The Farepak debacle is a story that simply won't go away, especially in the run up to Christmas.
The rival Christmas savings specialist Park Group Plc, which now that Farepak has collapsed is the UK's largest Christmas savings club, is claiming that they could have saved Farepak from collapse.
Managing Director, Chris Houghton, is quoted as saying:
"We made four (approaches) in 18 months. All at different times with different prices. We felt we'd made full offers for the business, and for some reason they did not want to take it."
Adding:
"We were bending over backwards to try to avoid the situation we've got now, but it ended up going into administration before we were able to get it done."
However, this claim is disputed; a spokesman for HBOS, bankers to Farepak's parent company European Home Retail (EHR) Plc, are claiming that EHR received no serious offers for the business.
Quote:
"The truth is that no realistic, viable deal was ever tabled.
If it had, EHR is a listed company it would have to be a matter of public record."
All very well, but none of this helps the victims of Farepak's collapse.
Thursday, December 21, 2006
Wednesday, December 20, 2006
The Farepak Debacle II
A very small measure of good news has been delivered to the hapless victims of the Farepak collapse. Roy Martin QC, one of Scotland's leading lawyers, is to represent Farepak victims for free in their fight to recover their money.
Roy Martin QC is dean of the Faculty of Advocates, and has agreed to waive his £5K per day fee to take up the case of the Farepak victims.
He will meet with campaigner Louise McDade, of the Farepak Victims Committee, to see if Farepak's victims have any grounds for legal action.
Mr Martin will examine the case on behalf of the 150,000 victims across the UK who lost £45M when Farepak's parent company, European Home Retail, went bust in October.
In other news The Office of Fair Trading and the Financial Services Authority are considering whether to introduce new regulations for the industry after the Farepak collapse, I would venture to suggest that this seems to be a tad late for the Farepak victims.
Meanwhile Park Group, the largest Christmas savings club in the UK, has unveiled measures to ring-fence £210M of savers' cash; in an attempt to maintain confidence following the collapse of Farepak (which was in fact a larger company).
Roy Martin QC is dean of the Faculty of Advocates, and has agreed to waive his £5K per day fee to take up the case of the Farepak victims.
He will meet with campaigner Louise McDade, of the Farepak Victims Committee, to see if Farepak's victims have any grounds for legal action.
Mr Martin will examine the case on behalf of the 150,000 victims across the UK who lost £45M when Farepak's parent company, European Home Retail, went bust in October.
In other news The Office of Fair Trading and the Financial Services Authority are considering whether to introduce new regulations for the industry after the Farepak collapse, I would venture to suggest that this seems to be a tad late for the Farepak victims.
Meanwhile Park Group, the largest Christmas savings club in the UK, has unveiled measures to ring-fence £210M of savers' cash; in an attempt to maintain confidence following the collapse of Farepak (which was in fact a larger company).
Tuesday, December 19, 2006
The Farepak Debacle
The hapless victims of the Farepak collapse have had their hopes dashed of a pre Christmas settlement of the monies owed to them. Mr Justice Mann, a High Court judge, said yesterday that there were too many issues that were not fully resolved for him to be able to agree to a distribution of about £1M.
The £1M being the figure suggested by the administrators of the collapsed saving club company.
Mr Justice Mann said:
"It will doubtless seem to some that the points which currently seem to stand in the way . . . are technical and unmeritorious... They are real points, I fear, and they arise out of the way that this company conducted its business. They must be disposed of properly and on the basis of law, not purely on the basis of sympathy and Christmas."
The contentious point is the fact that money was paid into Farepak, between October 11 and October 13. The directors had internally decided to cease trading on 11 October. However, the company was not formally put into administration until October 13.
To add to the complexity of the case is the fact that people paid monies to around 26,000 agents, who would in turn would pass the money to the company at a later date.
Overall it is estimated that Farepak customers, many of whom are low income families, have lost around £40M.
In other Farepak news, PricewaterhouseCoopers have decided to go ahead with creditors' meetings for EHR (the parent company of Farepak) despite concerns that they will be swamped by Farepak customers.
PwC's meetings are not expected before Christmas.
As if to add to the misery of the Farepak customers, it is also reported that loan sharks are now targeting them; offering them financially suicidal loans.
The £1M being the figure suggested by the administrators of the collapsed saving club company.
Mr Justice Mann said:
"It will doubtless seem to some that the points which currently seem to stand in the way . . . are technical and unmeritorious... They are real points, I fear, and they arise out of the way that this company conducted its business. They must be disposed of properly and on the basis of law, not purely on the basis of sympathy and Christmas."
The contentious point is the fact that money was paid into Farepak, between October 11 and October 13. The directors had internally decided to cease trading on 11 October. However, the company was not formally put into administration until October 13.
To add to the complexity of the case is the fact that people paid monies to around 26,000 agents, who would in turn would pass the money to the company at a later date.
Overall it is estimated that Farepak customers, many of whom are low income families, have lost around £40M.
In other Farepak news, PricewaterhouseCoopers have decided to go ahead with creditors' meetings for EHR (the parent company of Farepak) despite concerns that they will be swamped by Farepak customers.
PwC's meetings are not expected before Christmas.
As if to add to the misery of the Farepak customers, it is also reported that loan sharks are now targeting them; offering them financially suicidal loans.
Monday, December 18, 2006
Avoidance vs Evasion
Gordon Brown and the Labour government are allowing their natural prejudice against those that earn above the norm to override one of the fundamental principles of taxation. Namely that tax evasion is illegal, but tax avoidance is perfectly acceptable.
Simply put, tax evasion is where an individual or company does not declare/willfully understates income with the express intention of defrauding the tax collector. Tax avoidance is where an individual or company legitimately uses the tax rules to reduce their tax burden, eg by making the most of their personal allowances.
The tax lobby group, the Tax Justice Network, has noted that 41% of all new tax legislation is targeted at blocking tax avoidance. The group has issued a report that looks at the purpose for enacting every section and schedule of all 1503 pages of tax legislation in the Finance Acts, passed in the period 2004 to 2006.
It notes that only 48 pages deal with routine issues such as tax rates, 841 were the result of government-driven initiatives and 614 were anti-avoidance measures.
An absurd waste to time and resources, which of course spawns an entire industry tasked with outhinking the tax collector.
Unfortunately the Tax Justice Network misses the point of their research, and lays the blame on the hapless taxpayers,
Richard Lupson-Darnell, who conducted the research, said:
"The tax avoidance industry and tax advisers in general are constantly complaining about the volume of legislation they have to contend with. However, this research shows that they and their clients have to take a lot of the responsibility themselves."
Mr Lupson-Darbnell is wrong, all Chancellor Brown has to do the clamp down on this industry (and the resources wasted by "aggressive avoidance") is to simplify the tax system and to publicly state and accept that tax avoidance is perfectly legitimate.
The trouble is that Brown and the Labour party are saddled with ideological baggage that makes this all but impossible.
Simply put, tax evasion is where an individual or company does not declare/willfully understates income with the express intention of defrauding the tax collector. Tax avoidance is where an individual or company legitimately uses the tax rules to reduce their tax burden, eg by making the most of their personal allowances.
The tax lobby group, the Tax Justice Network, has noted that 41% of all new tax legislation is targeted at blocking tax avoidance. The group has issued a report that looks at the purpose for enacting every section and schedule of all 1503 pages of tax legislation in the Finance Acts, passed in the period 2004 to 2006.
It notes that only 48 pages deal with routine issues such as tax rates, 841 were the result of government-driven initiatives and 614 were anti-avoidance measures.
An absurd waste to time and resources, which of course spawns an entire industry tasked with outhinking the tax collector.
Unfortunately the Tax Justice Network misses the point of their research, and lays the blame on the hapless taxpayers,
Richard Lupson-Darnell, who conducted the research, said:
"The tax avoidance industry and tax advisers in general are constantly complaining about the volume of legislation they have to contend with. However, this research shows that they and their clients have to take a lot of the responsibility themselves."
Mr Lupson-Darbnell is wrong, all Chancellor Brown has to do the clamp down on this industry (and the resources wasted by "aggressive avoidance") is to simplify the tax system and to publicly state and accept that tax avoidance is perfectly legitimate.
The trouble is that Brown and the Labour party are saddled with ideological baggage that makes this all but impossible.
Friday, December 15, 2006
It's The Money Stupid
Buried beneath the media hype over the report into Princess Diana's death, was news that the Serious Fraud Office (SFO) has decided to drop its investigation into BAE Systems over the Al-Yamamah deal.
The government intervened in this long running investigation, and proclaimed that "national and international security" took precedence.
The probe, which focused on alleged slush funds for senior Saudis, had caused a major diplomatic row and threatened billions of pounds worth of British arms trade with Saudi Arabia.
The SFO said:
"This decision has been taken following representations that have been made both to the attorney general and the director of the SFO concerning the need to safeguard national and international security
It has been necessary to balance the need to maintain the rule of law against the wider public interest. No weight has been given to commercial interests or to the national economic interest."
Despite further assurances that this was a "national security matter" from the Prime Minister, who had earlier been interviewed by police in the cash for honours scandal (the first serving prime minister to ever be interviewed by police), cynics are of the view that economic considerations played a very large part in the ditching of this investigation.
Britain's reputation for financial probity is easy to squander, but will be very hard to earn back.
The government intervened in this long running investigation, and proclaimed that "national and international security" took precedence.
The probe, which focused on alleged slush funds for senior Saudis, had caused a major diplomatic row and threatened billions of pounds worth of British arms trade with Saudi Arabia.
The SFO said:
"This decision has been taken following representations that have been made both to the attorney general and the director of the SFO concerning the need to safeguard national and international security
It has been necessary to balance the need to maintain the rule of law against the wider public interest. No weight has been given to commercial interests or to the national economic interest."
Despite further assurances that this was a "national security matter" from the Prime Minister, who had earlier been interviewed by police in the cash for honours scandal (the first serving prime minister to ever be interviewed by police), cynics are of the view that economic considerations played a very large part in the ditching of this investigation.
Britain's reputation for financial probity is easy to squander, but will be very hard to earn back.
FSA Let Lenders Off The Hook
The Financial Services Authority (FSA) has given interest only mortgage lenders an early Christmas present this year, by concluding that consumers who take out these products generally have a reasonable understanding of the risks involved.
Given the level of indebtedness of the average British household, I wonder how realistic this view really is?
However, the FSA attempted to show some muscle by noting (or rather expressing a wish) that lenders should continue to develop and implement best practice strategies to ensure customers are sold the mortgage that is best for them, and that they remain aware of the risks.
Just like they did with endowment mortgages?
Interest only mortgages are now very popular in the UK. This is mainly due to the fact that people want to avoid paying off their debts, and that the housing market is now at an all time high.
By the end of Q2 2006 interest only mortgages accounted for 25% of the total mortgage market.
Unfortunately many borrowers take them out without specifying a repayment vehicle, the lenders choose to remain in blissful ignorance as to how the debt will be rapid.
Why?
Given that the average mortgage is for 25-30 years or more, many lenders will be secure in the knowledge that if disaster strikes at some unspecified date in the future, they won't be around to pick up the pieces.
The FSA last year put interest only mortgages at the top of its list of "emerging retail risks." However, its latest announcement indicates that it has backtracked.
That being said, the FSA note that 10% of consumers taking out interest only mortgages have either no idea or at best only a rough idea of how they plan to repay the loan they have taken out.
I believe that this is a recipe for disaster, akin to the endowment mis-selling scandal.
Given the level of indebtedness of the average British household, I wonder how realistic this view really is?
However, the FSA attempted to show some muscle by noting (or rather expressing a wish) that lenders should continue to develop and implement best practice strategies to ensure customers are sold the mortgage that is best for them, and that they remain aware of the risks.
Just like they did with endowment mortgages?
Interest only mortgages are now very popular in the UK. This is mainly due to the fact that people want to avoid paying off their debts, and that the housing market is now at an all time high.
By the end of Q2 2006 interest only mortgages accounted for 25% of the total mortgage market.
Unfortunately many borrowers take them out without specifying a repayment vehicle, the lenders choose to remain in blissful ignorance as to how the debt will be rapid.
Why?
Given that the average mortgage is for 25-30 years or more, many lenders will be secure in the knowledge that if disaster strikes at some unspecified date in the future, they won't be around to pick up the pieces.
The FSA last year put interest only mortgages at the top of its list of "emerging retail risks." However, its latest announcement indicates that it has backtracked.
That being said, the FSA note that 10% of consumers taking out interest only mortgages have either no idea or at best only a rough idea of how they plan to repay the loan they have taken out.
