Loans and Finance

Loans and Finance

Text

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

Monday, April 30, 2007

The End of Free Banking

The Office of Fair Trading (OFT) last week announced that it would launch a full-scale investigation into unfair bank charges on current accounts.

The OFT inquiry will be completed by Christmas, and will examine whether the "provision of so-called free banking" is explained clearly to customers. The OFT will also continue to study the fairness of unauthorised overdraft fees.

OFT chief executive, John Fingleton, said:

"This market study will enable the OFT to consider wider questions about transparency and value in the provision of personal current accounts. This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned-item charges before we apply the law in this area."

Needless to say the banks have been quick to issue a counter threat, by warining that any regulatory restriction on unauthorised borrowing charges might force them to end free banking to their customers who stay in credit.

As noted many times before on this site, banks are not charities they will make money one way or another.

Friday, April 27, 2007

Barclays Face Investigation

Barclays face an investigation by the Information Commissioner's Office (ICO) as a result of the recent BBC programme "Whistleblower", which placed an undercover reporter in a Barclays call centre and one of their high street branches.

Whistleblower alleged that call centre staff accessed private customer files, and made sales calls to people who asked not to be contacted.

The ICO said that the allegations were a cause for concern.

The BBC placed their undercover reporter in the Doxford call centre in Sunderland, where she found examples of mis-selling, employees lying to customers and security failings.

Quote:

"I've seen customers misled, lied to and treated with contempt. I've seen people charged for financial products they neither asked for or knew they had."

The ICO has asked Barclays for the results of an internal inquiry, and for a copy of its policy on telephone sales.

Barclays said in a statement:

"We take the allegations made by the programme very seriously and are conducting our own internal investigation. Where there has been improper behaviour we will take action to improve what we do. Of course we will also fully co-operate with the Information Commissioner's own investigation."

To add to Barclays humiliation Reuters report that it faces a US investigation by the Securities and Exchange Commission (SEC), into allegations of insider dealing by bank staff who served on bankruptcy committees.

The SEC will look at trading activity between 2002 and 2003 by a proprietary trading desk at Barclays.

A separate lawsuit filed against the bank in March by a former employee alleges that Barclays' U.S. distressed debt desk, which deals in bankrupt company bonds, traded debt after "potentially gaining nonpublic information" through bankruptcy creditor committees.

This has been topped off by the news that a group led by Royal Bank of Scotland says that it plans to go hostile if necessary with an offer for ABN AMRO, the Dutch bank that has already agreed a deal with Barclays.

The hostile bid is estimated to be worth around £49BN, compared with the £45BN offered by Barclays.

Not a happy week for Barclays!

Wednesday, April 25, 2007

The Phone In Rip Off

The poor old consumer has to be ever more vigilant these days, guarding himself/herself against rip offs and unnecessary products/services being foisted upon him/her by unscrupulous and dishonest individuals/companies.

Aside form the myriad of companies pushing loans with excessive interest rates, unnecessary PPI products and "ambulance" chasing lawyers it is now revealed that the phone in competitions run by our "trusted" media organisations are in fact rip offs.

This should come as no surprise to anyone, given the extortionate fees being charged per call and the ludicrous odds of actually being able to get through.

Nevertheless, the British consumer seems to be particularly gullible and has spent a veritable fortune on these scam phone competitions.

Finally they are now being exposed for what they really are. The BBC's Panorama programme broadcast on Monday revealed that viewers have been defrauded of millions of pounds on a phone in operated by GMTV's breakfast show.

Seemingly for the past four years Opera Interactive Technology, a company working for GMTV, had been finalising shortlists of potential winners "long before" lines closed.

GMTV has, not surprisingly suspended all phone-in quizzes, but said it was confident it had not breached regulators' codes.

Opera Interactive Technology have denied any wrongdoing.

Panorama claims that tens of thousands of callers had been charged £1.80 to enter competitions on GMTV, but at least 50% of them had no chance of winning.

The programme estimated that since 2003, callers had wasted £10m a year entering the competitions.

The premium rate phone line watchdog Icstis has formally written to Panorama to request a copy of the programme's evidence, which it would use to decide whether to launch an investigation into the "serious allegations".

Panorama said Ofcom has launched a formal investigation, following a complaint against GMTV and Opera. But Ofcom has not confirmed that it is related to the same issue.

GMTV has now terminated its contract with Opera Interactive Technology.

The lesson to be learned here is simple, don't waste your money on phone in competitions.

