High street banks have strengthened their code of practice over fears that consumers are taking on too much debt.

New rules introduced on Saturday will encourage lenders to ensure that money given to customers for consolidation purposes will be used to clear existing debts.

At the same time banks should make sure that if two people's incomes are used to access the affordability of a loan, the loan should then be made in joint names.

Lenders will also have to go to greater length to ensure that the person borrowing money will be able to pay it back.

The move comes amid growing levels of individual bankruptcies and record consumer debts. UK consumers owe a massive £1.2 trillion and increasing numbers of consumers are struggling to pay their debts.

The Banking Code Standards Board had expressed concerns that lenders were not going to sufficient lengths to ensure consumers could afford repayments when they advanced them further credit.

Other measures include lenders considering two aspects of affordability to assess people's ability to repay debt.

These include looking at their income and financial commitments, considering how they have handled their finances in the past, using information from credit reference agencies, credit scoring, or, subject to permission from the customer, using information from other sources such as their employer or landlord.

Seymour Fortescue, chief executive of the Banking Code Standards Board, said: 'In the context of rising concerns about personal indebtedness, our reviews have suggested ways in which the code could be strengthened.

'We are pleased that our recommendations have been accepted by the industry and believe they should encourage responsible lending and responsible borrowing.'

However, others don't think the new rules go far enough. Malcolm Hurlston, chairman of the Consumer Credit Counselling Service said: 'Self-regulation is the best way forward and this more stringent guidance is certainly a step in the right direction. There is, however, still a lot to do.'

The organisation is concerned that the information used to base credit decisions on is still scant.

The inquiry found that in some cases banks lent people money to consolidate existing debts, but did not make sure consumers used the money to repay or reduce their outstanding borrowings.

In other cases banks assessed the affordability of loans on joint incomes, but failed to ensure both parties were liable for, or even aware of, the debt.

It also found that loan terms often reflected borrowers' ability to afford the debt, rather than the purpose the loan was being taken out for, with seven-year loans taken out to pay for holidays in some cases.

http://www.myvesta.org.uk

This is Money
30 March 2006

One in five bankrupts is now under the age of 30 as student debt and the consumer spending splurge starts to bite.

The proportion of bankruptcies among the 18 to 29-age group has jumped from 7.9% in 2001 to 18.7% last year. The average age of a bankrupt has fallen from 43 to 41 in the last four years but female bankrupts tend to be younger than male bankrupts.

The figures, from the Insolvency Service, highlights a worrying trend for a Government that is trying to encourage pension saving amongst the young. The UK's consumer debt mountain, which includes mortgages, currently stands at £1.2 trillion and shows no signs of shrinking.

It also echoes today's call from the Financial Services Authority that young people need better finance education while at school. The City watchdog said a generation are growing up with no savings, no pension and huge debts.

Philip Long, head of corporate recovery at accountancy firm PKF, described the figures as worrying.

He said: 'It's easy for young consumers to get credit. As soon as they finish college they are offered consolidation loans for their student debts and it's too easy to make the situation worse.'

He predicts the average age of a bankrupt will continue to fall when student fees are raised later this year. Debt to the Student Loans Company is currently outside of bankrupt laws, but by consolidating it to a normal bank loan, the individual can claim for bankruptcy.

Long added that banks are failing to do properly assess a borrower's ability to repay. He said: 'We had a bar maid come to us who earned £1,000 a month gross, living in London. She had £30,000 worth of store card debt.'


Insolvency Service director of policy Mike Norris said: 'The research gives us some interesting information about the characteristics of bankrupts over the period.

'While the profile might be changing in some respects, men in their 30's and 40's continue to account for the largest number of bankruptcies and average scheduled debts continue to fall between £45,000 and £50,000.'

Nearly two-thirds of individual bankrupts in 2005 were men, according to figures from the Insolvency Service, with the average bankrupt owing £46,000.


• See if you can reduce your home phone costs by visiting our Money Shop section. You will also find some useful hints in our Money Savers articles.

However, the proportion of women filing for bankruptcy is rising, up by seven percentage points to 39% last year.

The national statistics were mirrored by regional figures, with men more likely to be bankrupts than women in all seven regions featured.

It added that all regions had seen an increase in the number of young people becoming insolvent, with the Midlands and the South West seeing the biggest jump.

http://www.myvesta.org.uk

Michael Clarke, This is Money
28 March 2006

HBOS, HSBC, Lloyds TSB and the Royal Bank of Scotland have teamed up with credit reference service Callcredit to launch the initiative to tackle over-indebtedness.