I believe that this is a recipe for disaster, akin to the endowment mis-selling scandal.
Thursday, December 14, 2006
Bonus Time
In the run up to Christmas, many people's credit cards are maxed out as they scrape their resources together to fund the feast of indulgence and revelry, spare a thought for the poor souls in the Square Mile.
It is now bonus season, where the select few can reap mind boggling sums on top of their annual salaries.
The Goldman Sachs bonus is reported to be an average of over £300K for every employee. This is nothing compared to some, figures in excess of £1M are paid to the real high flyers in the City.
The annual bonus round this year is expected to yield a bumper harvest. This in turn is expected to further stoke the housing bubble of London's over-stretched property market.
The question is, are these bonuses sustainable or justified?
It is now bonus season, where the select few can reap mind boggling sums on top of their annual salaries.
The Goldman Sachs bonus is reported to be an average of over £300K for every employee. This is nothing compared to some, figures in excess of £1M are paid to the real high flyers in the City.
The annual bonus round this year is expected to yield a bumper harvest. This in turn is expected to further stoke the housing bubble of London's over-stretched property market.
The question is, are these bonuses sustainable or justified?
Wednesday, December 13, 2006
Bank Robbery
Those of you who are fed up with being on the receiving end of extortionate penalty charges levied by banks and credit card companies, may be interested in the following.
In 2005 the top six High Street banks in the UK made an estimated £4.5BN from penalty charges. These charges are imposed by the banks when the account holder actions unauthorised overdrafts, bounced cheques and clears Direct Debits when there are insufficient funds in the account.
It seems that, according to Stephen Hone, these charges are in fact illegal. He argues that, under the Unfair Terms in Consumer Contracts Regulations (1999), all penalty charges have to truly reflect the cost of administering them.
They are not permitted to be a profit making enterprise for any business. He believes if a penalty charge is higher than its administrative cost, it is illegal.
Mr Hone managed to successfully claim back £840 in bank charges from Abbey. The BBC then asked a few other people to try the same. To see how they did, visit the BBC site.
The BBC have even set up a set by step guide, with pro forma letters, helping people to claim their charges back. To view the guide, visit Bank Robbers.
However, I would caution against undue and exuberant optimism, the banks will not take a mass "reclaim of charges" lying down. They are already arguing that the "penalties" are not "penalties", but "service charges"; this would, in the banks' opinion, exempt them from the Unfair Terms in Consumer Contracts Regulations.
I would also note that the banks may decide to become even more disagreeable, and simply stop honouring cheques and direct debits that push people into the red.
Remember, the banks are here to make money; they are not a charity.
In 2005 the top six High Street banks in the UK made an estimated £4.5BN from penalty charges. These charges are imposed by the banks when the account holder actions unauthorised overdrafts, bounced cheques and clears Direct Debits when there are insufficient funds in the account.
It seems that, according to Stephen Hone, these charges are in fact illegal. He argues that, under the Unfair Terms in Consumer Contracts Regulations (1999), all penalty charges have to truly reflect the cost of administering them.
They are not permitted to be a profit making enterprise for any business. He believes if a penalty charge is higher than its administrative cost, it is illegal.
Mr Hone managed to successfully claim back £840 in bank charges from Abbey. The BBC then asked a few other people to try the same. To see how they did, visit the BBC site.
The BBC have even set up a set by step guide, with pro forma letters, helping people to claim their charges back. To view the guide, visit Bank Robbers.
However, I would caution against undue and exuberant optimism, the banks will not take a mass "reclaim of charges" lying down. They are already arguing that the "penalties" are not "penalties", but "service charges"; this would, in the banks' opinion, exempt them from the Unfair Terms in Consumer Contracts Regulations.
I would also note that the banks may decide to become even more disagreeable, and simply stop honouring cheques and direct debits that push people into the red.
Remember, the banks are here to make money; they are not a charity.
Tuesday, December 12, 2006
Extra Endowment Compensation Won
The Financial Services Authority (FSA) claims that due to its pressure, life assurance companies and others involved in the most notorious financial scandal in recent British history, have been forced to pay compensation to over 100,000 customers whose endowment mis-selling complaints had previously been rejected.
The FSA claims that due to its pressure, 75% of the rejected claims have so far been decided in favour of the customers.
This represents around an extra £120m in compensation.
Vernon Everitt from the FSA gave warning to the financial services industry that the FSA would be keeping a very close eye on how the firms were operating.
Quote:
"It is encouraging that firms have improved the speed and quality of how they handle complaints.
News of a potential shortfall is a major worry for consumers and firms owe it to them to deal with their complaints quickly and fairly.
They need to pay particular attention to helping people deal with shortfalls when policies mature."
Around 1.8 million people have received compensation for mis-sold underperforming useless endowment products, totalling £2.7BN.
The FSA should be wary of indulging in too much self congratulations. Millions of people are still facing a shortfall on their endowment policy, with little idea of how they are going to cover their mortgage debt.
The life assurance industry could put a stop to this chaos now, by agreeing to underwrite these useless underperforming products. Instead they are more than happy to pass the buck to others.
Source www.endowmentdiary.com
The FSA claims that due to its pressure, 75% of the rejected claims have so far been decided in favour of the customers.
This represents around an extra £120m in compensation.
Vernon Everitt from the FSA gave warning to the financial services industry that the FSA would be keeping a very close eye on how the firms were operating.
Quote:
"It is encouraging that firms have improved the speed and quality of how they handle complaints.
News of a potential shortfall is a major worry for consumers and firms owe it to them to deal with their complaints quickly and fairly.
They need to pay particular attention to helping people deal with shortfalls when policies mature."
Around 1.8 million people have received compensation for mis-sold underperforming useless endowment products, totalling £2.7BN.
The FSA should be wary of indulging in too much self congratulations. Millions of people are still facing a shortfall on their endowment policy, with little idea of how they are going to cover their mortgage debt.
The life assurance industry could put a stop to this chaos now, by agreeing to underwrite these useless underperforming products. Instead they are more than happy to pass the buck to others.
Source www.endowmentdiary.com
Monday, December 11, 2006
Pru Rejects Egg Bid
Prudential has rejected the bid approach from Citigroup for its online bank, Egg.
Citigroup had offered £950M for Egg. However, the Prudential said that it remains committed to integrating Egg with the rest of its operations.
The Prudential (Pru) had tried before to sell Egg. However, that attempt failed and Jonathan Bloomer CEO was ousted for that failure.
Egg has made losses in the first 6 months of 2006 of £40M, and it is expected to report a loss in the second 6 months as well.
Prudential said:
"It was clear that it was speculative and conditional, and not in our shareholders' interests to pursue further. Our focus remains on our continuing review of the UK business and completing the integration of Egg."
We shall see.
Citigroup had offered £950M for Egg. However, the Prudential said that it remains committed to integrating Egg with the rest of its operations.
The Prudential (Pru) had tried before to sell Egg. However, that attempt failed and Jonathan Bloomer CEO was ousted for that failure.
Egg has made losses in the first 6 months of 2006 of £40M, and it is expected to report a loss in the second 6 months as well.
Prudential said:
"It was clear that it was speculative and conditional, and not in our shareholders' interests to pursue further. Our focus remains on our continuing review of the UK business and completing the integration of Egg."
We shall see.
Friday, December 08, 2006
Brown Screws Pensioners Again
Gordon Brown, in his pre budget report, has dropped a bombshell on tens of thousands of people who had hoped to bequeath part of their pension to their relatives.
Brown now intends to take over 80% of the money inherited from personal pensions for himself.
Needless to say, Chancellor Brown is facing a severe backlash as the pensions and insurance industry counter attack this removal of people's freedom over their pensions.
The tragic irony of this loss of freedom, is that Brown had only introduced it back in April 2006.
This shameful volte face indicates that either Brown is incompetent, or the UK's financial situation is worse than he is letting on.
Fergus Lyons, commercial director at AJ Bell, said:
"Previously you could pass on your pension fund to heirs.
Now you've got to give it to an insurance company or you've got to give it to Gordon Brown. I reckon this will be a major switch-off for future pension savers."
The new rules, introduced in April 2006, allowed those who were over 75 to pass on their entire pension fund to their family, subject only to inheritance tax.
Brown has now added a new tax on death of "up to 70%" which will be levied on these funds.
As ever, despite exhorting people to save for old age and to be independent from the state, Brown and the Labour Party do their best to wreck the savings industry and make people reliant on the state.
Brown now intends to take over 80% of the money inherited from personal pensions for himself.
Needless to say, Chancellor Brown is facing a severe backlash as the pensions and insurance industry counter attack this removal of people's freedom over their pensions.
The tragic irony of this loss of freedom, is that Brown had only introduced it back in April 2006.
This shameful volte face indicates that either Brown is incompetent, or the UK's financial situation is worse than he is letting on.
Fergus Lyons, commercial director at AJ Bell, said:
"Previously you could pass on your pension fund to heirs.
Now you've got to give it to an insurance company or you've got to give it to Gordon Brown. I reckon this will be a major switch-off for future pension savers."
The new rules, introduced in April 2006, allowed those who were over 75 to pass on their entire pension fund to their family, subject only to inheritance tax.
Brown has now added a new tax on death of "up to 70%" which will be levied on these funds.
As ever, despite exhorting people to save for old age and to be independent from the state, Brown and the Labour Party do their best to wreck the savings industry and make people reliant on the state.
Thursday, December 07, 2006
Foreign Banks Offer The Best Deals
Analysis prepared by moneysupermarket.com shows that seven foreign banks in the UK market offer savers interest rates of over 5.2%, with a further two offering rates in excess of 4.75%.
Stuart Glendinning, the managing director of the comparison website, said:
"This is a foreign invasion everyone with money to save can welcome.
These new banks offer savers more choice, higher rates and also put pressure on the existing providers to raise their rates. The only losers are the UK banks and building societies."
India's ICICI Bank and Landsbanki from Iceland both offer 5.45%.
Yet another example where the British financial services industry has been found to be wanting. The message here is clear, adapt and innovate or die.
Stuart Glendinning, the managing director of the comparison website, said:
"This is a foreign invasion everyone with money to save can welcome.
These new banks offer savers more choice, higher rates and also put pressure on the existing providers to raise their rates. The only losers are the UK banks and building societies."
India's ICICI Bank and Landsbanki from Iceland both offer 5.45%.
Yet another example where the British financial services industry has been found to be wanting. The message here is clear, adapt and innovate or die.
Wednesday, December 06, 2006
Financial Institutions Covering Up Fraud
As if the reputation of the British financial services industry was not already bad enough, banks and other financial institutions have found another way to drag their names even deeper through the mud.
It seems that they are deliberately failing to report incidents of online fraud to the police. Ironically they are covering up the incidents of fraud, in the mistaken belief that this will enhance their reputations.
Nothing could be further from the truth.
Metropolitan Police officer, Detective Superintendent Russell Day, told the all-party parliamentary group on identity fraud, that banks were deliberately covering up attacks on their IT systems.
Det Supt Day, who is in the Met's economic and e-crime unit, told MPs that one of the biggest threats was posed by "botnets". Botnets infect domestic pc's, and use them to launch attacks on companies' security systems and send out spam emails.
Quote:
"Financial institutions are not reporting it [these attacks] to law enforcement [agencies], and there could be two reasons for that. It could be one of consumer confidence, but I think that to be honest it is their lack of confidence in law enforcement to deal with it. And they are right. Because of the global nature of this, it doesn't fit in with our priorities."
Nigel Evans, the Tory MP chairing yesterday's hearing, asked Det Supt Day:
"Are you saying that there is fraud taking place in financial institutions and they don't refer it on to the Met because they are either afraid of their credibility being damaged or because they don't think you can cope with it?"
"Yes", was the answer.
Mr Evans said:
"while we all use this figure of £1.7BN, the real figure could be much, much higher. Institutions, for their own reasons, do not report the crime. It makes it much more difficult to give a proper estimate as to how huge the problem is
I assume the financial institutions lose the money and pass on the bill to customers."
It can most certainly be guaranteed that the costs of these crimes are passed on to the hapless consumers, even though the failings are due to the inadequate security measures taken by the banks and the fact that they choose to cover up the problem.
Losses from online banking fraud amounted to £22.5M in the first six months of this year.
The financial services industry will avail themselves nothing, if they continue to cover up the problem. They should get out in front of this thing, come clean with the public about the risks and problems that they face and publicly state how they are going to address the problem.
Failure to do this will further damage their already shoddy reputation, and undermine the public's confidence in e-commerce, on line banking and the financial services industry as a whole.
