the Bank of England to raise interest rates – good news for savers, but not something that hard-pressed home owners would welcome.

So what are the prospects for our personal finances as the economic recovery takes hold?

With Britain borrowing record amounts of money, many expect public spending cuts or tax rises – or both – as the Government attempts to balance the books. Income tax could have to rise by as much as 5p in the Pound.

Commentators are divided on the likelihood that interest rates will rise from their current unprecedented lows. Official rates were unlikely to rise this year because a tough post-election Budget would equate to a significant interest rate rise.

But you don’t need the Bank of England to put up official rates for mortgage costs to rise. Lenders are by and large able to change their standard variable rates at will, while Skipton Building Society recently abandoned a pledge to keep its SVR within three percentage points of Bank Rate.

Higher interest rates might seem like good news for savers, who would finally see better returns on their money. But if inflation rose faster than interest rates, pensioners’ and savers’ incomes would not keep up with increasing household bills. Rising rates also means higher mortgage rates, which will put further pressure on many households’ incomes.

While you would expect the end of a recession to be good news for the stock market, it’s worth bearing in mind that markets generally look ahead, so much of the good news will already be “in the price”. So instead of simply expecting the FTSE100 to soar, investors may have to be selective if they want to profit, experts say

An immediate improvement in employment prospects is unlikely, experts say. Jobs will remain hard to find, with employers likely to remain nervous about hiring when the economic recovery is still sluggish. In fact, we expect unemployment to start rising again and it could even reach 3m.

Even if employment holds up, that is only likely to be because firms are controlling costs by cutting or freezing pay instead. For many people, it will still feel very much like a recession.

Office of Fair Trading (OFT) offers debt case guidance

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Thu, 28 Jan 2010 09:50:00 +0000

Lenders and borrowers have been issued with draft guidance about when their loans may, or may not be enforced by the OFT.

The Office of Fair Trading (OFT) said it was worried that some debtors were being misled about their ability to get their debts written off.

Thousands of claims have been launched in the past couple of years, against lenders, by borrowers trying to avoid repaying their debts.

The draft guidance focuses on the rules laid down by the Consumer Credit Act.

The OFT's guidance draws on recent rulings by Judge Waksman at the High Court in Manchester.

He confirmed that it was acceptable for lenders to produce reconstituted copies of original loan agreements, for the purposes of providing the borrower with information about their loan.

The OFT said: "Some debtors are being misled into thinking that these sections [of the Consumer Credit Act] can be used to get their debts written off and that some creditors are not following legal obligations to provide information to customers.

"The lender is allowed to provide a reconstituted agreement, as long as that version is accurate and contains all the original information apart from the few exceptions that the law allows (which include the signature, signature box and date of signature)."

The authorities have been worried that some claims management companies have been drumming up business by exaggerating the chance of clients getting their debts cancelled.

Claimants have typically sought to achieve this by challenging their lenders to meet the strict requirements of the Consumer Credit Act.

One of these is that lenders have to produce a "true copy" of the loan agreement within 12 days of being asked.

If a legible true copy cannot be produced then the loan is temporarily unenforceable, by way of a county court judgement, until such time as a copy can be found.

Some claims management companies have argued that the debts are permanently unenforceable in these circumstances.

UK mortgage approvals on the rise

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Tue, 26 Jan 2010 09:47:00 +0000

The number of UK mortgages approved for house purchases rose at the end of 2009.

But overall, mortgage approvals in 2009 were 27% lower than the previous year and the lowest since British Bankers' Association records started in 1997.

Some 45,897 home loans were approved for house purchases last month.

This showed the extent of the recent recovery in the mortgage market as it was double that of December 2008.

Gross mortgage lending by the High Street banks rose from £9.6bn in November to £10.2bn in December.

This was also 12.5% higher than December 2008, and was boosted - according to the British Bankers' Association (BBA) - by borrowers bringing loans forward before the stamp duty holiday came to an end.

The temporary stamp duty holiday on properties worth between £125,000 and £175,000 ended on 1 January 2010. It means buyers will again have to pay 1% tax on the value of homes worth more than £125,000.