The lenders will share their customers' income data with the banks, along with current account information. The move will allow banks to form better decisions about whether an individual will be able to repay a loan or credit card.

The credit reference agency will provide the participants with details of customers who are severely overindebted and in need of debt advice. It will also provide daily alerts of customers whose changing levels of indebtedness may be a cause for concern.

Previously, lenders have focussed on how well a consumer has managed debt repayments and how much credit they can have on existing deals.

Callcredit managing director John Andrew said: 'The Government wants more consumer protection for borrowers and the lenders want to provide a better service to their customers.

'It is true that only a small percentage of customers are overindebted and our initiative provides additional opportunities to offer these customers appropriate advice and support.'

The scheme has been in planning for two years and it is expected more banks will join it as it progresses.

Lenders have taken steps to tighten up on who they lend to in recent months after several suffered a rising level of customers with bad debts.

Barclaycard recently said it has upped the proportion of applicants it rejects. It was part of a scheme, along with Egg, Abbey and the Co-Operative Bank, launched last year to expand the level of customer information they supply to the main credit reference agencies.

Banks share negative data, which shows if a customer has missed payments. However, it is difficult to judge how indebted a customer is on that information alone.

UK consumers currently owe £1.2 trillion, including mortgages, and bankruptcy figures show the number of individuals experiencing money difficulties is soaring.

http://www.myvesta.org.uk

Michael Clarke, This is Money
30 March 2006

People in debt are being warned of the severity of receiving a County Court Judgement (CCJ).

It may be a common misconception that getting a CCJ is an easy way to see off creditors and to prevent the lender from handing out more charges.

The consequences of being given a CCJ however can be very damaging.

Your credit rating will be affected negatively by CCJs and you may be left in a position where borrowing money in the future could be very costly.

"People underestimate the impact of CCJs," says Stuart Glendinning from Moneysupermarket.Com, "they simply don't appreciate the impact on credit ratings".

Once a CCJ has been issued all is not lost however, and if the borrower can make a full payment before they are due in court, the judgement will be dropped.

The important thing is to get in contact with the lender to prevent the action being taken.

http//:www.myvesta.org.uk


© Adfero Ltd

Credit cards can catch you out if you do not plan your finances properly.

We are being urged to ensure we know exactly how much we intend to borrow and how much we can afford to pay each month before signing on the dotted line.

Without budgeting properly many people can fall in to the trap of taking out a credit card and falling behind with repayments, often not having considered penalty fees and interest.

New research from Egg shows 22 per cent of card holders spend their money on day–to-day objects.

Mark Maguire, spokesperson for Egg, says getting a low APR on purchases is essential: "Some things are predictable, such as your mortgage and some things are more sporadic, such as restaurants."

"If you know how much you will have after bills, then you will know what you can spend and also where you can make savings," concludes Mr Maguire.

Egg's Retail Therapy Index shows that in the UK we spend a massive £65 billion a year on daily objects, such as snacks and newspapers.

http://www.myvesta.org.uk

© Adfero Ltd

Examining the small print reveals nasty surprises for some of the most vulnerable, reports Ian Cowie

Parents and pensioners promised help by Chancellor Gordon Brown in this week's Budget may be disappointed to learn from the small print that delivery is years away.


Take a closer look: there are some nasty surprises in the Chancellor's budget

Nor will all the innovations and amendments in the hundreds of pages issued by the Treasury on Wednesday prevent people on the minimum wage suffering marginal taxes of 70 per cent - more than millionaires pay - say accountants.

There is also an unpleasant surprise for 10 million people who must complete self-assessment tax returns - the deadline is to be brought forward by four months - and an immediate crackdown on family trusts designed to avoid inheritance tax.

Politicians seeking office used to be satisfied by kissing babies but Chancellor Brown went further on Wednesday, saying he would double child trust fund (CTF) windfalls to a minimum of £500 per child. About 2.3 million vouchers worth at least £250 each have already been distributed; now a second CTF voucher will be posted after each child's seventh birthday. Never mind that more than a third of those already distributed remain unused.

The Chancellor said that child tax credits (CTCs) - not to be confused with CTFs - will be increased in line with earnings until the end of this Parliament. Tax breaks on employers' childcare vouchers will rise by 10 per cent to £55 per week next month.