It seems that they are deliberately failing to report incidents of online fraud to the police. Ironically they are covering up the incidents of fraud, in the mistaken belief that this will enhance their reputations.
Nothing could be further from the truth.
Metropolitan Police officer, Detective Superintendent Russell Day, told the all-party parliamentary group on identity fraud, that banks were deliberately covering up attacks on their IT systems.
Det Supt Day, who is in the Met's economic and e-crime unit, told MPs that one of the biggest threats was posed by "botnets". Botnets infect domestic pc's, and use them to launch attacks on companies' security systems and send out spam emails.
Quote:
"Financial institutions are not reporting it [these attacks] to law enforcement [agencies], and there could be two reasons for that. It could be one of consumer confidence, but I think that to be honest it is their lack of confidence in law enforcement to deal with it. And they are right. Because of the global nature of this, it doesn't fit in with our priorities."
Nigel Evans, the Tory MP chairing yesterday's hearing, asked Det Supt Day:
"Are you saying that there is fraud taking place in financial institutions and they don't refer it on to the Met because they are either afraid of their credibility being damaged or because they don't think you can cope with it?"
"Yes", was the answer.
Mr Evans said:
"while we all use this figure of £1.7BN, the real figure could be much, much higher. Institutions, for their own reasons, do not report the crime. It makes it much more difficult to give a proper estimate as to how huge the problem is
I assume the financial institutions lose the money and pass on the bill to customers."
It can most certainly be guaranteed that the costs of these crimes are passed on to the hapless consumers, even though the failings are due to the inadequate security measures taken by the banks and the fact that they choose to cover up the problem.
Losses from online banking fraud amounted to £22.5M in the first six months of this year.
The financial services industry will avail themselves nothing, if they continue to cover up the problem. They should get out in front of this thing, come clean with the public about the risks and problems that they face and publicly state how they are going to address the problem.
Failure to do this will further damage their already shoddy reputation, and undermine the public's confidence in e-commerce, on line banking and the financial services industry as a whole.
Tuesday, December 05, 2006
The Ghosts of Christmas's Past
Christmas brings with it many problems, it is a time of year when there is great abundance yet "want" is most keenly felt. The average British consumer tries to get around the feeling of "want", by purchasing food and gifts on credit.
Unfortunately the debts incurred in Christmas's past tend to reappear, like Marley's ghost, in Christmas present.
Research conducted by UK financial comparison service, MoneyExpert, has found that over 4.2 million people are still paying back Christmas credit card debt from 2005. UK payments association Apacs has estimated that £11.4 billion will be spent on credit cards this Christmas.
Sean Gardner, chief executive of MoneyExpert.com, said:
"With more than four million of us still paying for last Christmas it is clear that there is a need for many of us to change our financial habits. Getting into debt is fine as long as you have the means to get out of it."
The modern belief in the immediate satiation of wants should be tempered with an appreciation of the old wisdom, that things are best appreciated if you have to wait and save for them.
Unfortunately the debts incurred in Christmas's past tend to reappear, like Marley's ghost, in Christmas present.
Research conducted by UK financial comparison service, MoneyExpert, has found that over 4.2 million people are still paying back Christmas credit card debt from 2005. UK payments association Apacs has estimated that £11.4 billion will be spent on credit cards this Christmas.
Sean Gardner, chief executive of MoneyExpert.com, said:
"With more than four million of us still paying for last Christmas it is clear that there is a need for many of us to change our financial habits. Getting into debt is fine as long as you have the means to get out of it."
The modern belief in the immediate satiation of wants should be tempered with an appreciation of the old wisdom, that things are best appreciated if you have to wait and save for them.
Monday, December 04, 2006
FSA is Failing
Which?, the consumer magazine, has issued a damning indictment on the Financial services Authority (FSA) by saying that five years after its inception it is failing to protect consumers.
Which? says that the FSA "must try harder".
Which? roundly condemns the FSA's lack of action to name and shame those who fail to follow advertising rules, or perform poorly in mystery shopping exercises.
Louise Hanson, head of campaigns at Which?, said:
"The FSA has had a busy five years and yet many of their major challenges in the retail financial area have left consumers exposed.
We believe they have not been open and transparent enough in tackling detriment or in robustly challenging the industry
Which? isn't calling for more legislation or regulation: what we need is better regulation and for the FSA to use its existing powers and tools more flexibly and more imaginatively to ensure proper enforcement and an effective deterrent for industry."
The FSA states that it is legally prevented from naming and shaming firms, without the matter being dealt with by its formal disciplinary process.
Which? says that the FSA "must try harder".
Which? roundly condemns the FSA's lack of action to name and shame those who fail to follow advertising rules, or perform poorly in mystery shopping exercises.
Louise Hanson, head of campaigns at Which?, said:
"The FSA has had a busy five years and yet many of their major challenges in the retail financial area have left consumers exposed.
We believe they have not been open and transparent enough in tackling detriment or in robustly challenging the industry
Which? isn't calling for more legislation or regulation: what we need is better regulation and for the FSA to use its existing powers and tools more flexibly and more imaginatively to ensure proper enforcement and an effective deterrent for industry."
The FSA states that it is legally prevented from naming and shaming firms, without the matter being dealt with by its formal disciplinary process.
Saturday, December 02, 2006
Happy Birthday FSA
The financial Services Authority (FSA), as it celebrates its 5th birthday, has come under a barrage of criticism.
Roy Leighton, chairman of the Financial Services Practitioner Panel (FSPP), has called for a clear-out of "dead wood" in the FSA.
A report by the FSPP said that overall industry satisfaction levels with the FSA had shown little or no improvement in the past two years.
The report calls for personnel changes, and claims that some of the less senior officials had a box-ticking approach and an unhelpful attitude.
Leighton said:
"There is undoubtedly some dead wood there.
They're not able to make the qualitative decisions [necessary in a principles-based regulatory regime] when they have been used to box-ticking."
To add to the FSA's woes, John Gummer MP and chairman of AIFA (the Association of Independent Financial Advisers), also "put the boot in" so to speak.
Gummer was speaking at the annual AIFA dinner on Thursday night. He used his speech to criticise the FSA for unfairly undermining IFAs in a recent press release.
He said that an FSA statement on advertising mortgage promotions in the sub prime sector gave the impression that IFAs mislead the public more than banks or lenders.
Quote:
"When we investigated, we found that the incidence of failure in large scale operations (banks) was twice as high as it was in IFAs and this was not mentioned in the FSA press release."
Adding that the FSA had given the impression that there was "something wrong with IFAs when their research showed the opposite to be true".
Warming to his theme, Gummer went on to accuse the FSA of failing to meet a legislative requirement to consult industry before setting down new rules or guidelines.
He said that the principles-based regulation was a primary cause of this problem and confusion and shirked fundamental guidelines put down by parliament, that "the regulator must be regulated by proper regulation".
Stephen Bland, director of the FSA's Small Firms Division and Retail Intermediary sector leader, said:
"We of course accept that AIFA will have strong views on subjects close to their members' hearts and that they are perfectly entitled to say them. On this occasion, however, we felt that the comments did not display a full understanding of where the FSA is coming from, which is disappointing given the frequent contact we have with them."
Happy Birthday FSA!
Roy Leighton, chairman of the Financial Services Practitioner Panel (FSPP), has called for a clear-out of "dead wood" in the FSA.
A report by the FSPP said that overall industry satisfaction levels with the FSA had shown little or no improvement in the past two years.
The report calls for personnel changes, and claims that some of the less senior officials had a box-ticking approach and an unhelpful attitude.
Leighton said:
"There is undoubtedly some dead wood there.
They're not able to make the qualitative decisions [necessary in a principles-based regulatory regime] when they have been used to box-ticking."
To add to the FSA's woes, John Gummer MP and chairman of AIFA (the Association of Independent Financial Advisers), also "put the boot in" so to speak.
Gummer was speaking at the annual AIFA dinner on Thursday night. He used his speech to criticise the FSA for unfairly undermining IFAs in a recent press release.
He said that an FSA statement on advertising mortgage promotions in the sub prime sector gave the impression that IFAs mislead the public more than banks or lenders.
Quote:
"When we investigated, we found that the incidence of failure in large scale operations (banks) was twice as high as it was in IFAs and this was not mentioned in the FSA press release."
Adding that the FSA had given the impression that there was "something wrong with IFAs when their research showed the opposite to be true".
Warming to his theme, Gummer went on to accuse the FSA of failing to meet a legislative requirement to consult industry before setting down new rules or guidelines.
He said that the principles-based regulation was a primary cause of this problem and confusion and shirked fundamental guidelines put down by parliament, that "the regulator must be regulated by proper regulation".
Stephen Bland, director of the FSA's Small Firms Division and Retail Intermediary sector leader, said:
"We of course accept that AIFA will have strong views on subjects close to their members' hearts and that they are perfectly entitled to say them. On this occasion, however, we felt that the comments did not display a full understanding of where the FSA is coming from, which is disappointing given the frequent contact we have with them."
Happy Birthday FSA!
Friday, December 01, 2006
New Rules For Home Credit
The Competition Commission yesterday unveiled a number of measures, designed to increase competition and lower prices in the home credit market. It did not impose price caps on home credit lenders.
The new measures force lenders to share data on their customers' payment records, and require them to publish their prices on a website so that borrowers can make more informed choices.
Home credit lenders, which include Provident Financial PLC and Cattles PLC, will also be obliged to give rebates to customers who repay their loans early.
However, the competition watchdog said that it had no plans to impose a ceiling on the repayment rates that lenders can charge. It argued that a rate cap might make home credit unavailable to the most vulnerable customers.
Competition Commission chairman, Peter Freeman, said:
"These measures are designed to open up the market to greater competition so that customers will get more choice and lower prices."
Provident Financial said that it would "work constructively" with the Commission to implement the new measures.
Quote:
"Provident Financial is pleased that the CC's own research confirms high levels of satisfaction among customers who find home credit products well suited to their needs."
Damon Gibbons, chair of campaign group Debt On Our Doorstep, said:
"The measures proposed in this report will probably take a further 18 months to impact on the price of credit.
In that time, lenders will have made another £100M in excess profits. Low income borrowers will wonder why it is that the industry isn't being forced to pay that amount as a levy to fund affordable credit provision such as credit unions, or why interest rates aren't being reduced through a cap immediately to ensure they get a fair price.."
The financial services industry is much like a balloon filled with water, when it is squeezed by rules and regulations in one direction it produces a "swelling" of new charges and fees in another.
The new measures force lenders to share data on their customers' payment records, and require them to publish their prices on a website so that borrowers can make more informed choices.
Home credit lenders, which include Provident Financial PLC and Cattles PLC, will also be obliged to give rebates to customers who repay their loans early.
However, the competition watchdog said that it had no plans to impose a ceiling on the repayment rates that lenders can charge. It argued that a rate cap might make home credit unavailable to the most vulnerable customers.
Competition Commission chairman, Peter Freeman, said:
"These measures are designed to open up the market to greater competition so that customers will get more choice and lower prices."
Provident Financial said that it would "work constructively" with the Commission to implement the new measures.
Quote:
"Provident Financial is pleased that the CC's own research confirms high levels of satisfaction among customers who find home credit products well suited to their needs."
Damon Gibbons, chair of campaign group Debt On Our Doorstep, said:
"The measures proposed in this report will probably take a further 18 months to impact on the price of credit.
In that time, lenders will have made another £100M in excess profits. Low income borrowers will wonder why it is that the industry isn't being forced to pay that amount as a levy to fund affordable credit provision such as credit unions, or why interest rates aren't being reduced through a cap immediately to ensure they get a fair price.."
The financial services industry is much like a balloon filled with water, when it is squeezed by rules and regulations in one direction it produces a "swelling" of new charges and fees in another.
Wednesday, November 29, 2006
Barclaycard To Write Off £1.5BN
Britain's burgeoning debt crisis was highlighted by Barclaycard yesterday, when it announced that it expected its customers to default on £1.5BN of debt this year.
Seemingly the blame is being placed by Barclays (the parent company) on the rising number of personal insolvencies, eg individual voluntary arrangements (IVAs). A cynic might argue that had the bank been a little more careful with whom it lent money to, then it might not have found itself in this mess.
Barclaycard's write-off rate for bad debt is now a staggering £26.8M a week.
Barclaycard has 11.2M cardholders, and has outstanding at any one time around £25BN.
The write off represents a 37% rise in Barclaycard bad debts, compared with the previous year.
A Citizens Advice spokeswoman said:
"It doesn't surprise us, because all banks are reporting increasing levels of debt. It does, however, mean that lenders should always make sure that people are able to repay the money before they agree to loans. At the same time, people should be wary of borrowing more than they can realistically afford."