According to the BBA, the level of those remortgaging remained low in December - at 23,480 - as people continued to choose to move to their lender's standard variable rate (SVR), rather than move to a new fixed-rate deal when their term came to an end.

Concern over pre paid card costs

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Mon, 25 Jan 2010 09:39:00 +0000

People in some of the poorest parts of the country are having benefits paid onto pre paid cards, but many are not aware of the costs involved.
An internal e-mail from the Department for Work and Pensions expresses concern at the lack of customer awareness.

One benefit office has received requests to pay benefits for almost 100 people directly onto these pre-paid cards, which incur charges.

The card providers say the cards promote financial inclusion.

However when staff at the Clyde and Fife Benefits Delivery Centre contacted customers before processing the requests, they found that the majority of customers were not aware of the charges.

One of the companies mentioned in the e-mail sent 46 applications to the benefit office requesting benefits to be paid on to a GO: Card.

The forms were accompanied by a letter from Go Money Solutions sales director, Steve Tobin. In the letter Mr Tobin says the forms were obtained "through face to face marketing" in the local area.

The DWP confirmed it had raised concerns with Go Money Solutions and it had subsequently revised its sales practices.

Minister Helen Goodman told Radio 4's Money Box: "Considering the charges that are associated with these cards, it is very unlikely that they are suitable for our customers.

"We certainly don't endorse them. There are much better options available for having your benefit/pension paid, such as the Post Office card account, a basic bank account or current account."

Online shopping

But Mr Tobin says the GO: Card offers much more in terms of financial inclusion, flexibility and convenience:

"We offer our customers the chance to take part in fully utilising the internet's many advantages in purchasing goods and services at considerably discounted prices and convenience. We do not charge for this facility."

While most banks offer basic banking facilities to all customers, many will not offer a debit card to people with a bad credit history. A pre-paid credit card is currently the only way those customers can shop online.

A GO: Card costs £10 to buy and a £7.50 annual management fee is charged after the first month. It costs a minimum of £1.25 and a maximum of £2.50 to have each benefit loaded on to the card and the same charges apply for each cash withdrawal.

UK debit card spending to overtake cash spending in 2010

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Thu, 21 Jan 2010 20:21:00 +0000

UK debit card spending will overtake spending with cash as a method of payment this year.

Debit card transactions rose by 10 per cent last year, according to Visa Europe, which is owned by the banks for which it processes payments.

It means that 77 per cent of its business was now done with debit cards, rather than credit cards, the use of which stalled over the past year.

Total card spending at “points of sale” was up 3.7 per cent to £746 billion, Visa Europe said. The busiest day for spending was December 23, when consumers performed more than 20 million transactions and spent more than £1 billion – up 28 per cent on the same day in 2008.

The recession has meant that consumers are increasingly using debit cards to pay for purchases, rather than build up debt on credit cards, Visa said.

At the same time consumers have been reluctant to pay booking fees for payment with a credit card. Retailers are barred from making such charges on debit card transactions, but justify the credit card levies on the grounds that they are passing on so-called interchange fees charged by banks.

Internet shopping has also accelerated the rise of debit card use, with a quarter of all Visa spending in the UK conducted online over the Christmas period and 20 per cent for the year as a whole.

Debit card users could have same protection as UK credit cards

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Wed, 20 Jan 2010 20:03:00 +0000

UK Consumers who buy goods and services with a debit card could be offered the same protection as those who use a credit card.

Some shoppers are losing out on hundreds of pounds each year because they have been caught out by unscrupulous internet retailers, companies going bust or just plain poor service.

Consumer Focus, the Government's consumer watchdog, said these shoppers could avoid being out of pocket if they used credit cards, but many shoppers do not like buying goods on credit. And the only way to pay for goods bought over the internet, if you do not like using credit cards, is with a debit card.

The Government has now hinted that it might tighten the rules to give greater protection to those shoppers that use debit cards, as part of a shake-up of the card industry.

The Government is reviewing the industry and Tuesday 19 January was the deadline for parties to submit their ideas of how to improve credit cards. Any changes accepted by the Government are likely to be announced next month.