However, George Bull, of accountants Baker Tilly, said: "The increase in CTCs was presented as a goody for parents but Treasury papers make it clear this will not have any cost to the Exchequer until 2008."

Pensioners and the disabled were promised free off-peak bus travel nationwide but this will not arrive until April 2008. Pensioners will also get £200 winter fuel allowance - but not the £200 bung to soften the blow of council tax hikes that was promised before the Election. Joe Harris, of the National Pensioners Convention, said: "Millions face council tax increases of five per cent and rises in fuel bills of up to 25 per cent. But the basic state pension is set to rise by £2.20 to just £84.25 a week."

The personal allowance - the slice of income everyone receives before paying income tax on it - will rise by £140 to £5,035 in April. But Mike Warburton, of accountants Grant Thornton, said means-tested tax credits will continue to prove a poverty trap. "This Budget does nothing to increase the income low-paid people can receive before tax credits are withdrawn at a rate of 37p in the pound," he said.

"So someone earning the minimum wage of £5.05 an hour - due to rise to £5.35 in November - who works 30 hours a week will pay an effective tax rate of 70 per cent. That is, 37 per cent loss of tax credits, plus 22 per cent basic-rate income tax, plus 11 per cent National Insurance contributions - all on an annual income of as little as £7,185."

Homebuyers and owners will gain some relief from the Chancellor's decision to raise the starting point for stamp duty to £125,000 and inheritance tax (IHT) to £285,000 in April.

However, the Council of Mortgage Lenders said these thresholds needed to rise to £146,000 and £522,000 respectively to keep pace with rising house prices. Fiscal drag - failing to preserve the real value of allowances - has helped quadruple receipts from stamp duty and double the IHT take since 1997.

All higher-rate taxpayers, the self-employed and people with income from more than one source will have to file tax returns sooner - and may also have to pay bills earlier. Carolyn Steppler, of KPMG, said Budget small print will bring the deadline for filing self-assessment forms forward by four months to September 30 2008 - or November 30 that year if filed online. She added: "This is a nonsensical change and a discrimination against people who are not comfortable with computers. Will the next step be to bring the tax payment date forward from January 31, too?"

Mr Brown repeated plans to grab "unclaimed assets" in bank accounts and imposed a crackdown on IHT avoidance.

Bob Rothenberg, of accountants Blick Rothenberg, said: "Unannounced by the Chancellor is a savage retroactive attack on trusts, including those set up under people's wills. These accumulation and maintenance trusts - and interest in possession trusts - are likely to suffer six per cent IHT every 10 years, and new trusts will be subject to an immediate 20 per cent IHT charge."

His brother, David Rothenberg, warned that many families - including those of modest means - need to seek professional advice. He said: "Everyone who has made a will leaving assets in trust for their surviving spouse should review what they have done so they are not caught out.

"The transitional relief does not cover wills made before Budget day for those who die afterwards. Some people who have made wills may now be too ill to be able to change them and the changes are so monstrous in their impact on innocent taxpayers that MPs should be lobbied to demand that the rules are amended to prevent this injustice to those least able to protect themselves - the sick and dying."

Individual savings accounts (Isas) remain unchanged but initial tax relief on venture capital trusts (VCTs) will be cut from 40 per cent to 30 per cent. They will also be made riskier from April 6 as the maximum size of companies qualifying for VCT investment will be halved to £7 million.

Despite widespread doubts among experts about how next month's pension rule changes will work, the Chancellor did not mention these funds in his speech. Budget documents say there will be a partial reprieve for those "recycling" pensions to maximise tax relief. Contrary to what the Treasury said last year, it will be possible for people aged more than 50 to draw pension benefits and then reinvest up to 30 per cent of this money to gain further tax relief.

However, there was bad news for some other pensioners. Hyman Wolanski, of Alliance Trust Savings, explained: "There will be a new 40 per cent tax charge where a pensioner with income drawdown dies after the age of 75. The procedure is extremely complicated - so much for so-called 'simplification'."

http://www.myvesta.org.uk

The Telegraph

Two million households are living on a financial knife-edge, susceptible to an economic downturn, a Financial Services Authority (FSA) survey has suggested.
A further half million households are already having difficulty paying bills and meeting debts, the report found.

The FSA identified a lack of consumer knowledge, particularly amongst the 18-40 age group, as key to low levels of saving in the UK.

The FSA pledged £10m this year to boost financial knowledge amongst consumers.