Barclays has tightened up its lending criteria in recent months. It now rejects 57% of credit card applicants.
Shutting the stable door maybe?
Seemingly the blame is being placed by Barclays (the parent company) on the rising number of personal insolvencies, eg individual voluntary arrangements (IVAs). A cynic might argue that had the bank been a little more careful with whom it lent money to, then it might not have found itself in this mess.
Barclaycard's write-off rate for bad debt is now a staggering £26.8M a week.
Barclaycard has 11.2M cardholders, and has outstanding at any one time around £25BN.
The write off represents a 37% rise in Barclaycard bad debts, compared with the previous year.
A Citizens Advice spokeswoman said:
"It doesn't surprise us, because all banks are reporting increasing levels of debt. It does, however, mean that lenders should always make sure that people are able to repay the money before they agree to loans. At the same time, people should be wary of borrowing more than they can realistically afford."
Barclays has tightened up its lending criteria in recent months. It now rejects 57% of credit card applicants.
Shutting the stable door maybe?
Tuesday, November 28, 2006
Nationwide Reneges on Mortgage Deal
Nationwide has announced that it is to scrap its highly publicised guarantee that new and existing customers will receive the mortgage same deals.
As from December 1st, existing Nationwide customers who want to change deals, borrow more or remortgage will be penalised by higher rates.
Mortgage brokers claim that Nationwide had reneged on its principles.
In the recent Nationwide advertising campaign (Nationwide's slogan is "proud to be different"), the society promotes its promise to offer all customers the same rates.
The advertisements also criticise other lenders that offer better deals to new clients, but fail to reward the loyalty of existing customers.
Melanie Bien, of Savills Private Finance, the mortgage broker, said:
"This is a real shame. Nationwide made a principled stand, promising existing and new customers that no one would receive preferential rates. This guarantee no longer stands."
The new policy favours first time buyers and people moving house.
On a two-year tracker deal, remortgagers on a rate of 4.99% will pay £21 a month more than homebuyers, who will receive a rate of 4.73%.
Ms Bien added:
"Translated, Nationwide's change of policy means it can now offer more competitive rates for first-time buyers by charging others a higher rate."
Northern Rock and Alliance & Leicester still offer the same rates to all customers.
Stuart Bernau, an executive director of Nationwide, said:
"By making these changes, we will achieve greater flexibility and will be better placed to offer all our mortgage customers what they want."
Ray Boulger, technical director at John Charcol, said:
"This U-turn hurts the building society movement because Nationwide has been the most vocal in making claims about the benefits of mutuality. These claims now look rather hollow.
A large part of Nationwide's advertising was based around how good it was that they were a mutual. Now it seems that they are doing the same as what they criticise others for doing. It is hypocritical."
Adding:
"Nationwide claimed to pride itself on not discriminating against loyal customers. There can't be much pride left after today."
Money is the prime motivator here, customer care comes second.
As from December 1st, existing Nationwide customers who want to change deals, borrow more or remortgage will be penalised by higher rates.
Mortgage brokers claim that Nationwide had reneged on its principles.
In the recent Nationwide advertising campaign (Nationwide's slogan is "proud to be different"), the society promotes its promise to offer all customers the same rates.
The advertisements also criticise other lenders that offer better deals to new clients, but fail to reward the loyalty of existing customers.
Melanie Bien, of Savills Private Finance, the mortgage broker, said:
"This is a real shame. Nationwide made a principled stand, promising existing and new customers that no one would receive preferential rates. This guarantee no longer stands."
The new policy favours first time buyers and people moving house.
On a two-year tracker deal, remortgagers on a rate of 4.99% will pay £21 a month more than homebuyers, who will receive a rate of 4.73%.
Ms Bien added:
"Translated, Nationwide's change of policy means it can now offer more competitive rates for first-time buyers by charging others a higher rate."
Northern Rock and Alliance & Leicester still offer the same rates to all customers.
Stuart Bernau, an executive director of Nationwide, said:
"By making these changes, we will achieve greater flexibility and will be better placed to offer all our mortgage customers what they want."
Ray Boulger, technical director at John Charcol, said:
"This U-turn hurts the building society movement because Nationwide has been the most vocal in making claims about the benefits of mutuality. These claims now look rather hollow.
A large part of Nationwide's advertising was based around how good it was that they were a mutual. Now it seems that they are doing the same as what they criticise others for doing. It is hypocritical."
Adding:
"Nationwide claimed to pride itself on not discriminating against loyal customers. There can't be much pride left after today."
Money is the prime motivator here, customer care comes second.
Monday, November 27, 2006
The British Bankers' Association have reported that home purchase loans have reached the highest level in four months in October.
Lenders have approved 74,997 mortgages for home purchase, an increase from 72,155 in September and 4% higher than a year earlier.
The average value of loans has risen by 11% (in the year to October) to £114K, a total of £18.9BN was lent in October (8% higher than the previous year).
The UK housing market underpins the British economy, and as such any increase in lending is taken by financial pundits as being good news for the economy.
Needless to say, house prices are also rising. Property research group Hometrack report that house prices rose 0.6% in November, pushing the annual rate to the highest since August 2004.
So long as the market keeps rising, then there will be no problems......the question is, can it keep rising?
Lenders have approved 74,997 mortgages for home purchase, an increase from 72,155 in September and 4% higher than a year earlier.
The average value of loans has risen by 11% (in the year to October) to £114K, a total of £18.9BN was lent in October (8% higher than the previous year).
The UK housing market underpins the British economy, and as such any increase in lending is taken by financial pundits as being good news for the economy.
Needless to say, house prices are also rising. Property research group Hometrack report that house prices rose 0.6% in November, pushing the annual rate to the highest since August 2004.
So long as the market keeps rising, then there will be no problems......the question is, can it keep rising?
Friday, November 24, 2006
The Great Travel Insurance Rip Off
As we all know, Britain's financial services industry has something of a poor reputation.
The long suffering British public have, over the past few years, had to endure; the endowment loans mis-selling scandal, unjustifiably high banks charges, extortionate interest rates on unsecured loans and credit card debts and the mis-selling of insurance policies to cover these debts.
It is hardly surprising that the British public are fed up with the financial services industry, and have lost their trust in it. Therefore it should come as no surprise to learn that the Treasury have found yet another area of shameful conduct, that of travel insurance policies.
Travel insurance policies, sold with package holidays, brings in the insurance companies £1BN per annum.
A "nice little earner" by anyones standards!
The Treasury has decided to probe this area after complaints that the policies are over-priced, and contain too many get-out clauses. Travel agents could face regulation by the financial services watchdog, if they are found to be mis-selling insurance policies.
By way of example, over 50% of policies sold don't cover terrorist attacks.
As is usual with the financial services industry, nothing is ever quite what it seems. Stand-alone travel insurance is regulated by the Financial Services Authority (FSA). However, policies sold as a holiday add on are not.
Ed Balls, Treasury Minister, who launched a public consultation yesterday said:
"We need to find out whether travel insurance sold with a holiday is being mis-sold and if we need to educate consumers to consider the cover they want and ensure they are properly informed."
A Which? survey of travel agents found that many policies were mis-sold, with customers not told what policies do and don't cover and not warned that pre-existing medical conditions are excluded.
Which? spokeswoman Emma Bundy said:
"Many policies are sold by travel firms which are not regulated so policyholders have no right of redress."
The common thread to the problems of Britain's financial services industry is that of "mis-selling"; whether it is the mis-selling of endowments, debt insurance, debt or travel insurance.
A cynic might argue that all the banks, insurance companies and other money men want to do is to get their hands on people's money; without giving a damn for the suitablility of the product, or the client profile.
Whilst banks and insurance companies might argue that this is not so, an ever growing number of people in Britain are now taking this to be the case.
The financial services industry needs to learn that a reputation once damaged is very hard to restore. Whilst the money men in the City will be enjoying exceptionally large bonuses this year, they may care to think on that once people finally lose confidence in the system they will stop buying the products. As such, the bonuses in future years will be very spartan indeed.
What goes around, comes around!
The long suffering British public have, over the past few years, had to endure; the endowment loans mis-selling scandal, unjustifiably high banks charges, extortionate interest rates on unsecured loans and credit card debts and the mis-selling of insurance policies to cover these debts.
It is hardly surprising that the British public are fed up with the financial services industry, and have lost their trust in it. Therefore it should come as no surprise to learn that the Treasury have found yet another area of shameful conduct, that of travel insurance policies.
Travel insurance policies, sold with package holidays, brings in the insurance companies £1BN per annum.
A "nice little earner" by anyones standards!
The Treasury has decided to probe this area after complaints that the policies are over-priced, and contain too many get-out clauses. Travel agents could face regulation by the financial services watchdog, if they are found to be mis-selling insurance policies.
By way of example, over 50% of policies sold don't cover terrorist attacks.
As is usual with the financial services industry, nothing is ever quite what it seems. Stand-alone travel insurance is regulated by the Financial Services Authority (FSA). However, policies sold as a holiday add on are not.
Ed Balls, Treasury Minister, who launched a public consultation yesterday said:
"We need to find out whether travel insurance sold with a holiday is being mis-sold and if we need to educate consumers to consider the cover they want and ensure they are properly informed."
A Which? survey of travel agents found that many policies were mis-sold, with customers not told what policies do and don't cover and not warned that pre-existing medical conditions are excluded.
Which? spokeswoman Emma Bundy said:
"Many policies are sold by travel firms which are not regulated so policyholders have no right of redress."
The common thread to the problems of Britain's financial services industry is that of "mis-selling"; whether it is the mis-selling of endowments, debt insurance, debt or travel insurance.
A cynic might argue that all the banks, insurance companies and other money men want to do is to get their hands on people's money; without giving a damn for the suitablility of the product, or the client profile.
Whilst banks and insurance companies might argue that this is not so, an ever growing number of people in Britain are now taking this to be the case.
The financial services industry needs to learn that a reputation once damaged is very hard to restore. Whilst the money men in the City will be enjoying exceptionally large bonuses this year, they may care to think on that once people finally lose confidence in the system they will stop buying the products. As such, the bonuses in future years will be very spartan indeed.
What goes around, comes around!
Thursday, November 23, 2006
The Pensions Time Bomb
The Association of British Insurers (ABI), in its annual State of the Nation's Savings survey, is warning that almost 33% of working adults are not saving for retirement and that another 16% are not saving enough to provide them with an adequate income.
ABI also noted that 25% of employers would consider "levelling down" their current pension contributions, when personal accounts are introduced.
Chris Kenny, director of life and pensions at the ABI, said:
"The broad direction of travel on pension reform is right. Bit there is still a long way to go both to encourage more saving and to get the details of personal accounts right.
In this context, it is even more vital that the Government takes action to ensure that existing private pension provision is allowed to prosper and grow."
However, as I have already noted on this site, given the lousy reputation of the British financial services industry (excessive bank charges, mis-selling of insurance and the endowment loans scandal) it is hardly surprising that people have lost confidence in it and are not saving.
My opinion is shared by others, Doug Taylor, personal finance campaigner at Which?, said:
"It is staggering that the industry responsible for endowment and pension misselling, which so undermined the confidence of the British consumer, is now trying to undermine a Government scheme to protect the interests of the 10 million people who currently have no provision for their retirement.
For the ABI to cast doubt over these landmark pension reforms will do nothing but feed a consumer confidence crisis. We need to move the debate on from points scoring and really focus on how the industry plans to instil trust to encourage consumers to save now for their retirement."
Until the financial services industry smartens up it act, and restores people's confidence in it there will be little that the government and other bodies can do to persuade people to save more.
Quite simply people do no think that there is any point in saving, as they have seen their money wasted on endowment policies, insurance policies and how they are being screwed by the banks and credit card companies.
ABI also noted that 25% of employers would consider "levelling down" their current pension contributions, when personal accounts are introduced.
Chris Kenny, director of life and pensions at the ABI, said:
"The broad direction of travel on pension reform is right. Bit there is still a long way to go both to encourage more saving and to get the details of personal accounts right.
In this context, it is even more vital that the Government takes action to ensure that existing private pension provision is allowed to prosper and grow."
However, as I have already noted on this site, given the lousy reputation of the British financial services industry (excessive bank charges, mis-selling of insurance and the endowment loans scandal) it is hardly surprising that people have lost confidence in it and are not saving.
My opinion is shared by others, Doug Taylor, personal finance campaigner at Which?, said:
"It is staggering that the industry responsible for endowment and pension misselling, which so undermined the confidence of the British consumer, is now trying to undermine a Government scheme to protect the interests of the 10 million people who currently have no provision for their retirement.