Tuesday, April 24, 2007

Living Beyond Our Means

Those of you who are yet to be convinced that we as a nation are living beyond our means, should read the Spring forecast presented by the Ernst & Young ITEM Club.

The report starts out optimistically enough, predicting growth of 2.9 % GDP for 2007 and noting that a rapidly expanding business sector is now driving UK economic growth faster than household or government spending.

However, ITEM then goes on to note that as a nation we are far too relaxed about risk, inflating assets and the costs of borrowing (as a result of the "benign" economic conditions in which we are living).

Professor Peter Spencer, Chief Economic Advisor to the Ernst & Young ITEM Club, says:

"Many people are following the Chancellor's lead and are borrowing to finance consumption. The UK's current deficit has reached 3.5 % of GDP which suggests that as a country we are close to the edge. Ultimately, we are all skating - not to say wobbling - on thin ice. There's a danger that we are slithering into complacency."

Spencer warns of an increase in interest rates, which will squeeze homeowners and borrowers.

Quote:

"...it is clear that interest rates will be pushed up again to 5.5% after the May MPC meeting, putting them 1% above their level in early August."

He warns:

"Both as individuals and as a country we have borrowed a huge amount to support this growth. The bottom line is that we are all living beyond our means.

In the short term, Mr Brown has resorted to borrowing for consumption. If the Chancellor is forced to borrow so much when the economy's so sweet, what will happen when it turns sour
?".

Economies work in cycles, we have been privileged to live in a time when the British economy has enjoyed a lengthy period of growth and prosperity. However, history teaches us that at some stage, there will be a downturn.

Monday, April 23, 2007

Tamil Tigers Target Petrol Stations

Those of you who use credit/debit cards to buy your petrol (ie all motorists) should be on your guard.

It seems that there is an international credit/debit card scam being perpetrated by criminals with links to the Tamil Tigers, the victims being motorists who buy their petrol via credit/debit cards.

The victims' bank details are being skimmed, and the card details and Pin numbers are then used to withdraw money from customer accounts.

It is estimated that approximately 200 of the UK's 9,500 petrol stations have been targeted. Police are investigating complaints made in Edinburgh, Norwich, Bury St Edmunds, Peterborough, Nottingham, Leeds, Bristol and Hull.

Keep a close eye on your bank and credit card statements for anything suspicious.

Friday, April 20, 2007

British Gas Lambasted

British Gas has been lambasted by Energywatch, which has reported that the number of complaints from customers have more than doubled in a year.

As from October 2006 to March 2007, British Gas had 21,427 complaints mainly concerning disputes over bills.

The total number of complaints and enquiries from British Gas customers hit a stonking 14,001 in March.

Ironically, although British Gas has around 30% of the market, it has over 70% of the total complaints in the industry.

Well done British Gas!

Seemingly, according to British Gas, the problems are being blamed on their new computerised billing system. How many times have we heard that tired old refrain "it's a computer error"?

Let me nail that nonsense once and for all, computers are programmed and operated by humans; the computer is only as good as the software and data input. Where errors occur, these errors are due to human error not computer error.

These problems imply that British gas had not tested its new system thoroughly enough before going live.

As if to add to the hapless customers' woes, British Gas has also managed to find itself without an adequate number of staff available to handle the complaints arising from this mess.

Energywatch noted:

"But it has compounded the error by not having the level of customer service, and the ability to handle customer complaints, in a way that leaves customers assured that British Gas is taking their problem seriously."

British Gas are rather shame faced about this fiasco, and have taken on an 800 extra staff to deal with customer queries (doubtless the extra costs of the face saving exercises will be reflected in gas future bills).

Phil Bentley, MD of British Gas, told the BBC:

"Obviously we apologise for the inconvenience and the stress.

I understand what it's like to get a bill that's incorrect. We apologise to those customers and we're working very hard to improve services
."

Finally, as if to rub salt in British Gas's festering wounds, Energywatch's data reveals that most other suppliers have at least halved their complaints on a year-by-year basis.

Well done British Gas!

Thursday, April 19, 2007

Consumers Encouraged To Litigate

The Office of Fair Trading (OFT) has decided to encourage consumers, who have been cheated, to litigate against the miscreants.

The OFT has stated that it believes that the public should have wider access to litigation, if they have bought goods from companies that operated cartels or otherwise colluded to fix prices.

The OFT has also committed to becoming more proactive in helping consumers bring private claims.