Academics at Bristol University, on behalf of the FSA, quizzed more than 5,000 consumers about their personal finance know-how, the largest survey of its type ever conducted.

The survey results revealed an alarming lack of knowledge amongst consumers.

Some of the key findings included:

Half a million households are in serious financial difficulty, even in current benign economic conditions

Most Britons are good at making ends meet but not so good at saving for the future

Seven out of 10 consumers have no savings in place to see them through a sudden drop in income

42% of working age adults do not have a personal or workplace pension, yet 81% recognise that the state pension will not be enough for them to enjoy a comfortable retirement

Four out of 10 consumers who have an equity Individual Savings Account are unaware that its value can fluctuate with stock market performance.
Part of the FSA's remit is to promote financial education amongst consumers.

The survey suggests that it is amongst younger people that the FSA faces its biggest challenge.

"There is a real problem amongst the young," John Tiner, FSA chief executive, said.

"Today's 18-40 year olds are faced with greater challenges than were faced by their parents...the cost of not having the necessary skills to make sound financial decisions is becoming increasingly significant.

"We have to find new innovative, creative ways to grab the attention of young people," Mr Tiner added.

Initiatives

Over the next five years, at an estimated cost of £10m a year, the FSA plans a series of initiatives to boost personal finance knowledge, particularly amongst the young.

Pupils in 4,000 secondary schools will receive lessons in managing money and students in higher education will have access to debt and financial advice.


Younger people are being targeted by the FSA

Some large employers are to hand out financial information packs to their workers, while new and prospective parents are to receive a Money Box pack, containing details of the government's child trust fund and subsidised nursery places.

In total, the FSA aims to help 10 million Britons with managing their money.

The FSA plans to conduct mass consumer surveys every four years to see if its measures are improving financial know-how.

"We don't expect to see a dramatic jump in financial capability...just a steady improvement," Mr Tiner told BBC News.

http://www.myvesta.org.uk

BBC News

1 Annual percentage rate

Credit card companies are required by law to display a card’s annual percentage rate (APR), which is supposed to show the total annual cost a customer has to pay for credit.

2 The same, but different

However, just because two cards have the same advertised APR, this does not mean that they cost the same in interest charges. Credit card companies use 14 different methods for calculating interest.

3 Highs and lows

A card with a lower APR can end up costing more in interest charges than one with a higher APR. For example, if you borrow £2,800 over a year and pay your bill in full only every four months, a cahoot card with an APR of 11.8 per cent will cost you £40 in interest, while an HSBC credit card with an APR of 13.9 per cent will cost you £38.

4 Buying time

Although it takes a few days for a purchase to clear, most companies charge interest from the date the transaction was made. A few card issuers, such as Liverpool Victoria and Saga, wait until the transaction has cleared. This makes these cards cheaper.

5 Interest on interest

Most credit card companies charge interest on the interest that cardholders have accrued in previous months. For example, if you owed £100 one month and were charged £2 interest, you will be charged interest on £102 the next month, plus charges for any additional spending. Egg and Tesco charge interest only on new transactions.

6 Read the small print

Some cards will charge you interest on a monthly balance, even if you have cleared it in full, if you failed to repay the previous month’s balance in full. Such cards include Marks & Spencer’s &More card and NatWest’s credit card.

7 Minimum repayments

Credit card companies usually allow customers to make a minimum repayment of between 3 per cent and 5 per cent of the total balance each month. A customer with a £10,000 balance on a card that charges an APR of 15.9 per cent will pay a hefty £1,346.18 in interest over a year if he chooses to repay just 3 per cent of the balance each month. Dr Hunt says: “Paying back a smaller amount each month might seem to be a cheap way to borrow money but the effects of compound interest will quickly push up the overall cost.”

8 Saving graces

Compound interest works against debtors but in favour of savers. If you have money in a savings account, you earn interest on your interest. If you put £100 in a savings account that pays 6 per cent, you will earn £6 in one year. The following year, you will earn interest on £106.

9 Know your acronym

The annual equivalent rate (AER) is a formula to show how much interest you will earn in a year, whether your bank calculates interest daily, monthly or annually. This makes comparisons easier.

10 Monthly interest

Some account providers that pay interest monthly quote one interest rate for a product while account comparison services show another. For example, ING Direct quotes 4.5 per cent for its account while Moneyfacts shows 4.41 per cent for the same account. This is because Moneyfacts quotes the simple gross rate paid each month while ING Direct quotes the AER, which takes into account the effect of interest compounding monthly.