For the ABI to cast doubt over these landmark pension reforms will do nothing but feed a consumer confidence crisis. We need to move the debate on from points scoring and really focus on how the industry plans to instil trust to encourage consumers to save now for their retirement."
Until the financial services industry smartens up it act, and restores people's confidence in it there will be little that the government and other bodies can do to persuade people to save more.
Quite simply people do no think that there is any point in saving, as they have seen their money wasted on endowment policies, insurance policies and how they are being screwed by the banks and credit card companies.
Wednesday, November 22, 2006
House Price Slow Down
It seems that finally the long bull run of house prices in the UK may be coming to an end. That at least is the view of a former government economic adviser, David Miles, the Morgan Stanley chief UK economist.
UK house prices have risen more than twice as much as general inflation in the past 10 years.
Mr Miles predicts that the rate of house price inflation will slow down. However, he is cautious about predicting exactly when the prices may fall.
Quote:
"A substantial fall in real house prices is likely at some point in the relatively near future, though it could yet be one or two years away."
Mr Miles issued his warning in a report, entitled "UK Housing: How did we get here".
PricewaterhouseCoopers have also predicted that there is a one-in-three chance of UK house prices falling by 2010.
That being said, past reports of the death of the UK house market have been premature. This year prices have started to accelerate again, and are now running about 8% higher than a year ago.
The main driver behind the price rise is speculation that they will continue to rise, in other words it has become self fulfilling prophecy.
Therefore once the confidence in the system is knocked, we may expect a price slow down or even a collapse.
However, it is unclear as to when this will happen. Prospective home owners should take note in the old saying, "timing is everything".
UK house prices have risen more than twice as much as general inflation in the past 10 years.
Mr Miles predicts that the rate of house price inflation will slow down. However, he is cautious about predicting exactly when the prices may fall.
Quote:
"A substantial fall in real house prices is likely at some point in the relatively near future, though it could yet be one or two years away."
Mr Miles issued his warning in a report, entitled "UK Housing: How did we get here".
PricewaterhouseCoopers have also predicted that there is a one-in-three chance of UK house prices falling by 2010.
That being said, past reports of the death of the UK house market have been premature. This year prices have started to accelerate again, and are now running about 8% higher than a year ago.
The main driver behind the price rise is speculation that they will continue to rise, in other words it has become self fulfilling prophecy.
Therefore once the confidence in the system is knocked, we may expect a price slow down or even a collapse.
However, it is unclear as to when this will happen. Prospective home owners should take note in the old saying, "timing is everything".
Tuesday, November 21, 2006
Lessons in Finance
George Osborne, the Shadow Chancellor, is calling for children to be given lessons in finance and money management.
The lessons would include life relevant areas such as, how to calculate rates of interest and how to balance a budget to prevent levels of debt from worsening.
The lessons are, in the opinion of the Conservatives, necessary in order to address the spiraling level of indebtedness of the British public.
Mr Osborne presented his suggestion during the third "debt summit" held by the Tories this year. The summit was attended by leading figures from the financial services industry, consumer protection bodies and charities.
The Tories have quite a challenge ahead of them, whilst it is true that people should take responsibility for their own finances, they are faced with the aggressive marketing of all manner of financial products. It is not unreasonable to call on the financial services industry, which has sullied its reputation over the last few years (with its appalling response to the endowment mortgage crisis), to act in a responsible manner when lending money.
Citizens Advice has agreed to work with the Tories to help people achieve a better grasp of financial matters.
The Conservatives have also asked the Advertising Standards Authority to investigate whether some companies, encouraging people struggling with debts to sign IVAs, were in breach of its advertising code.
Mr Osborne said:
"Like many consumer groups and banks, I am concerned that people may be being encouraged by unscrupulous IVA companies to commit to IVAs, even where this may not be the right course of action.
And I'm also concerned that companies aren't always properly informing their customers about the fees they charge for arranging an IVA, or about the adverse effects of IVAs on credit ratings."
The trouble that all the politicians face, whatever party they belong to, is that Britain relies on the debt burdened consumer to fuel the economy. Unnerve the consumer too much, and you have a recession. It is a delicate balancing act.
The lessons would include life relevant areas such as, how to calculate rates of interest and how to balance a budget to prevent levels of debt from worsening.
The lessons are, in the opinion of the Conservatives, necessary in order to address the spiraling level of indebtedness of the British public.
Mr Osborne presented his suggestion during the third "debt summit" held by the Tories this year. The summit was attended by leading figures from the financial services industry, consumer protection bodies and charities.
The Tories have quite a challenge ahead of them, whilst it is true that people should take responsibility for their own finances, they are faced with the aggressive marketing of all manner of financial products. It is not unreasonable to call on the financial services industry, which has sullied its reputation over the last few years (with its appalling response to the endowment mortgage crisis), to act in a responsible manner when lending money.
Citizens Advice has agreed to work with the Tories to help people achieve a better grasp of financial matters.
The Conservatives have also asked the Advertising Standards Authority to investigate whether some companies, encouraging people struggling with debts to sign IVAs, were in breach of its advertising code.
Mr Osborne said:
"Like many consumer groups and banks, I am concerned that people may be being encouraged by unscrupulous IVA companies to commit to IVAs, even where this may not be the right course of action.
And I'm also concerned that companies aren't always properly informing their customers about the fees they charge for arranging an IVA, or about the adverse effects of IVAs on credit ratings."
The trouble that all the politicians face, whatever party they belong to, is that Britain relies on the debt burdened consumer to fuel the economy. Unnerve the consumer too much, and you have a recession. It is a delicate balancing act.
Monday, November 20, 2006
Nigerian Scams Costing UK Billions
The Chatham House group has issued a report today, that states that financial crime in the UK stemming from Nigeria involves "billions of pounds".
However, not nearly enough is being done to stop it.
The commonly termed "Nigerian Scams" (419 scams) involve internet scams, credit card fraud and money laundering. All of these, according to Chatham House, are going unchecked by governments in both countries.
The scam usually involves an email/fax offering the naive and gullible a highly attractive but fake financial deal, the scammer then steals money and personal information from the gullible victim.
These scams are costing the UK economy £150m a year, with the average victim losing £31K.
Quote:
"Criminal activity is carried out by a small minority of Nigerians, relative to the size of the country and the number of nationals resident in Britain or visiting it.
But the numbers of people involved are still significant and their successes reflect wider political and logistical shortcomings with the way the British authorities deal with financial crime."
The costs "have almost certainly run into billions of pounds over the past 10 years".
Report author Michael Peel said:
"The scale and scope of Nigeria-related financial crime highlights critical wider failures in the way the British authorities tackle fraud, corruption and money laundering.
Despite important, but limited reforms, criminal networks and corporate bribery still flourish.
This raises questions about how sincere the governments in both countries are in their talk of change, particularly when significant political, commercial or energy interests are at stake."
The report urges law enforcement agencies and the Financial Services Authority to build better links with counterparts in Nigeria, to cooperate in fraud and corruption cases.
As ever, it is also down to the individual to remain forever vigilant.
However, not nearly enough is being done to stop it.
The commonly termed "Nigerian Scams" (419 scams) involve internet scams, credit card fraud and money laundering. All of these, according to Chatham House, are going unchecked by governments in both countries.
The scam usually involves an email/fax offering the naive and gullible a highly attractive but fake financial deal, the scammer then steals money and personal information from the gullible victim.
These scams are costing the UK economy £150m a year, with the average victim losing £31K.
Quote:
"Criminal activity is carried out by a small minority of Nigerians, relative to the size of the country and the number of nationals resident in Britain or visiting it.
But the numbers of people involved are still significant and their successes reflect wider political and logistical shortcomings with the way the British authorities deal with financial crime."
The costs "have almost certainly run into billions of pounds over the past 10 years".
Report author Michael Peel said:
"The scale and scope of Nigeria-related financial crime highlights critical wider failures in the way the British authorities tackle fraud, corruption and money laundering.
Despite important, but limited reforms, criminal networks and corporate bribery still flourish.
This raises questions about how sincere the governments in both countries are in their talk of change, particularly when significant political, commercial or energy interests are at stake."
The report urges law enforcement agencies and the Financial Services Authority to build better links with counterparts in Nigeria, to cooperate in fraud and corruption cases.
As ever, it is also down to the individual to remain forever vigilant.
Thursday, November 16, 2006
UK Government Must Knock Heads Together
The Parliamentary Treasury Committee inquiry into banking services for the poor has noted that the UK government needs to clamp down on illegal money lending, raise competition in home credit markets and improve access to financial advice for millions of poorer people.
John McFall MP, who headed the inquiry, said:
"Many of the financial services that most people take for granted are either not available to many of the most vulnerable in our society or are only available at a premium."
The committee noted that financial advice was not widely available, and that 8 million people earning between £10K and £22K found it difficult to get advice that wasn't linked to commissions and the sales process.
Mr McFall recommended that the Treasury should take the lead in brokering an agreement with the Financial Services Authority and the financial industry, to organise a framework for a national financial advice network.
The committee also stated that it expected the government to take a tougher line against illegal lenders.
McFall said it was for the government to "knock heads together" to ensure that there is progress among lenders in sharing data.
John McFall MP, who headed the inquiry, said:
"Many of the financial services that most people take for granted are either not available to many of the most vulnerable in our society or are only available at a premium."
The committee noted that financial advice was not widely available, and that 8 million people earning between £10K and £22K found it difficult to get advice that wasn't linked to commissions and the sales process.
Mr McFall recommended that the Treasury should take the lead in brokering an agreement with the Financial Services Authority and the financial industry, to organise a framework for a national financial advice network.
The committee also stated that it expected the government to take a tougher line against illegal lenders.
McFall said it was for the government to "knock heads together" to ensure that there is progress among lenders in sharing data.
Wednesday, November 15, 2006
The End of Free Banking
Those of you who already feel that UK banks are making more than enough money, may be a tad "annoyed" to learn that there are plans to make even more money; by charging customers for the privilege of placing their money in a bank account.
The rot has started with First Direct, part of HSBC, which plans to charge £10 per month to customers who run current accounts. Only those who deposit £1,500 a month or who maintain an average balance of £1,500 will escape the fee.
In other words, a large number of their customers will have to pay £120 per year for the "privilege" of holding a First Direct account.
Needless to say, where one bank goes, others will follow.
Alan Duncan, Shadow Trade and Industry Secretary, said:
"This is an irrational basis for charging. This is simply a tax on the lower-paid which will prevent access to bank accounts. I cannot see any way in which this is fair or justified."
The Office of Fair Trading (OFT) recently said that it would investigate current account charges, prompting some to predict an end to free banking as a "tit for tat" move by the banks.
Banks already do rather well for themselves via charging for unauthorised overdrafts and other transactions, such as foreign currency transmission. Indeed they make around £5BN a year from unauthorised overdraft charges. The OFT investigation on capping these fees is clearly the trigger for banks to look for other ways of charging their customers.
Meanwhile, the long suffering customer gets screwed by the banks whatever happens.
Pathetic isn't it?
The rot has started with First Direct, part of HSBC, which plans to charge £10 per month to customers who run current accounts. Only those who deposit £1,500 a month or who maintain an average balance of £1,500 will escape the fee.
In other words, a large number of their customers will have to pay £120 per year for the "privilege" of holding a First Direct account.
Needless to say, where one bank goes, others will follow.
Alan Duncan, Shadow Trade and Industry Secretary, said:
"This is an irrational basis for charging. This is simply a tax on the lower-paid which will prevent access to bank accounts. I cannot see any way in which this is fair or justified."
The Office of Fair Trading (OFT) recently said that it would investigate current account charges, prompting some to predict an end to free banking as a "tit for tat" move by the banks.
Banks already do rather well for themselves via charging for unauthorised overdrafts and other transactions, such as foreign currency transmission. Indeed they make around £5BN a year from unauthorised overdraft charges. The OFT investigation on capping these fees is clearly the trigger for banks to look for other ways of charging their customers.
Meanwhile, the long suffering customer gets screwed by the banks whatever happens.
Pathetic isn't it?
Tuesday, November 14, 2006
Pensions in Terminal Decline
Approximately half of the UK's defined benefit (DB) pension schemes, where the recipient receives a pension based on a percentage of his termination salary, will close within five years.
That is the finding of the Alexander Forbes Financial Services' second pension confidence survey.
Approximately 46% of employers, who currently provide final salary schemes, do not expect to be able to afford to provide them within the next five years. The DB pensions will morph into defined contribution schemes.
