Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Friday, March 30, 2007

OFT Backs Down

Proving once again that the financial regulatory bodies in Britain are "pussies", when it comes to standing up to vested interests, the Office of fair Trading (OFT) has baoked down on imposing limits on bank charges.

The OFT tried its best to save face by shrouding its decision in the thin, and flimsy, veneer of initiating an in depth review.

Stating:

"The banking industry is not straightforward and that a more detailed examination is needed".

However, the reality is that the OFT has faced sustained and intense lobbying from the banks and they have a greater sway with the OFT than the consumer.

Some banks have threatened to end free accounts, were there to be a regulatory move against excessive and unjustifiable bank charges.

Needless to say, consumer groups see the OFT decisions for what it is (a total climbdown).

Which? said:

"We agree it's crucial the OFT investigates retail bank pricing. But today's announcement still leaves people in the dark about unfair bank charges.

Before the end of the year consumers could be charged up to £3.5BN by their banks in unauthorised overdraft charges. So we are telling consumers not to be put off claiming back their charges while the OFT is looking into this - claim them back now
."

In 2006 Which? calculated that bank customers pay £4.7BN each year on default charges. No wonder the banks like to make these charges.

John Fingleton, OFT chief executive, said:

"The UK retail banking market performs well in many dimensions, especially relative to international norms. However, the issue of bank current account charges is a matter of real concern to the banks' customers, and raises wider questions about competition and transparency of pricing."

However, just because the OFT are "pussies" doesn't mean that the consumer has to be one. Consumers should challenge every single unreasonable charge levelled on them by banks, as a matter of course, in many cases these challenges result in refunds being made.

If nothing else, at least it annoys the hell out of the banks and might make them think twice about "drinking the well dry" (ie overcharging consumers).

Thursday, March 29, 2007

Hamper Schemes Ring-Fenced

Following on from the collapse of Farepak, the Christmas hamper company, last year the government has finally got its act together.

It has been announced that payments to Christmas Hamper schemes will be ring-fenced, so that savers will be protected from suffering the same fate as the victims of the Farepak collapse.

Consumer minister, Ian McCartney, said that payments to similar schemes should now be placed in separate accounts, run by independent trustees on behalf of the customers.

The money would only be released to pay for the customers' orders for Christmas hampers and vouchers, not for other business activities.

This of course, in any well run business, should have been happening already.

Quote:

"The companies are now working to introduce these accounts over the coming weeks.

We think that effective safeguards of this type will provide the reassurance consumers are looking for in this industry
".

This action was in response to one of the recommendations of a review into Christmas hamper savings schemes collapse by Brian Pomeroy, chairman of the Financial Inclusion Taskforce.

Pomeroy has also called for more to be done to offer consumers better choice within the market, and to educate people about the best options available to them.

Quote:

"This is a market which has operated for many years and provides as many as 700,000 families with a useful way of saving.

However it is vital that more is done to protect its customers and ensure genuine choice for those who want to save for Christmas
."

The government's response, whilst being welcome, is somewhat late in the day for the victims of Farepak.

Tuesday, March 27, 2007

Diamond Geezer

Congratulations to Barclays' president, Bob Diamond, who could according to reports earn £42m for his work in 2006.

This gobsmacking amount is even more gobsmacking, when one takes into account that the CEO of Barclays, John Varley, earns a lot less.

Mr Diamond's £42M comes about from the following:

-He earns a paltry £250K
-He has a potential bonus of £10.4m
-Benefits of £17K
-Shares worth £4.5m
-Paper profit of £5.7m from the Barclays Global Investors Executive Option plan, which he exercised last year.

On top of the above, which comes to £20.9m, Barclays have made a further award of 934,516 shares to Mr Diamond; these are worth nearly £7m at current prices.

If his Barclays Capital investment banking operation and other businesses continue the performance of recent years, that could be increased to 2.8 million shares worth £21m, bringing the maximum total earnings from work in 2006 to £41.9m at current prices.

On top of that Mr Diamond could receive a further £14.8m "retention" bonus this year. His total holdings in Barclays shares, through various option plans, amount to nearly £70m.

John Varley earned a paltry £3.2m plus £1.2m in shares in 2006.

It is ironic that Barclays was recently given a public flaying on the BBC programme "Whistleblower", for mis-selling and fraud, and that it is also under fire along with other banks for its excess penalty charges.

Well, look at it this way, they have to make money somehow; otherwise how on earth could they afford to pay Mr Diamond?

Monday, March 26, 2007

Credit Card Users Missing Perks

A survey for credit card provider Goldfish, has revealed that 52% of UK credit card holders are missing out on perks offered by their cards.