A spokesman for the Department for Business, Innovation and Skills said: "We are aware consumers have concerns about their rights when using different types of cards. That is why we are looking at this issue very carefully and will be announcing our views in the New Year."

Any change would be a major victory for consumers.

According to Consumer Focus, over the last year, one in ten consumers has been failed to get something they had paid for in advance – with less than half of the people not getting their money back. Those that have been ripped off have been out of pocket to the tune of £242, on average.

Under the 1976 Consumer Credit Act, the credit card company is jointly responsible – along with the retailer – for the quality of goods and services. This means anything between £100 to £30,000 will be covered by the credit card company if it arrives faulty or fails to arrive.

However, people buying goods on debit cards enjoy none of these rights and are left in a particularly weak position if an internet retailer goes bust.

Banks argue that it would be very expensive to offer consumers the same rights with debit cards. Credit card providers can only afford to cover the value of faulty goods up to £30,000 because they charge customers a large annual percentage rate. Debit cards are free in the great majority of cases.

Credit card lenders battle new lending rules

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Tue, 19 Jan 2010 20:28:00 +0000

UK credit card lenders are attempting to dilute plans to curb lenders' activities.

Government proposals include stopping card firms changing interest rates on existing debts and ensuring the most expensive debts are paid off first.

But now a trade body, the UK Cards Association, has claimed that the changes would push more people into financial difficulty.

There are 30 million UK credit card customers holding 66 million cards.

The industry said that 62% of all UK adults had at least one credit card, but borrowing on these cards had been in "gentle decline" since 2005.

Despite greater caution from lenders about who gets a card, the government is keen to outlaw certain practices that it regarded as unfair and has challenged the industry to "clean up its act".

It invited responses to proposals, published in October, which included:
* changing the order of priority for credit card repayments, so that the most expensive debts, such as cash advances, are paid off first
* increasing the minimum amount that must be paid off each month to accelerate the overall rate of repayment
* banning the practice of raising borrowers' credit limits without their consent
* restricting or banning increases in interest rates on debts already incurred.

The plans follow other limits on credit card practices brought in during 2009, aimed at bringing more transparency for customers.

But the latest proposals have brought a strident response from the industry, which claimed in a 230-page report that customers would not benefit from some of the planned changes.

"These options would reduce competition within the industry," said Melanie Johnson, a former Labour MP who chairs the UK Cards Association.

"They would also have far reaching consequences for customers and lenders alike and would change the basic 'deal' offered by lenders to their customers and lead to increased financial difficulties for many and to more defaults."

How to cut your credit card debts

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Mon, 18 Jan 2010 19:52:00 +0000

Paying off any credit card debts should be your top financial priority for 2010.

If you've got a lot of debt sitting on your credit card following Christmas, and it's racking up a lot of interest, the first step you should take is to transfer that debt onto a 0% balance transfer credit card.

The top card to use at the moment is the Virgin Credit Card, which offers an interest free period on all balance transfers for 16 months. So this means you've got 16 months to start making progress tackling your debt without worrying about paying interest.

It's a good idea to set up a monthly standing order for your minimum monthly repayment to make sure you don't forget to make a payment each month. If you do, you could be charged a fee, lose your 0% deal, and possible get a black mark on your credit record.
Get budgeting

If you're struggling to pay off your debt, the most obvious way to tackle it is to throw as much money towards it as possible.

But if you're feeling a little strapped for cash, this might seem slightly daunting. So a good idea is to sit down and draw up a budget. To do this, work out exactly what your monthly outgoings and earnings are by using a statement of affairs calculator.

If you can't manage to get all of your credit card debts onto interest-free deals, you need to adopt the method of 'snowballing'.

To do this, simply work out which of your credit card debts is charging the most interest - this is the debt that will grow at the fastest rate, so it's the one you need to concentrate on.

Keep paying the minimum monthly payments on all of your borrowings, but put any spare cash towards your most expensive debt. Once you've paid off this debt, put the extra money towards the next most expensive debt, and so on. Leave your interest-free debt until last.