The respondents cited the cost of meeting the requirements of the Pension Act 2004, including making provisions for Pension Protection Fund (PPF) levies to cover final salary schemes at companies that have gone bust, and Scheme Specific Funding which introduced tiered contributions to meet deficits.
Less than half of the schemes surveyed believed that the introduction of the PPF and Scheme Specific Funding had greatly increased pension security for members of their company's DB pension scheme.
Robert Macgregor, corporate development director at Alexander Forbes Financial Services, said:
"It's quite clear from the survey that businesses are struggling with their defined benefit pensions.
A very high proportion of employers expect to end all defined benefit pension provision within the next five years building on the already strong trend to switch from defined benefit to defined contribution."
He laid the blame squarely at the door of the government, saying:
"Government action to protect members of final salary schemes through the introduction of the PPF and Scheme Specific Funding has also had the perverse effect of hastening the end of defined benefit provision.
Employers have seen their costs soar with some seeing their costs rise by an alarming 30 pct just to comply with the terms of the Pensions Act 2004."
Link this with the appallingly low level of savings being laid down by the average British citizen, and the endowment mortgage crisis, and you can see a picture developing of a very miserable and impoverished old age for many.
That is the finding of the Alexander Forbes Financial Services' second pension confidence survey.
Approximately 46% of employers, who currently provide final salary schemes, do not expect to be able to afford to provide them within the next five years. The DB pensions will morph into defined contribution schemes.
The respondents cited the cost of meeting the requirements of the Pension Act 2004, including making provisions for Pension Protection Fund (PPF) levies to cover final salary schemes at companies that have gone bust, and Scheme Specific Funding which introduced tiered contributions to meet deficits.
Less than half of the schemes surveyed believed that the introduction of the PPF and Scheme Specific Funding had greatly increased pension security for members of their company's DB pension scheme.
Robert Macgregor, corporate development director at Alexander Forbes Financial Services, said:
"It's quite clear from the survey that businesses are struggling with their defined benefit pensions.
A very high proportion of employers expect to end all defined benefit pension provision within the next five years building on the already strong trend to switch from defined benefit to defined contribution."
He laid the blame squarely at the door of the government, saying:
"Government action to protect members of final salary schemes through the introduction of the PPF and Scheme Specific Funding has also had the perverse effect of hastening the end of defined benefit provision.
Employers have seen their costs soar with some seeing their costs rise by an alarming 30 pct just to comply with the terms of the Pensions Act 2004."
Link this with the appallingly low level of savings being laid down by the average British citizen, and the endowment mortgage crisis, and you can see a picture developing of a very miserable and impoverished old age for many.
Monday, November 13, 2006
Annual Credit Card Fees To Return
A recent study by PricewaterhouseCoopers (PWC) says that annual fees for having a credit card could be making an unwelcome return.
The fees were dropped in the 1990s. However, seemingly the credit card companies and banks are simply not making enough money out of their customers; and want to make even more, by charging people for the privilege of owning a credit card.
This is somewhat ironic, given that retailers are charged a percentage for every credit card transaction they make. In effect the consumer is being hit by a double "whammy".
The excuse that our much "respected" banks and credit card companies are making for this extra fee is that new consumer protection measures are costing them money.
The Office of Fair Trading's (OFT) cap on credit card default charges, and its payment-protection insurance probe, has hit card providers' incomes.
PWC say that we can expect annual fees of around £35 per card.
An OFT spokesman is quoted as saying:
"If we find any evidence of collusion (over the re-introduction of annual fees) that will be very serious indeed.
We are likely to see a 'waterbed effect', whereby charges pushed down in one area pop up somewhere else."
Moneyfacts claim that card providers are already getting ready to impose fees.
Michelle Slate, Moneyfacts senior researcher, said:
"Last week Co-op imposed an annual charge and some premium credit cards - with added benefits such as travel insurance - already charge hefty fees.
All it will take is for one of the big providers Barclaycard, MBNA or Capital One to introduce a fee and the rest will follow."
The OFT are working under the misguided belief that if banks tried to recoup their losses, through the re-introduction of annual card fees, consumers would "vote with their feet" and cut up their cards.
That's fine if you don't have any debt. However, a very large number of Britons have credit card debts and cannot end their agreement with the companies until that is paid off.
In effect they are a captive market, ripe for the "plucking".
The OFT seems to be a tad naive in its view of how the market works.
It is hardly surprising that people have little respect for the financial services industry or its regulators.
The fees were dropped in the 1990s. However, seemingly the credit card companies and banks are simply not making enough money out of their customers; and want to make even more, by charging people for the privilege of owning a credit card.
This is somewhat ironic, given that retailers are charged a percentage for every credit card transaction they make. In effect the consumer is being hit by a double "whammy".
The excuse that our much "respected" banks and credit card companies are making for this extra fee is that new consumer protection measures are costing them money.
The Office of Fair Trading's (OFT) cap on credit card default charges, and its payment-protection insurance probe, has hit card providers' incomes.
PWC say that we can expect annual fees of around £35 per card.
An OFT spokesman is quoted as saying:
"If we find any evidence of collusion (over the re-introduction of annual fees) that will be very serious indeed.
We are likely to see a 'waterbed effect', whereby charges pushed down in one area pop up somewhere else."
Moneyfacts claim that card providers are already getting ready to impose fees.
Michelle Slate, Moneyfacts senior researcher, said:
"Last week Co-op imposed an annual charge and some premium credit cards - with added benefits such as travel insurance - already charge hefty fees.
All it will take is for one of the big providers Barclaycard, MBNA or Capital One to introduce a fee and the rest will follow."
The OFT are working under the misguided belief that if banks tried to recoup their losses, through the re-introduction of annual card fees, consumers would "vote with their feet" and cut up their cards.
That's fine if you don't have any debt. However, a very large number of Britons have credit card debts and cannot end their agreement with the companies until that is paid off.
In effect they are a captive market, ripe for the "plucking".
The OFT seems to be a tad naive in its view of how the market works.
It is hardly surprising that people have little respect for the financial services industry or its regulators.
Friday, November 10, 2006
Phish Warning
Heise Security, a German computer security publisher has warned that the websites of three UK banks remain vulnerable to phishing attacks despite the banks being warned about a potential loophole recently.
This September Heise published a report warning that five banks had serious security weaknesses on their home pages. Heise explained how the bank websites could be exploited by Internet fraudsters. Its security experts inserted a false page on to the websites, exploiting a loophole on the sites.
Heise claims that customers of the banks would have almost no chance of detecting such a fraudulent page. They could then be tricked into entering their logon information which would then be captured by the scammers.
The banks named in the September report were:
-Bank of Ireland
-Cahoot
-First Direct
-NatWest
-Bank of Scotland
Heise has subsequently said that the Bank of Ireland had fixed the vulnerability on its website and that NatWest was taking to steps to do so as well. However, as at the 23rd of October, it said that the other three banks were still vulnerable.
The BBC on October 23rd quoted spokespersons from Bank of Scotland, Cahoot and First Direct as saying that the three banks aim to have fixed the flaws on their website "very shortly".
UK banking organisation APACS says the number of phishing incidents in the UK rose by 800% in the year to August 2006.
This September Heise published a report warning that five banks had serious security weaknesses on their home pages. Heise explained how the bank websites could be exploited by Internet fraudsters. Its security experts inserted a false page on to the websites, exploiting a loophole on the sites.
Heise claims that customers of the banks would have almost no chance of detecting such a fraudulent page. They could then be tricked into entering their logon information which would then be captured by the scammers.
The banks named in the September report were:
-Bank of Ireland
-Cahoot
-First Direct
-NatWest
-Bank of Scotland
Heise has subsequently said that the Bank of Ireland had fixed the vulnerability on its website and that NatWest was taking to steps to do so as well. However, as at the 23rd of October, it said that the other three banks were still vulnerable.
The BBC on October 23rd quoted spokespersons from Bank of Scotland, Cahoot and First Direct as saying that the three banks aim to have fixed the flaws on their website "very shortly".
UK banking organisation APACS says the number of phishing incidents in the UK rose by 800% in the year to August 2006.
Financial Services Authority Heavily Criticised
The Treasury committee has criticised the Financial Services Authority's (FSA) regulation of financial advertising, and said that the FSA should copy the policy of the Advertising Standards Authority (ASA) and make its findings public.
Committee chairman John McFall MP has written to the FSA chairman, Sir Callum McCarthy, complaining about its methods.
The FSA said:
"As a regulator we have a formal procedure we have to go through - we can't just issue a formal censure of a firm."
In contrast, the ASA publishes its rulings on its web site.
McFall said that the financial regulator should follow suit:
"The FSA has, at the moment, a seemingly far less transparent system in regard to financial advertisements, with no publication of complaints, and little public record of which companies have broken the rules.
This means consumers seem to get a worse deal, with the FSA offering no public scrutiny and little incentive for advertisers to keep to the rules.
The FSA needs to take a far more robust approach by highlighting poor practice."
Committee chairman John McFall MP has written to the FSA chairman, Sir Callum McCarthy, complaining about its methods.
The FSA said:
"As a regulator we have a formal procedure we have to go through - we can't just issue a formal censure of a firm."
In contrast, the ASA publishes its rulings on its web site.
McFall said that the financial regulator should follow suit:
"The FSA has, at the moment, a seemingly far less transparent system in regard to financial advertisements, with no publication of complaints, and little public record of which companies have broken the rules.
This means consumers seem to get a worse deal, with the FSA offering no public scrutiny and little incentive for advertisers to keep to the rules.
The FSA needs to take a far more robust approach by highlighting poor practice."
Thursday, November 09, 2006
Bank of England Raises Rates to 5%
The Bank of England raised interest rates by a quarter of a percent, to 5%, today.
Needless to say this will negatively impact mortgages and credit card debts.
Interest rates are now at levels not seen since August 2001.
The move does not come as a surprise. However, it will not be welcomed by many mortgage and credit card holders who are already heavily in debt.
It will be interesting to see if banks and building societies, who will most assuredly raise borrowing costs, also pass on the full rate increase to their savers.
Needless to say this will negatively impact mortgages and credit card debts.
Interest rates are now at levels not seen since August 2001.
The move does not come as a surprise. However, it will not be welcomed by many mortgage and credit card holders who are already heavily in debt.
It will be interesting to see if banks and building societies, who will most assuredly raise borrowing costs, also pass on the full rate increase to their savers.
ICAS Warns of The Dangers of Debt
The Institute of Chartered Accountants of Scotland (ICAS) has warned of the dangerous rise in debt and bankruptcy.
In England and Wales there has been a 55% increase in personal bankruptcy from last year, and a 118% increase in the number of people taking out IVAs (individual voluntary arrangements).
Part of the problem, according to ICAS, is that in England and Wales debt consolidators are allowed to aggressively advertise and market debt relief products.
To read the full article visit ICAS.
In England and Wales there has been a 55% increase in personal bankruptcy from last year, and a 118% increase in the number of people taking out IVAs (individual voluntary arrangements).
Part of the problem, according to ICAS, is that in England and Wales debt consolidators are allowed to aggressively advertise and market debt relief products.
To read the full article visit ICAS.
Tuesday, November 07, 2006
The Ties That Bind
Estranged couples with joint accounts such as; mortgages, credit cards and loans to mobile phone and television rental accounts should immediately tell their lenders of their new single status.
Otherwise there is a risk that they might be refused credit if their ex partner incurs financial penalties, eg defaults on a credit card.
A joint credit history means that partners are named on each other's credit reports as financial associates. Details of all financial associations stay on credit reports until notification of terminations have been sent to the relevant agencies.
Lenders check credit reports when assessing loan applications, and will check the credit reports of associates.
You have been warned!
Otherwise there is a risk that they might be refused credit if their ex partner incurs financial penalties, eg defaults on a credit card.
A joint credit history means that partners are named on each other's credit reports as financial associates. Details of all financial associations stay on credit reports until notification of terminations have been sent to the relevant agencies.
Lenders check credit reports when assessing loan applications, and will check the credit reports of associates.
You have been warned!
Thursday, November 02, 2006
The Big Mortgage
It seems that in order to prevent Britain's already dangerously inflated housing bubble from bursting, mortgage lenders are creating ever more dangerous products with which to ensnare the unwary and desperate house hunters.
Abbey have created a mortgage product which people may well regret buying into. Abbey has become the first major bank to lend first-time buyers five times their salary, for their first house purchase.
Lloyds TSB's Scottish Widows Bank have also confirmed that it offers mortgages of up to five times salary, in its professional and graduate packages. However, this is only for individual borrowers, the maximum a couple can get is four times earnings.