Lat year consumers were given the right to sue companies that have engaged in anti-competitive. However, the costs of mounting such a lawsuit has prohibited many from taking them to court.

The OFT has stated that it will address the costs of consumer based litigation. It intends to introduce new forms of "no win, no fee" arrangements.

Matthew Levitt, a competition law expert at Lovells, is quoted as saying:

"The OFT will be sensitive to the need to avoid the 'excesses' of the US system. One of the key features of the US system - triple damages (where consumers are awarded compensation equal to three times their loss) is not part of the OFT's proposals."

However, quite how long the process of taking this forward to practical reality will take is anybodies guess.

Wednesday, April 18, 2007

Interest Rates Set To Rise

Yesterday's shock rise in inflation to 3.1% has sent a warning signal to the financial markets that interest rates are sure to rise, in order to try to tame the inflationary tiger.

The rise in inflation forced Mervyn King, Governor of The Bank of England, to write a letter of explanation to Gordon Brown, as its rate was more than 1% higher than the 2% target.

This was the first such letter in almost 10 years.

Mr King blamed the sustained rise in inflation partly on sharp increases in food, electricity and gas prices over the past year, but also on businesses discovering a greater degree of pricing power as the economy continued to grow.

Sterling broke the $2 barrier, for the first time since 1992, in anticipation of the rise in interest rates.

However, before savers rush to celebrate in anticipation of seeing their meagre returns on savings rise; they should be aware that banks are very happy to pass on interest rate rises to borrowers, but are remarkably recalcitrant when passing on benefits to savers.

Tuesday, April 17, 2007

NatWest Caves In

Congratulations to the unnamed businessman who took a principled stand against the excess bank charges levelled by NatWest, and succeeded in getting them to refund him £36K.

This is believed to be the largest sum ever refunded to an individual customer, since the start of the consumer revolt against excess bank and credit card charges.

NatWest caved in rather than face Justice in court, where it would have had to explain the reasons for its bank charges.

The anonymous Norfolk businessman challenged NatWest over the £26,010 worth of charges he was levied between January 2001 and February 2003. These fees were mainly for cheques and direct debits that bounced. He also claimed £10,280 interest and £400 costs.

Quote:

"The bank said it was my fault that the company grew too big too quickly - ie didn't have enough cashflow."

However, he claimed that his business had a turnover of over £1M, no mean feat, yet NatWest refused him an overdraft above £10,000.

A case management conference had been due to be held next month, in which he had planned to ask the judge to order NatWest to disclose the real cost of bouncing cheques and direct debits.

NatWest blinked first, and decided that it was less expensive to pay him rather than to rack up legal fees and publicly admit the true cost of bouncing a cheque.

However, before everyone reaches for the champagne, consider this; the banks will find other ways to make their living from their hapless customers. Should they be forced to lower their charges for bounced cheques etc, they will simply start charging for other services previously taken for granted as being free.

This is only a victory in battle, not a victory in the war against greedy banks.

The Guardian has created two proforma letters that you can use to reclaim excess bank charges, they can be accessed here Guardian Letters.

Monday, April 16, 2007

The World Bank Fiasco

I hold my hands up to mistakenly saying on Friday, with confidence, that Paul Wolfowitz would be out of his job as president of the World Bank by the end of the day.

Monday morning, and he is still there vowing to stay on.

However, whilst I may have got the timing of his departure wrong, I am confident that his position is now untenable and he will soon be gone.

Unfortunately for the World Bank, and those hapless impoverished nations that rely on it, Wolfowitz's dogged determination to stay on and the rancour and negative publicity that this pig headedness is causing does the institution and those that it serves no good whatsoever.

The final nails in the coffin of Wolfowitz's career were driven in on Sunday, when the oversight committee of the bank delivered a public rebuke of his leadership, expressing "great concern" about the institution's future and the need to preserve its credibility and staff morale.

In simple terms, they want him to fall on his sword and go.

Unfortunately, Wolfowitz just doesn't seem to get it; he is working under the delusion that it is alright for him to act outwith the ethical requirements of the bank in the time honoured tradition of "do as I say, not as I do". He is also naively trying to ride the storm out.

The simple fact is that this storm will not die down, the European countries that contribute to the funding of the bank (such as the UK) want him gone. His only support comes from his friends President Bush and Dick Cheney, as the old saying goes "with friends like those..."