The Times

Extracts from the Myvesta Forum...

Question...

Hello I just wanted to ask some one about a CIFAS warnings I have a debt up to £40,000 because I lost my credit cards along with my pin munber and someone has used my cards. I have not sure what to do because I am a student I there is no way I can afford you pay back the money that I didnt spend but the banks are blameing me because I lost pin my biggest mistake and I they are saying that they are going to blacklist name for life and I will never get credit again. is this true? and can the banks can blacklist my for name for fraud for life? please someone reply

Answer...

enders who issue plastic cards which have PIN numbers go to great lengths to cut down on the possibity of fraud caused by the cards and PINs being lost together. In the literature they send you they specificaly ask you not to write down a note of your PIN and tell you never to keep a note of it in the same bag as your card. If you do not do this they consider you to be negligent and as such liable to any debt that is run up on the card should you lose it and the PIN before they can put a stop on the card.
CIFAS is an anti fraud organisation supported by the main high street lenders. As such they have rules and regulations and your bank should be able to give you exact details of what information has been put on your credit file and how long it will stay on your file. You may still be able to get credit but it will down to each creditor how they look at what has happened and if they cosider you a good risk. You can also get a copy of your credit file by applying to the credit referrence agencies ( Equifax, Experian and Callcredit) .
_________________
Best regards

Len

http://www.myvesta.org.uk

Extracts from the Myvesta Debt Help Forum.....

From a Myvesta Forum poster..

Hi, my husband and I are considering bankruptcy as we feel this is now our only option. I have been told that we will not be able to keep our landline though. Is this correct, could someone also please tell me what other assets they may take.

We currently don't have any income except incapacity benefit (husband has had major back surgery, but will be hopefully back at work in next couple of months) and child tax credits. We have 2 cars, both not worth more than £800, but need for getting kids to and from school and the other for as soon as one of us can find work.

Will will have to give up things such as the internet, which kids use for homework. We don't own a house or have anything of any value.

This probably sounds slightly silly, considering what a lot of you have had to lose, but I can't take anymore and need to know we are making the right decision.

Any advise would be gratefull appreciated.

thanks

Maria

Reply From Another Myvesta Forum Poster...

Hi Maria,

My fiance and I went bankrupt on 28th February (owing 50k between us). This was are last option after looking at IVA's and Pay plan's. We didn't have enough surplus income for an IVA and our debts would have taken us 31 years to pay back on a Pay plan!

We spent ages just waiting around in Court, didn't see the judge, just signed our forms, sworn the Affidavit and paid our fees. Saw the Official Receiver the same day (interview took 40 mins and she was quite nice).

We are tenants in a rented flat, have the internet (obviously), Sky TV, own a 7 year old car and have the usual furniture items. We told the Official Receiver that the car was needed for work and she let us keep it (it's worth about £750). She didn't mention anything else and we have not heard anything since (no news is good news as far as I'm concerned).

You will be able to keep your landline, I'd be very surprised if they mention it, tell them the car is needed for getting the kids to and from school and when you are successful in finding work, you'll need it for that too.

We panicked like mad about this, we were extremely anxious but had lots of help from forums and went through with it, there was nothing much to worry about. Our biggest concern was bailiffs calling on us but that never happened either, we had 3 months of our creditors contacting us, letters at first, then phone calls, we just ignored them. I bought a caller ID phone from Argos (£17) and screened our calls (BT had to set up their caller ID service (£1.75 extra a month), this took 24 hours to activate.

We have since opened a CO-OP Cashminder account, they will take you 9 times out of 10 (unless fraud is involved).

You won't lose anything (unless you have a 10k car, 5k plasma screen - elaborate things like that), my fiance said something poignant...

If they take everything off you, you'll get into more debt buying it all again. The second hand value of everything wouldn't be worth them taking everything in the first place.

Our landlord hasn't been involved and if you provide honest answers and are quick to help the Official Receiver out they will be ok.

We are happier now.

Good luck
Shaun

Hi Maria

I have re-read your post since posting earlier and realise you have 2 cars, I know you need both but they might take one back but cannot know this for sure, just explain to the Official Receiver if you go bankrupt.

Regards
Shaun

Reply From Myvesta Advisor...