Last week, Bank of Ireland Mortgagees and Bristol and West increased their standard lending multiples from four to 4.5 times earnings.
Abbey, will now lend £300,000 to a single customer or two people with a good credit record and a total income of at least £60,000.
Abbey is making the offer available to individuals, couples, or two people not in a relationship who have a 25% deposit.
The maximum Abbey will lend a borrower for a standard mortgage is £2M.
Not surprisingly some people are warning against this product. Malcolm Hurlston, chief executive of the Consumer Credit Counselling Service said:
"For some people this is going to look like an answer to their prayers but it risks taking them into dangerous territory.
If their salaries do not go up in the way they think, then they are going to be very stretched."
An Abbey spokesman said:
"It's a real shift within the industry.
Our research shows that affordability is the biggest barrier to people's ability to get onto the property ladder.
This is very much about looking at an individual's ability to pay."
Abbey's research showed that 17.3 million adults are not able to get on the property ladder with 7.4 million citing house prices as a key obstacle.
Recent house price surveys have put the inflation at between 8%-10%.
That is all very well. However, at some stage the ongoing price rises will stop and those who bought in on the expectation of being to sell at a profit, thus clearing the debt, will be in for a rude awakening.
Abbey have created a mortgage product which people may well regret buying into. Abbey has become the first major bank to lend first-time buyers five times their salary, for their first house purchase.
Lloyds TSB's Scottish Widows Bank have also confirmed that it offers mortgages of up to five times salary, in its professional and graduate packages. However, this is only for individual borrowers, the maximum a couple can get is four times earnings.
Last week, Bank of Ireland Mortgagees and Bristol and West increased their standard lending multiples from four to 4.5 times earnings.
Abbey, will now lend £300,000 to a single customer or two people with a good credit record and a total income of at least £60,000.
Abbey is making the offer available to individuals, couples, or two people not in a relationship who have a 25% deposit.
The maximum Abbey will lend a borrower for a standard mortgage is £2M.
Not surprisingly some people are warning against this product. Malcolm Hurlston, chief executive of the Consumer Credit Counselling Service said:
"For some people this is going to look like an answer to their prayers but it risks taking them into dangerous territory.
If their salaries do not go up in the way they think, then they are going to be very stretched."
An Abbey spokesman said:
"It's a real shift within the industry.
Our research shows that affordability is the biggest barrier to people's ability to get onto the property ladder.
This is very much about looking at an individual's ability to pay."
Abbey's research showed that 17.3 million adults are not able to get on the property ladder with 7.4 million citing house prices as a key obstacle.
Recent house price surveys have put the inflation at between 8%-10%.
That is all very well. However, at some stage the ongoing price rises will stop and those who bought in on the expectation of being to sell at a profit, thus clearing the debt, will be in for a rude awakening.
Wednesday, November 01, 2006
Banking Fees Still Opaque
Francis Chittenden, professor of small business finance at The University of Manchester Business School, says that regulations imposed on the small business banking market four years ago have failed to improve the transparency of fees and there is little point in new measures being imposed.
A report by Chittenden, said that in the last two years it had become more difficult for business owners to find out how much they would pay in charges and interest if they changed banks.
Chittenden claims that regulations imposed by the Competition Commission in 2002, to increase transparency and limit the dominance of four major banks, had failed.
Quote:
"The quality of information available has declined from two years ago. Despite regulations to make small business banking more transparent, the reverse seems to have been true."
Adding:
"I don't think governments are able to influence markets in the way they thought they could four or five years ago."
Chittenden estimated it now took a business owner three days to screen banks, negotiate with them and reach a conclusion on the best bank for them.
A report by Chittenden, said that in the last two years it had become more difficult for business owners to find out how much they would pay in charges and interest if they changed banks.
Chittenden claims that regulations imposed by the Competition Commission in 2002, to increase transparency and limit the dominance of four major banks, had failed.
Quote:
"The quality of information available has declined from two years ago. Despite regulations to make small business banking more transparent, the reverse seems to have been true."
Adding:
"I don't think governments are able to influence markets in the way they thought they could four or five years ago."
Chittenden estimated it now took a business owner three days to screen banks, negotiate with them and reach a conclusion on the best bank for them.
Tuesday, October 31, 2006
ICAEW Enterprise Survey
The Institute of Chartered Accountants in England and Wales (ICAEW) has just released its enterprise survey, which examines how UK business is taking advantage of globalisation, reports on future growth plans and discusses the barriers to that growth.
The research revealed that:
The research revealed that:
- banks are seen as obstructive
- regulatory costs to business continue to intensify - with the burden increasingly falling on small and medium sized businesses
- over the next five years we will see a major shift up the value chain of business activity being purchased from abroad
- the lack of high level skills is impacting on business growth
Monday, October 30, 2006
Banks Throw Customer Details Onto The Street
Despite the fact that banks are forever lecturing their customers about personal security, and the risk of id theft, it seems that when it comes to practicing what they preach they are found to be wanting.
It has been revealed that high street banks are dumping details of their customers' accounts on the street.
Richard Thomas, the Information Commissioner, says that he has received "highly disturbing" evidence that personal information, including bank statements and loan applications, are being left in bin bags on streets throughout the UK.
Needless to say, this exposes the banks' customers to a severe risk of id theft and fraud. Thomas is considering taking enforcement action against those financial institutions that are failing to apply adequate security over customer details. They could face unlimited fines.
His office is investigating; the Post Office, HSBC, NatWest and the Royal Bank of Scotland.
Thomas is quoted in an interview saying:
"There have been cases now which have quite strong prima facie evidence which we are urgently investigating, of banks' rubbish bags found on the public highway outside banks.
And I have seen some of these where, open up the rubbish bag and there you find bank statements".
Cases being examined by his office include an application for a current account (which had the individual's name, address, date of birth, telephone number, previous address, current account number, mother's maiden names and place of birth) which was found in the rubbish.
Detective Chief Inspector Derek Robertson has warned that criminal gangs have infiltrated about 10% of Glasgow's financial call centres, stealing customers' identities and robbing them of thousands of pounds.
Another nail in the coffin of the already tarnished reputation of Britain's financial services industry.
To read the full interview with Richard Thomas, visit The Thomas Interview.
It has been revealed that high street banks are dumping details of their customers' accounts on the street.
Richard Thomas, the Information Commissioner, says that he has received "highly disturbing" evidence that personal information, including bank statements and loan applications, are being left in bin bags on streets throughout the UK.
Needless to say, this exposes the banks' customers to a severe risk of id theft and fraud. Thomas is considering taking enforcement action against those financial institutions that are failing to apply adequate security over customer details. They could face unlimited fines.
His office is investigating; the Post Office, HSBC, NatWest and the Royal Bank of Scotland.
Thomas is quoted in an interview saying:
"There have been cases now which have quite strong prima facie evidence which we are urgently investigating, of banks' rubbish bags found on the public highway outside banks.
And I have seen some of these where, open up the rubbish bag and there you find bank statements".
Cases being examined by his office include an application for a current account (which had the individual's name, address, date of birth, telephone number, previous address, current account number, mother's maiden names and place of birth) which was found in the rubbish.
Detective Chief Inspector Derek Robertson has warned that criminal gangs have infiltrated about 10% of Glasgow's financial call centres, stealing customers' identities and robbing them of thousands of pounds.
Another nail in the coffin of the already tarnished reputation of Britain's financial services industry.
To read the full interview with Richard Thomas, visit The Thomas Interview.
Friday, October 27, 2006
Lousy Call Centre Security Puts You At Risk
Poor security at Indian call centers resulted in the theft and illegal trading of personal financial information, according to charges raised in a report by the London-based Channel 4, which broadcast the results of a 12-month investigation on October 5th.
Channel 4's Dispatches program reported that it has discovered data protection breaches at several Indian call centers. Dispatches claims that confidential information on UK mobile phone customers, as well as their credit or debit card details, have been gathered and sold to third parties.
The Information Commissioner's Office, a UK government data privacy watchdog, says it is investigating the claims made by Channel 4.
"It appears that some mobile phone companies' call centers in India are being targeted by criminals intent on unlawfully obtaining UK citizens' financial records and this will be the focus of our investigation," the Information Commissioner’s Office says in a statement.
Dispatches reporters discovered a phenomenon known as "data farming" in which unauthorized harvesting of personal information is sold on at a profit. The program alleged that some Indian call centre workers are involved in the scam, gathering data from customers before selling it on to brokers.
"What has been happening is that UK customers phone a mobile phone company's call centre, which is located in India, and they are asked for their bank or credit card details as part of a credit check," a Channel 4 spokeswoman said. "For example, they will be asked for their card number, expiry date and verification code, the three-digit code that is displayed on the back of their card. This information is then stored on the call centre's computer system and it is then illegally accessed."
In the program, an undercover reporter is shown obtaining personal financial data from an Indian middleman. The data includes full banking and financial profiles. The data was not taken from bank call centers, but from call centers working for UK mobile phone operators.
Indian IT trade association Nasscom criticised Channel 4 after the London-based TV station refused to show the organization any of the footage before the broadcast. Nasscom called on Channel 4 to co-operate in rooting out and prosecuting any "corrupt" call centre workers.
Source Citadel Advantage
Channel 4's Dispatches program reported that it has discovered data protection breaches at several Indian call centers. Dispatches claims that confidential information on UK mobile phone customers, as well as their credit or debit card details, have been gathered and sold to third parties.
The Information Commissioner's Office, a UK government data privacy watchdog, says it is investigating the claims made by Channel 4.
"It appears that some mobile phone companies' call centers in India are being targeted by criminals intent on unlawfully obtaining UK citizens' financial records and this will be the focus of our investigation," the Information Commissioner’s Office says in a statement.
Dispatches reporters discovered a phenomenon known as "data farming" in which unauthorized harvesting of personal information is sold on at a profit. The program alleged that some Indian call centre workers are involved in the scam, gathering data from customers before selling it on to brokers.
"What has been happening is that UK customers phone a mobile phone company's call centre, which is located in India, and they are asked for their bank or credit card details as part of a credit check," a Channel 4 spokeswoman said. "For example, they will be asked for their card number, expiry date and verification code, the three-digit code that is displayed on the back of their card. This information is then stored on the call centre's computer system and it is then illegally accessed."
In the program, an undercover reporter is shown obtaining personal financial data from an Indian middleman. The data includes full banking and financial profiles. The data was not taken from bank call centers, but from call centers working for UK mobile phone operators.
Indian IT trade association Nasscom criticised Channel 4 after the London-based TV station refused to show the organization any of the footage before the broadcast. Nasscom called on Channel 4 to co-operate in rooting out and prosecuting any "corrupt" call centre workers.
Source Citadel Advantage
FSA Fines Credit Broker
The Financial Services Authority (FSA) has fined LOANS.CO.UK, a licensed credit broker, £450K for mis-selling Payment Protection Insurance (PPI).
Approximately 14,400 customers were sold policies that they may not have needed.
Last week the Office of Fair Trading (OFT) referred the PPI industry to the Competition Commission. The conclusion of a five month investigation by the OFT was that the sale of PPI policies offered a "poor deal and often less protection than [consumers] think".
PPI is worth around £5BN a year, so it should come as little surprise to learn that some companies sell these rather dubious products in an "aggressive" manner.
In theory the insurance is meant to provide people with protection, if they fall ill or lose their jobs. The FSA was critical of the way that Loans.co.uk had been selling, usually over the telephone. It said that customers were not given enough information at the point of sale to make an informed choice.
One would have thought that the financial services industry had learned its lesson from the endowment mortgage scandal of the 80's and 90's. Unfortunately not, despite its reputation being in tatters, it seems that the financial services industry is determined to make money no matter what the cost to the poor saps that it dupes and its own reputation.
Approximately 14,400 customers were sold policies that they may not have needed.
Last week the Office of Fair Trading (OFT) referred the PPI industry to the Competition Commission. The conclusion of a five month investigation by the OFT was that the sale of PPI policies offered a "poor deal and often less protection than [consumers] think".
PPI is worth around £5BN a year, so it should come as little surprise to learn that some companies sell these rather dubious products in an "aggressive" manner.
In theory the insurance is meant to provide people with protection, if they fall ill or lose their jobs. The FSA was critical of the way that Loans.co.uk had been selling, usually over the telephone. It said that customers were not given enough information at the point of sale to make an informed choice.
One would have thought that the financial services industry had learned its lesson from the endowment mortgage scandal of the 80's and 90's. Unfortunately not, despite its reputation being in tatters, it seems that the financial services industry is determined to make money no matter what the cost to the poor saps that it dupes and its own reputation.