Friday, April 13, 2007

Sex, Power and Money

Sex, power and money are a heady combination; as any seasoned politician, member of the media or hooker will tell you.

Paul Wolfowitz, Head of the World Bank, has also learnt of the power of such a combination.

His position within the World Bank now looks untenable, as he was publicly booed and heckled by his own staff at a meeting, and forced to leave.

His crime?

Wolfowitz personally intervened to obtain a pay rise for his girlfriend, Shaha Riza, who works at the bank. he got her a nice little earner from $132,660 to $193,590 tax free.

Aside from the obvious ethical issues surrounding the merits of this pay rise, the bank rules actually forbid couples from working together.

Ironically Wolfowitz, who was an advocate of the Iraq war when he was Deputy Defence Secretary for President Bush (who appointed him to the bank), is a strong advocate for tough rules on corruption and corporate governance.

He has forgotten the cardinal rule, lead by example. Those at the top of an organisation must not only be ethical, but must be seen to be ethical.

He will be out of office by the end of the day.

Thursday, April 12, 2007

The World's Local Bank!

HSBC, which claims to be the "world's local bank", has decided that the concept of "local" is flexible depending on your income.

That at least is the case for the hapless customers of its Poole Canford Cliffs branch.

HSBC have decided that those people that it classifies as non "Premier" are no longer worthy of interacting with staff at its branch in Poole; ie it will ban "face to face" interaction with "poor people".

Why is this?

Seemingly Poole is a wealthy area and HSBC have more than enough wealthy customers, so they don't need to deal with the "riff raff".

HSBC should take note that it's the "little people" that keep many banks going, as they borrow at exorbitant rates of interst and become steadily indebted.

Arrogance comes before a fall.

To find out if you qualify to see a human being at HSBC's Poole branch, take this simple test:

Do you have:

-£50,000 savings?
-or a £200,000 mortgage?
-or a £100,000 mortgage and £75,000 salary?
-or pay £19.95 a month "premier" account fee?

No?

Then Fark Off!

Wednesday, April 11, 2007

FSA Reviews Subprime Sector

The Financial Services Authority (FSA) is to launch an investigation into the subprime mortgage sector.

Specifically the FSA will examine whether customers who get into financial difficulty, after taking on a subprime mortgages, are being treated fairly by banks.

Yet another indication that, following on from the endowment shambles, the mortgage industry in Britain has something of an image problem.

The FSA will also look into lifetime mortgages, and related matters.

Subprime mortgages, aimed at people with poor credit ratings, have caused chaos in the USA as the number of repossessions and defaults rockets.

The FSA will publish its findings this June.

There are approximately 40 companies in the UK that handle subprime business. They account for approximately 6% of the UK mortgage market.

Dan Waters, director of retail policy at the FSA, is quoted in the FT as saying:

"This next stage of the mortgage effectiveness review will focus on more specialised sectors where we think there is greater risk of consumer detriment.

We will also look at the treatment of customers in arrears. The findings of the review will help inform our thinking about how we might apply a more principles-based approach to our mortgage rules
."

It shall be interesting to see how principles and mortgages can be "married".

Tuesday, April 10, 2007

Hacking Threat To 5 Million PC's

Research, carried out by the government, indicates that around 5 million UK home computers are open to criminal attack.

"Internet Safety: The State of the Nation" has been published on the government's website www.getsafeonline.org.

The research shows that UK PC owners are making fundamental errors, that expose them to hacking and identity theft.

Tony Neate, managing director of Get Safe Online said:

"Protecting your home PC is a basic part of being safe and secure from the threat of criminal activity on the internet.

The fact that there are millions of households where the virtual backdoor is left wide open for criminals is a real concern – these people risk not only losing their own personal and financial information, but also put others at risk if criminals are able to access an innocent user's PC or internet connection. None of us would ever leave home without locking our doors and windows; by taking a few simple steps we can all ensure that our computers' doors and windows are automatically 'locked' every time they are switched on
."

The research found that:

  • 36% of the UK's 13.9 million home internet-connected PC users – 5 million machines – do not have any form of firewall stopping hackers from gaining access to their computers and using personal information.


  • 46% do not have anti-spyware software.


  • 35% of home PC users said they do not download updates from Microsoft or Apple to ensure that their machines have the latest security updates.


  • Over 10% of the 9 million broadband users in the UK do not have a firewall on their home PCs.


  • 21% households that use wireless broadband for their PCs say that they do not have password protection on their connections. This means that criminals could "take over" their internet connection and use it to send thousands of spam emails, posing as the legitimate user.