Charlotte Hogg, Goldfish credit card managing director, said:

"Credit card holders need to demand more from their plastic. If customers hold a card that doesn't reward their spending then they should investigate what other cards might be better suited to their spending patterns.

We have found that an increasing number of our customers are using their credit cards for everyday purchases such as groceries and petrol, realising that they can reap rewards for all the regular purchases they make anyway
."

Given the outlandish interest rates that credit cards charge on outstanding balances, the owners of these cards are very foolish not to take advantage of the rather modest perks.

The Co-op

The Co-op has been named the UK's most ethical business, according to a study from GfK NOP, which considered how brands are ethically perceived by consumers across five countries.

The study found that UK consumers are the most ethically aware and view the treatment of employees, care for the environment and support for fair trade as core components to being an ethically driven organisation.

Friday, March 23, 2007

The VAT Implications of Lap Dancing

Never let it be said that HMRC does not truly understand the "human condition"; HMRC knows full well that we are mortal, and that humans take their pleasures in many forms.

It goes without saying, that all of these pleasures must be taxed.

Today a dispute between Spearmint Rhino (a chain of lap dancing clubs) and HMRC, over VAT, has finally been settled. HMRC had attempted to levy VAT on Spearmint Rhino for the earnings of its dancers.

However, Spearmint Rhino has won its High Court appeal against that ruling.

This means that the lap dancers themselves, must pay the VAT.

David Milne QC, who represented Spearmint Rhino, argued that the club should not pay because it was the dancer and not the club that provided the services.

Self-employed dancers pay to use its facilities and are paid by the clients.

A statement from HM Revenue and Customs said:

"HMRC will consider the High Court's decision carefully before deciding what further action to take, including whether to appeal."

Court of Appeal judge, Lord Justice Ward, described the club's aim in an earlier case as "to tease and not to satisfy".

Quite how the HMRC intend to quantify each dancer's earnings, is of course another story.

Suggestions welcome!

Thursday, March 22, 2007

BBC Puts Boot Into Barclays

The BBC investigative programme "Whislteblower", which investigates anti-social or criminal practices in organisations and companies across the UK, put the boot into Barlcays Bank last night.

It exposed a catalogue of shabby practices at a call centre and branch in Guildford, ranging from mis-selling unnecessary products to fraud.

The programme sent in an undercover reporter firstly to a Barclays call centre, then to a branch in Guildford. There she uncovered a catalogue of shabby practices:
  • Her bank trainer told a classroom of call centre trainees that he "loved" getting customers complaining about bank charges.


  • People were charged for financial products they neither asked for, or knew they had. Beware of being charged for the new Barclay product "Additions", one incident showed that a customer was charged for this without even having asked for it. One manager admitted that the bank's "Additions" accounts are one of the "most mis-sold" products in the bank.


  • One employee moved over £200K from one customer's account to another, without permission, purely so that he could get commission.


  • The programme highlighted serious flaws in security and fraudsters at work, the reporter saw bank employees working with criminals to commit fraud.
The good news is that Barclays made £7BN last year, and their spokeswoman when confronted with the evidence in her ivory tower in Canary Wharf said:

"I don't think what you've seen is any way representative of the way in which Barclays does business, and I'm sure our millions of customers would tell you exactly the same thing."

So that's alright then!

Extracts of the programme can be watched via this link Whistleblower.

Here is Barclays response, as posted on their website Barclays.

Wednesday, March 21, 2007

The Budget

Gordon Brown will cut the basic rate of tax from 22% to 20% in 2008. However, he has also abolished the lower rate of 10%.

Booze, fags and road tax are all up.

As with all of Brown's budgets, the devil will be in the detail; which takes quite some time for even the experts to digest.

What Brown gives with one hand, he takes with another!

Ex Citigroup Analyst Fined For Miconduct

The Financial Services Authority (FSA) have fined, Roberto Casoni, a former Citigroup analyst £52K for market misconduct.

The FSA said that Casoni had released details of his research into Banca Italease, an Italian leasing and factoring bank, to several clients in January 2006 before formal publication.

Casoni was head of Citigroup's mid-cap team, when he disclosed details of his valuation methodology, final recommendation and target price for Banca Italease.

According to the FSA, Casoni emailed one fund manager who held a large position in Banca Italease stock on January 12 saying "Itaplease a bomb", and later offered to share his valuation methodology.

On January 13 he told a second fund manager that "Banca Italease is still a strong buy. I initiate tomorrow with a +50 pc upside". He also emailed a draft spreadsheet of his valuation model to another fund manager on that day. On January 16 he emailed another draft spreadsheet of his methodology to a fourth fund manager, which contained a valuation for Banca Italease.