Thursday, October 26, 2006
Fixed rate Deals Being Pulled
First time home buyers may soon find the already semi impossible task of affording their first home even more problematic.
Lenders are expected to withdraw their best fixed rate mortgage deals from the market. Halifax has withdrawn its lowest fixed rate, which was 4.39% for two years. This follows hot on the heels of Alliance & Leicester's recent increase in interest rates, on its two and three year fixed rate deals earlier in the week.
You can expect more bad news soon.
Lenders are expected to withdraw their best fixed rate mortgage deals from the market. Halifax has withdrawn its lowest fixed rate, which was 4.39% for two years. This follows hot on the heels of Alliance & Leicester's recent increase in interest rates, on its two and three year fixed rate deals earlier in the week.
You can expect more bad news soon.
Wednesday, October 25, 2006
Households Lamentably Unprepared
Research from Scottish Widows reveals that British households are lamentably unprepared for the loss of a breadwinner's income. The research identified a "protection gap" that meant serious financial hardship for families if a main earner was to fall ill or die.
Over 10 million households are now dependent on more than one salary, to maintain an acceptable standard of living.
Over 50% of take-home pay goes on essentials such as mortgage repayments, managing debt, food, gas and electricity bills.
The study warns that many families would face serious financial hardship in the event of the worst happening.
Nick Kirwan, protection-market director at Scottish Widows, said:
"The majority of the population is walking a financial high wire without a safety net.
Nobody knows what is around the corner, but we have to accept that all too often illness does strike and accidents do happen.
If people don't start to take responsibility for their own financial futures then they could be left in a position where they can't even cover the essential expenditure in their lives."
It is not unreasonable to assume that Scottish Widows would like to sell these underprotected families some protection.
Over 10 million households are now dependent on more than one salary, to maintain an acceptable standard of living.
Over 50% of take-home pay goes on essentials such as mortgage repayments, managing debt, food, gas and electricity bills.
The study warns that many families would face serious financial hardship in the event of the worst happening.
Nick Kirwan, protection-market director at Scottish Widows, said:
"The majority of the population is walking a financial high wire without a safety net.
Nobody knows what is around the corner, but we have to accept that all too often illness does strike and accidents do happen.
If people don't start to take responsibility for their own financial futures then they could be left in a position where they can't even cover the essential expenditure in their lives."
It is not unreasonable to assume that Scottish Widows would like to sell these underprotected families some protection.
Tuesday, October 24, 2006
Stupid Users
A recent survey carried out by Quest Software, has identified that some of the major players in the City of London have their security compromised by the stupidity of their staff.
The Quest Software survey looked at the best security practices in Square Mile, and found that whilst companies may have good security policies they were being undermined by user stupidity.
Over 25% of workers shared passwords between work PCs and their normal home PCs. This makes it easier for thieves to hack into "secure" systems.
Quest also found that some security policies at some financial institutional were inadequate. Some passwords were less than eight characters, making them easy to crack. Over 84% allowed users to chose their own passwords, 25% allowed real words rather than random characters.
This follows hot on the heels of reports that major banks are dumping customer details, such as names address and other personal information, in the street.
Given this lax attitude towards security, it is hardly surprising that the incidents of identity theft keep rising.
The Quest Software survey looked at the best security practices in Square Mile, and found that whilst companies may have good security policies they were being undermined by user stupidity.
Over 25% of workers shared passwords between work PCs and their normal home PCs. This makes it easier for thieves to hack into "secure" systems.
Quest also found that some security policies at some financial institutional were inadequate. Some passwords were less than eight characters, making them easy to crack. Over 84% allowed users to chose their own passwords, 25% allowed real words rather than random characters.
This follows hot on the heels of reports that major banks are dumping customer details, such as names address and other personal information, in the street.
Given this lax attitude towards security, it is hardly surprising that the incidents of identity theft keep rising.
Monday, October 23, 2006
APACS Debt Report
It is reported that the level of personal debt in the UK now stands at a staggering £1.2 trillion, and that this debt level is increasing.
However, a report on credit card spending for 2005 from the Association of Payment Clearing Services (APACS) has revealed a shift in cardholder behaviour.
The amount that is being spent has started to level off, having risen by just 1% to £124BN, whilst the number of transactions has fallen by 1% to 2.1bn. In addition to this, the report notes that the level of debt repayments has increased. The number of card holders who repaid their credit card in full each month rose from 56% to 59% with 95% of all spending in 2005 repaid in full.
APACS have speculated that this change in behaviour is due to nervousness about economic growth.
To read the APACS report visit APACS.
However, a report on credit card spending for 2005 from the Association of Payment Clearing Services (APACS) has revealed a shift in cardholder behaviour.
The amount that is being spent has started to level off, having risen by just 1% to £124BN, whilst the number of transactions has fallen by 1% to 2.1bn. In addition to this, the report notes that the level of debt repayments has increased. The number of card holders who repaid their credit card in full each month rose from 56% to 59% with 95% of all spending in 2005 repaid in full.
APACS have speculated that this change in behaviour is due to nervousness about economic growth.
To read the APACS report visit APACS.
Friday, October 20, 2006
Hedge Funds Put On Notice
Britain's hedge funds came under fire yesterday, from both the Financial Services Authority (FSA) and the Bank of England.
The FSA's director of Enforcement, Margaret Cole, said:
"Of particular interest to us in Enforcement is the regulator's belief that some hedge funds may be testing the boundaries of acceptable practice with respect to insider trading and market manipulation.
In addition, given their payment of significant commissions and close relations with counter-parties, they may be creating incentives for others to commit market abuse.
Characteristically, our main response has been on the surveillance side and we have recently devised metrics to measure the incidence of unusual price movements in order to see if this belief is correct."
The Bank of England's deputy governor, Sir John Gieve, chimed in and warned that hedge funds would be at the centre of the next crisis in financial markets. He said that he was concerned that many funds had begun taking aggressive risks again over the past few weeks.
The message to the hedge funds is clear, "keep your noses clean" as they are now being watched very closely. Britain can do without another scandal in the financial services industry.
To read more see The Independent.
The FSA's director of Enforcement, Margaret Cole, said:
"Of particular interest to us in Enforcement is the regulator's belief that some hedge funds may be testing the boundaries of acceptable practice with respect to insider trading and market manipulation.
In addition, given their payment of significant commissions and close relations with counter-parties, they may be creating incentives for others to commit market abuse.
Characteristically, our main response has been on the surveillance side and we have recently devised metrics to measure the incidence of unusual price movements in order to see if this belief is correct."
The Bank of England's deputy governor, Sir John Gieve, chimed in and warned that hedge funds would be at the centre of the next crisis in financial markets. He said that he was concerned that many funds had begun taking aggressive risks again over the past few weeks.
The message to the hedge funds is clear, "keep your noses clean" as they are now being watched very closely. Britain can do without another scandal in the financial services industry.
To read more see The Independent.
Thursday, October 19, 2006
Endowment Mortgage Misery Continues
Quite unbelievably, even though endowment mortgages have been shown to be the worst fanancial product ever foisted on the unsuspecting British public in living memory, around 40,000 of these useless underperforming products were sold in the first six months of this year. Even worse, around 100,000 were sold last year.
It beggars belief that, despite the lousy performance and negative publicity surrounding these useless products, people are still prepare to fall for the salesman's patter.
It also beggars belief that life assurance companies have the balls to continue to sell them. Clearly money and profits come before reputation and integrity.
A smooth talking salesman can earn a commission equivalent to the first 18 months' premiums, just for selling the policy. He can then continue to get paid annual commission, as long as the hapless endowment owner continues to keep the plan going.
It is little wonder that many people in Britain have lost confidence in the life assurance industry, and the financial services sector as a whole.
To read more, visit This Is Money.
It beggars belief that, despite the lousy performance and negative publicity surrounding these useless products, people are still prepare to fall for the salesman's patter.
It also beggars belief that life assurance companies have the balls to continue to sell them. Clearly money and profits come before reputation and integrity.
A smooth talking salesman can earn a commission equivalent to the first 18 months' premiums, just for selling the policy. He can then continue to get paid annual commission, as long as the hapless endowment owner continues to keep the plan going.
It is little wonder that many people in Britain have lost confidence in the life assurance industry, and the financial services sector as a whole.
To read more, visit This Is Money.
Wednesday, October 18, 2006
Hefty Mortgages For Hefty Bonuses
Those of you expecting a hefty bonus this Christmas, yet looking to borrow a minimum of £500K, may care to take a look at the Woolwich's "The City Bonus Mortgage".
The product offers a minimum loan of £500K, with an offset facility.
The City Bonus Mortgage offer starts at a 0.51% discount below the Bank of England's base rate, offering an initial pay rate of 4.24%.
This lasts until July 2007, when it reverts to base rate plus 0.49%. This would give a current pay rate of 5.24% for the life of the loan. The mortgage has an arrangement fee of £1,499.
To read more about this visit Citywire
The product offers a minimum loan of £500K, with an offset facility.
The City Bonus Mortgage offer starts at a 0.51% discount below the Bank of England's base rate, offering an initial pay rate of 4.24%.
This lasts until July 2007, when it reverts to base rate plus 0.49%. This would give a current pay rate of 5.24% for the life of the loan. The mortgage has an arrangement fee of £1,499.
To read more about this visit Citywire
Gordon Brown Pledges Cuts in Red Tape
Hot on the heels of a report issued by the UK government's regulation watchdog, that said that the UK's obsession with regulation is destroying the UK's "national resilience and spirit of adventure", Gordon Brown is seeking to pacify the great and good of the City by pledging to cut red tape by 25%.
He will deliver this pledge toady, at the financial services summit at No 11 Downing Street.
Words are cheap, by his actions so shall he be judged.
To read more visit The Telegraph.
He will deliver this pledge toady, at the financial services summit at No 11 Downing Street.
Words are cheap, by his actions so shall he be judged.
To read more visit The Telegraph.
Tuesday, October 17, 2006
Empty Home Loans
Owners of empty homes in Kent are being targeted by a new initiative which, if taken up by other councils, could help to bring thousands of derelict properties back into use.
Kent County Council last week launched a £5m fund which will provide interest-free loans to landlords, developers and owners to cover the cost of renovation and refurbishment of about 9,000 empty properties in the east of the county.
One of the main stumbling blocks for owners of empty homes is often a lack of funds with which to renovate a property and bring it back into use. So the county is working with councils in Dover, Shepway, Swale and Thanet to offer any owner of an empty property - or anyone considering buying one - interest-free loans for renovation or refurbishment of to £25,000 per single dwelling.
As much as £175,000 could be available for properties that could be converted into more than one flat. The property in question has to have been empty for at least six months, and owners taking out loans now must bring it back into residential use by March 2008.
To read the article in full, visit The Observer.
Kent County Council last week launched a £5m fund which will provide interest-free loans to landlords, developers and owners to cover the cost of renovation and refurbishment of about 9,000 empty properties in the east of the county.
One of the main stumbling blocks for owners of empty homes is often a lack of funds with which to renovate a property and bring it back into use. So the county is working with councils in Dover, Shepway, Swale and Thanet to offer any owner of an empty property - or anyone considering buying one - interest-free loans for renovation or refurbishment of to £25,000 per single dwelling.
As much as £175,000 could be available for properties that could be converted into more than one flat. The property in question has to have been empty for at least six months, and owners taking out loans now must bring it back into residential use by March 2008.
To read the article in full, visit The Observer.
Monday, October 16, 2006
Secret Payments
It appears that some major financial institutions, that sold the hapless British home owners their useless and underperforming endowment policies, are conducting a secret "payoff" exercise.
Fearful that their already tarnished reputations will be further dragged through the muck and mire, some of Britain's leading financial institutions are paying off endowment holders, so as to avoid fines from the FSA and further reputational damage.
Included on the list of shame are; Barclays, Halifax, Friends Provident and Legal & General. They are reportedly secretly contacting customers, and offering to "review" the way business has been handled.
Pretty pathetic isn't it?
Hardly surprising that people long ago lost faith in the financial services industry in Britain.
Source This Is Money
Fearful that their already tarnished reputations will be further dragged through the muck and mire, some of Britain's leading financial institutions are paying off endowment holders, so as to avoid fines from the FSA and further reputational damage.
Included on the list of shame are; Barclays, Halifax, Friends Provident and Legal & General. They are reportedly secretly contacting customers, and offering to "review" the way business has been handled.
Pretty pathetic isn't it?
Hardly surprising that people long ago lost faith in the financial services industry in Britain.
Source This Is Money
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