  • 25% of home PC users do not have anti-spam programmes which would protect them from "phishing" attacks and other email frauds.


  • Almost 1 million home PC users do not have anti-virus software on their machines.


Nick McGrath, Microsoft and Get Safe Online spokesperson, said:

"Governments and businesses are working tirelessly to counter online security threats but the reality is we're dealing with criminals who use ever more sophisticated methods to attack computers.

Regardless of security measures that have been pre-installed, entirely new and complex threats will continue to emerge.

Prevention is the best defence! For many people today, a PC is increasingly becoming a vital investment for the home and as long as some basic measures are taken from the moment of boot-up and throughout its life-time, it can remain that way
."

You have been warned!

Thursday, April 05, 2007

What Goes Around, Comes Around II

In case you are worried that Gordon Brown's raid on pensions ten years ago, which effectively destroyed one of the most successful pensions industry in the world, will have adversely affected his pension...please worry no more.

The Liberal Democrat pensions spokesman, Lord Matthew Oakeshott, said that the chancellor would have a pension pot worth more than £3.5M if he became prime minister.

How does this come about?

Simple, MPs' pensions have been unaffected because they have successively voted to make up the shortfall with taxpayers' funds.

Brown will pay dearly for this.

Tuesday, April 03, 2007

What Goes Around, Comes Around

Those of you with reasonably long memories may recall the heady days of 1997 when Gordon Brown, the newly appointed Chancellor, performed his smash and grab raid on the British pension industry.

His sleight of hand, where he raided dividend tax credits, netted him a £5BN a year.

Whilst there were protests at the time, over the dangers that this posed to the pension industry, Brown did what he does best and ignored them

However, as the old saying goes:

"What goes around, comes around"

In the 10 years since Brown's smash and grab raid, the pensions industry in Britain has effectively fallen apart; helped on its way to an unseemly end, in no uncertain terms, by Brown's dividend credit heist.

Those of us, still lucky enough to have a defined benefit company pension are in a fortunate and ever dwindling group. Defined benefit schemes have been closed by many companies, as people have been asked to move to defined contribution schemes.

Those who work for the state, are still enjoying the benefits of the defined benefit scheme. Unfortunately, thanks to Brown, these have become increasingly expensive. The result being that council tax throughout Britain has been raised annually, in order to pay for these pensions.

It is somewhat ironic that only now, after a two year battle using the Freedom of Information Act, that it has come to light that Brown was warned by his advisers of the chaos and damage that his pension smash and grab raid would wreak upon the pensions industry in Britain.

Seemingly, Brown has been fighting to keep this information secret.

Why?

He stands accused of destroying the pension industry, at the very time he seeks to stand for leadership of the Labour Party.

As one cab driver eloquently put it to his Labour party passenger:

"You bastards stole my pension".

Brown will pay a heavy price for this action, he may win leadership of the party but he most assuredly will lose the leadership of the country.

Monday, April 02, 2007

The 45 Million Credit Card Heist

Congratulations to TJX for entering the history books, by being the victim of the largest reported data theft in history.

Person or persons unknown have hacked into the TJX database, and stolen data from at least 45.7 million credit and debit cards of shoppers at off-price retailers including T.J. Maxx and Marshalls.

However, the problems for TJX don't end there. Rather foolishly, although they reported the theft 2 months ago, they only reported the number stolen card details last week.

That mistake and the possible security lapses may well cost them dear, as various orangisations are mooting taking legal action against them.

IT experts have been quoted in the Media as saying that the information disclosed to date, indicates that there were security weaknesses viz; failure to promptly delete data on customer transactions, and to guard secrets about how such data is protected through encryption.

Deepak Taneja, chief executive of Aveksa, said:

"It's not clear when information was deleted, it's not clear who had access to what, and it's not clear whether the data kept in all these files was encrypted, so it's very hard to know how big this was."

Card companies and banks around the world are having to reissue cards to customers, as a precaution against fraud.

Information from 45.7 million cards was stolen from transactions beginning in January 2003 and ending November 23 of that year.

TJX faces an investigation by the Federal Trade Commission, which could fine the company, and lawsuits accusing the firm of failing to safeguard private data.

TJX is the parent company of the T.J. Maxx, Marshalls, HomeGoods and A.J. Wright stores in the US, Winners and HomeSense in Canada and T.K. Maxx in Britain.