Casoni's work was not officially published until January 23.

The FSA said:

"The FSA considers that it is improper market conduct for an analyst to selectively disseminate valuations (including drafts), recommendations or target prices to clients ahead of publication of that research.

It is also improper market conduct for an analyst to forward his working model to clients when there is an impending initiation of coverage. This is particularly so when the client is sophisticated and therefore may be in a position to derive benefit from the model
."

The FSA noted that Casoni had not had any intention of manipulating the Banca Italease share price, and had not personally profited from his actions. He received a 30% reduction in his fine for co-operating fully, and for settling the case at an early stage.

Rob McIvor, Citigroup spokesman, said that Casoni had left Citigroup in February 2006, shortly after Citigroup contacted the FSA about the matter. Mr McIvor pointed out that Citigroup's procedures on this issue, which Casoni had breached, were in line with the FSA's code of business requirements.

Tuesday, March 20, 2007

Budget Day

Much like the depressing inevitability of the return of an unloved season, budget day is once more upon us (Wednesday).

Quite why people expect to be better off after a budget is beyond me, governments need money to function. Their only source for that money is the hapless taxpayer; one way or another, we pay.

Monday, March 19, 2007

Get a Grip

The Financial Services Authority (FSA) has launched a £2M campaign, to help consumers "get a grip" on insurance matters.

A recent FSA survey showed that consumers haven't a clue about insurance. Quite why they needed to conduct a survey to find that out is beyond me. According to the survey:

-49% of people are confused about what their insurance covers;
-52% of people find it difficult to compare insurance products;
-45% don't know if they're getting a good deal;

Vernon Everitt, Director of Retail Themes at the FSA, said:

"Insurance plays an important part in protecting our families, homes and possessions. But as with all financial products, consumers need to be capable and confident in making the right choices, including shopping around for the best deal and asking the right questions. Our jargon-free information will help them do just that.

We want to help consumers ask the right questions of themselves and the insurance market when it comes to buying products. The market as a whole will benefit from more capable and confident consumers
."

The FSA website can be accessed via www.moneymadeclear.fsa.gov.uk/insurance

Friday, March 16, 2007

Banks' Behaviour Unacceptable

The Information Commissioner has publicly accused banks, that have left customer details in the street, of an 'unacceptable' breach of the Data Protection Act.

It seems that the ever popular banks, who provide their customers with such "value for money", have been leaving customer account details in waste bins, skips and bin bags outside 11 branches across the country.

Needless to say this exposes the hapless customer to identity theft and fraud.

Deputy Information Commissioner David Smith said:

"It is unacceptable for banks and other organisations to carelessly discard their customers.

It is vital that banks and other organisations take security seriously. If they do not, they not only risk further action from the Information Commissioner but also risk losing the trust of their customers.

Individuals must feel confident that banks and other organisations are safeguarding their personal information
."

The 11 financial institutions that have been named and shamed are:

-Halifax-Bank of Scotland
-Barclays
-Alliance & Leicester
-Royal Bank of Scotland
-NatWest
-Nationwide Building Society
-Co-operative Bank
-HFC Bank
-Clydesdale Bank
-Scarborough Building Society
-United National Bank

Also on the list were the Post Office and the Immigration Advisory Service.

The information publicly discarded by the banks included; names, addresses and bank account numbers.

Nigel Evans MP, chairman of the All Party Parliamentary Group on Identity Fraud, demanded heavy fines for the organisations involved.

Quote:

"It is absolutely unforgivable that these financial institutions have acted so irresponsibly.

They seem to have ignored warnings about the need to keep customer details secure. Quite frankly, I am amazed that this is still going on. It is well known that criminals actively target bins in search of this sort of detail. This behaviour shows a cavalier disregard towards the protection of customers
."

The Information Commissioner's Office has asked the banks and other organisations to sign a formal undertaking to abide by the Data Protection Act in future. If they fail to do so, they would face action leading to prosecution and fines.

The British Bankers' Association said:

"Banks take their responsibilities for protecting customers' personal information very seriously and each bank has secure arrangements for disposing of confidential customer information.

The banks concerned have fully investigated the circumstances and taken appropriate steps to ensure that any weak links in their security practices have been addressed
."

The statement by the Bankers' Association is of course contradictory, what is the point of having secure arrangements if they are not followed?

Pretty pathetic really, it hardly leads one to conclude that the high fees that banks charge for their "services" are justified.