As I mentioned earlier, it's important to remember to pay the minimum monthly repayment (MMR) on your credit card each month. However, minimum monthly repayments are usually set at a ridiculously low level - often as low as 2% of your total card debt.

This means it will take you a long time to pay off your balance - typically more than 15 years on £1,000 of debt. This also means your debt becomes much more expensive, as you'll be paying a lot of interest over that period.

So it's a good idea to set up a direct debit and pay a fixed amount on top of the minimum monthly repayment each month. That way you will pay off the debt far quicker and you won't have to pay as much in interest. You can find more about minimum monthly repayments in The dangers of minimum payments.

Illegal UK loans sharks profit from Christmas

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Fri, 15 Jan 2010 14:02:00 +0000

Some of the UK's poorest people are starting 2010 in severe debt after borrowing from loans sharks to pay for Christmas.

The Financial Inclusion Centre said 100,000 families had borrowed a total of £29m from illegal money lenders.

The think tank said on average it would take a year to pay the money back as lenders recouped three times the value, with some interest rates up to 1,500%.

The average amount borrowed was £288, but the average repayment was £820.

Mick McAteer, director of the Financial Inclusion Centre, said: "Because of the financial crisis, the High Street banks are restricting the access to loans to those people they consider to be low risk or [have a] higher income.

"That tends to push more and more people out into the hands of loan sharks."

The research was commissioned by housing association Circle Anglia, after it noticed loan sharks increasingly targeting its residents.

The government's consumer minister, Kevin Brennan, said: "It is worrying that people are borrowing these sums of money from loan sharks, because they're illegal.

"In the law they don't have to pay it back, and my advice would be don't go to a loan shark if you need to borrow. Approach a credit union or one of our debt advice teams."

Chris Tapp, of charity Credit Action, urged people to contact the police if they fell victim to loan sharks, because the lending was illegal.

He said: "It often feels like the only option is to go for the person they know of locally, to go to the loan shark, but that's not actually the case.

"In a lot of communities now around Britain there are credit unions or local finance organisations that operate from the 'third sector'.

"They're not-for-profit organisations that can lend money at considerably lower rates.

"It's not actually as cheap as you'd get from a bank, but it's much cheaper than borrowing from an illegal lender."

Also, the government's social fund helps people on low incomes and on benefits when they need crisis loans immediately, he said.

Inaccurate data files restricts borrowers access to credit

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Thu, 14 Jan 2010 15:22:00 +0000

Inaccurate information on credit files is preventing consumers from gaining access to loans and credit, the Information Commissioner's Office (ICO) has said.

The ICO is urging people in the UK to check their file so the information accessed by lenders is accurate.

Banks, shops and catalogue companies all use these files to decide whether to offer credit to customers.

Information should be corrected by the organisation that provided it to the credit reference agency.

"Many of us will be relying on credit to get us through 2010," said David Smith, deputy commissioner at the ICO.

"Out of date or wrong information in your credit file might not only stop you getting the credit you need but could have further damaging or embarrassing consequences.

"By checking your credit file regularly you can spot anything that is wrong and act swiftly to correct it."

Individuals have the right, under the Data Protection Act, to look at their credit file. The ICO has produced a new guide that runs through how to access these files.

Credit card borrowing costs are highest since 2006

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Wed, 13 Jan 2010 20:37:00 +0000

The average loans interest rate charged during the month was the highest average interest rate since September 2006.

The cost of credit card borrowing continued to increase during December, with lenders hiking their rates from an average of 15.89pc in November to 16.28pc.

The interest charged during the month was the highest average rate since September 2006, and considerably higher than the 15.58pc seen in December 2008.

Rates for people borrowing £10,000 through personal loans remained at 11.08pc, up from 9.3pc a year earlier and the highest level since August 2002.

Interest charged on a £5,000 loan also rose by more than 1pc during the year, climbing from 12.08pc to 13.38pc, while average overdraft rates rose from 18.04pc to 18.96pc.

The figures contained little cheer for savers, with the average rate paid on a branch-based instant access account remaining close to its recent record low at 0.17pc, while interest on notice accounts dropped by 0.03pc to 0.31pc.

Returns paid on fixed-rate bonds, currently the most competitive area of the savings market, fell for the fourth month in a row, dropping to 2.51pc, down from a recent peak of 3.05pc in August last year.

Christmas takes three months to pay off on average

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Tue, 12 Jan 2010 14:07:00 +0000

Britons are taking twice as long to repay their Christmas debts having spent an average of £435 on presents than a decade ago.

Credit card holders are taking an average of 90 days to pay off the debt they built up over Christmas, more than a month longer than a decade ago, according to the findings by the over 50s group Saga.

Paul Green, a spokesman for Saga Group, said: “It is a shocking indictment of the nation’s economy that so many people are left struggling to cope with so much debt.”

Credit card holders took 33 days less to pay off their debts, or just 57 days in 1999, it said.

Younger people are less debt savvy with one in five under 50s saying they were still paying off debts incurred from Christmas 2008. But those over 50 are much wiser users of credit with a third of card holders planning to clear their balance immediately.

The reliance on credit cards to cover the costs of Christmas comes after savers saw their rates of return plummet last year. It means almost all higher rate taxpayers now miss out on a return on their savings once tax and inflation is taken into account.

Just 13 per cent of people dipped into their savings to help fund Christmas last year, compared to 31 per cent 10 years ago, Saga said.

Sub prime lender may be about to re enter loans market

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Mon, 11 Jan 2010 13:14:00 +0000

Sub prime lender Paragon announced last week that the buy-to-let lender was getting closer to starting new lending.

Rumour has it that management at the group met with bankers and lawyers last week to discuss the resumption of lending.

The company said last November that any improvements in funding markets would encourage it to look more confidently at reinstating its funding programme to support new lending.

Paragon was forced to stop new lending in early 2008 because of higher funding costs amid the financial crisis. The group trades at a big discount to its net asset value, but usually trades at a premium when lending.

Bank of England freeze on UK interest rates continues

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Fri, 08 Jan 2010 18:20:00 +0000

UK interest rates have been left at 0.5% following the Bank of England's latest meeting.

The cost of borrowing has been at a record low since March 2009 and economists do not expect the central bank to raise rates in the near term.

The Bank's Monetary Policy Committee (MPC) also maintained the quantitative easing (QE), or asset buying, programme at £200bn.

The UK is thought to have exited recession in the last quarter of 2009.

The MPC said it expected its QE programme to take another month to complete and that the scale of the programme would be kept under review.

Manufacturers said they supported the Bank's decision. The recovery is now underway, but its strength remains in doubt.

UK loans interest rates could rise as early as March

noreply@blogger.com (Dr Search- Principal Consultant at the Search Clinic) — Thu, 07 Jan 2010 18:11:00 +0000

UK loans interest rates could start to rise in two months' time, according to one economist.

Signs of an economic recovery and sharply rising inflation could force the Bank of England's monetary policy committee (MPC) to consider raising rates early this year, an analysis by Henderson New Star indicated.

The company's "MPC-ometer" – a statistical tool for forecasting interest rate decisions based on the latest economic and financial indicators – predicts that the MPC will shift to a "tightening bias" in early 2010.

"With preliminary fourth-quarter GDP [economic growth] figures released in late January likely to confirm a recovery, and inflation rising sharply, the model suggests that Bank Rate could be increased as early as March," Henderson said.

The MPC-ometer has a good record of predicting the Bank's decisions on interest rates. It has correctly signalled the month and direction of 12 out of 13 rate movements over the past two and a half years, two more than the mean economists' forecast from the monthly Reuters poll, the fund manager said.

Simon Ward, Henderson's chief economist, said: "Monetary policy must remain loose to support the recovery but the current emergency level of Bank Rate is no longer warranted and poses a risk to achieving the inflation target.

"The MPC is likely to prepare markets for policy reversal in the February Inflation Report and follow through with a rate increase in the spring, unless economic or financial indicators take a sudden turn for the worse."

Mr Ward first warned in September last year that rates could start to rise sharply in early 2010. He said then: "Given the historically low starting level [of interest rates], rises in Bank Rate, when they begin, could be larger than in the initial stages of prior cycles."