Thursday, March 15, 2007

HMRC Porposals Not Fit For Purpose

The Institute of Chartered Accountants of Scotland (ICAS) have put the boot into HMRC proposals on tax penalties.

ICAS describe the proposals as "not fit for purpose".

In a press release issued today, ICAS say:

"The single penalty regime for non-payment or underpayment of taxes proposed by HM Revenue & Customs is not fit for purpose, according to The Institute of Chartered Accountants of Scotland (ICAS). Responding to HMRC’s consultation document, ICAS spells out two main problems with the proposals.

The legislation would introduce new concepts about what behaviour is reasonable, whilst failing to define what is expected of the taxpayer. This means that the ultimate arbiter in any dispute would be the tax inspector
."

The question is, will HMRC listen?

Wednesday, March 14, 2007

Claims Allowed

The Financial Services Compensation Scheme (FSCS) has announced that it will welcome compensation claims from clients of Carden Insurance Services Limited of Rubislaw Den South in Aberdeen, and Spear Gulland Financial Services Limited in Lynedoch Crescent, Glasgow.

These firms have been declared in default.

Loretta Minghella, chief executive of the FSCS, said:

"It is important that we let consumers know that FSCS may be able to help if they have lost money and the firm can't pay."

Thursday, March 08, 2007

Virgin Media

Congratulations to Virgin Media on their successful launch into the world cable TV. Not only have they raised the price of my package by £2, they have also dropped Sky One owning to a dispute over costs.

Customer service at its best!

Hardly the most inspired of launches was it though?

Tuesday, March 06, 2007

British Gas

British Gas have announced that they will not be introducing a £5 late payment fee for recalcitrant customers.

This change of heart is due in no small measure to the pressure applied by consumers, who were upset at facing what they viewed as price rise by stealth.

However, before the champagne corks are pooped, the gas consumer would do well to remember that this is in effect no more than a Pyrrhic victory:

1 Pay your bill on time, and you would never have suffered the late payment fee

2 The cost of recalcitrant customers will be met by all of British Gas's customers, in some form or another.

Saturday, March 03, 2007

Money For Old Rope

Much like sharks, when they detect blood in the water, some claim recovery firms are quick to rush in when they see an easy way to make money.

Such seems to be the case with some firms, who have been handling claims for endowment mis-selling, who are now entering the market to help people recover excess bank charges.

Needless to say, they don't provide their services for free and expect a cut of around 25% of monies recovered.

The question that the man in the street ought to be asking himself is this:

"Why do I need to pay for a service that I can do myself?"

Read more about the issue here FT.

Friday, March 02, 2007

Mortgage Exit Fees

The hapless home owners, screwed by the endowment mortgage scandal and high mortgage exit fees, may be forgiven for thinking that the banks and loan companies merely regard them as a cash cow to be slaughtered for their personal consumption.

However, after some considerable pressure from the Financial Services Authority (FSA), there may at least be a some respite for those home owners who have suffered from unreasonably high mortgage exit fees.

In January, the FSA told lenders that they would need to justify raising mortgage "exit" fees.

The FSA said if they could not do so by 28 February, then they would have to agree to charge no fee at all, or keep with their original fee.

It seems that has produced a positive result. Robin Gordon-Walker, an FSA spokesman, said:

"Certainly the impression we are getting as we go through the responses is that most lenders have gone for the original mortgage exit administration fee option."

Many of the fees charged by lenders have doubled to between £200 and £300.

People who have paid the raised charges will now be able to go back to their former lenders, and ask for some of their money back.

Ray Boulger, from John Charcol, told the BBC:

"Around 10 million mortgages have been redeemed in the last four years.

But the number of people who claim compensation will no doubt be largely influenced by the amount of media coverage this topic receives.

However, I would estimate that the total compensation payable will be at least £50m and probably in the region of £100m
."

However, before people start popping champagne corks, remember that the banks and lenders will find other ways to part you from your cash.

Thursday, March 01, 2007

The Forthcoming Credit Squeeze

Those of you who are heavily in debt, and rely upon debt to pay your debt, be warned; there is a credit squeeze coming.

Aside from the prospect of further interest rate rises, which increases the cost of borrowing, banks and credit card companies are in the process of reviewing their customers' debt portfolio and tightening up their terms and conditons.

Such changes include; reducing credit limits, refusing new loan applications and reducing the amount of cash that you can withdraw via credit cards.

All of this will cause pain to those who are heavily in debt, and living "at the end of their credit lines", by forcing them to address their indebtedness.

A cynic might argue, that had the banks and credit card companies been a little more stringent in the first place with regards their customer portfolio, then there would be no need for this credit squeeze (shutting the stable door after the horse has bolted) now.