Hi Maria,
2indebt is correct in that one of the cars may be at risk if the Official Reciever decides that you do not need more than one car (despite there low value) I think some good 'first hand' advice was offered by Shaun in his previous post also.

Thanks for your input Shaun!
_________________
Kind regards

Sean

http://www.myvesta.org.uk
----------------------
Myvesta UK - A Not-For-Profit Financial Assistance Organisation - "We Can Help!"
----------------------

Another round of inflation-busting council tax rises will be confirmed by the Office of the Deputy Prime Minister today.

Bills are expected to increase by more than twice the level of inflation. The property tax will have doubled since Labour came to office, from £525 in 1997 to well over £1,000 this year.

The average bill is likely to rise by 4.5 per cent. About 20 councils have proposed rises higher than 5%. Yet ministers are expected to judge this year's rise a success, following recent annual increases of up to 12%.

The Office of the Deputy Prime Minister will release details of each council's bill for 2006/7. Although councils have already sent their bills to householders, this is the first national picture available. Until now, details came from small surveys by newspapers and the Local Government Association.

Last week's Budget revealed that Gordon Brown expects an extra £1billion in council tax in the next financial year. Council leaders in the South complain that extra Government money has been funnelled to the North. As a result, council taxes in the South will rise more.

The Tories and Liberal Democrats say council tax has turned into the Government's most lucrative stealth tax.

Matthew Elliott, of the Taxpayers' Alliance, said: 'Pensioners are having to make the choice between paying their heating bills and their council tax, and it's time this dilemma ended.'

Mr Brown gave pensioners a £200 rebate on council tax before the general election. This has now been dropped in a move described as cynical by Caroline Spelman, Tory spokesman on local government.

Sir Sandy Bruce Lockhart, of the Local Government Association, said: 'There is £2.5bn spent on civil servants issuing directives and guidance, overseeing bid funding schemes and regulating local authorities. By cutting this bureaucracy, the money could be ploughed back into frontline services or to reduce council tax.'

http://www.myvesta.org.uk

James Chapman, Daily Mail
27 March 2006

British taxpayers will stump up £145bn in income tax this coming financial year, more than double the annual figure collected when Labour came to power nine years ago.

Grant Thornton, the accountant, has calculated that on the Government's own projections the new tax thresholds, to be confirmed in this week's Budget, will put £144.7bn into the Exchequer's coffers during the 2006-07 tax year. This would be an increase of 109 per cent on the £69bn raised in 1996-97 tax year - the last full tax year before Labour took office.

The huge increase in income tax is mirrored by the 125 per cent rise in the amount of inheritance tax people have paid since Gordon Brown became chancellor in 1997.

The Treasury estimates it will collect more than £3.6bn from death duties this coming tax year, compared with just £1.6bn nine years ago.

The tax increases have been achieved without raising headline tax rates. Instead, the tax-take has been pushed up by increasing the thres-holds where basic and higher rate taxes become payable in line with price inflation rather than wage increases.

Wage inflation has outpaced price inflation, with the result that hundreds of thousands more people have been pushed into the higher tax bracket.

The number of people caught by the higher tax rate of 40 per cent has increased steadily from 2.1m in 1997 to 3.4m last year, according to figures from the Office for National Statistics.

This week the chancellor will confirm in his Budget a new threshold for higher rate income tax of £33,300, up from £32,400 this year. This increase is in line with retail price inflation of 2.7 per cent last September, when the Treasury fixed the rate.

The Treasury said: "There are now twice as many people earning £50,000 as there were in 1997. It is only fair that as real income goes up, the amount of tax people pay rises. That is the effect of having a progressive tax system."

Mike Warburton, the senior tax partner at Grant Thornton, said that by pegging threshold increases to price inflation rather than wage inflation, now at 3.8 per cent a year, Brown will pull in an extra £6bn - equivalent to an increase of 2p on the basic rate of tax.

He added: "This chancellor has proved himself a master of the stealth tax. He has managed to double both the income tax and the inheritance tax-take without changing the rate of either."

Meanwhile, Halifax has estimated that Britain's total inheritance tax bill will triple to £5.6bn by 2020 because £360bn in housing wealth will be passed on at death over the next 14 years.

The bank said there were now 1.5m properties in the UK valued at more than the 2006-07 inheritance tax threshold of £285,000.

It added that the number of homes subject to IHT would rise threefold by 2020 if the government increased the threshold in line with retail prices rather than house prices. The steep rise in house price inflation has increased the stamp duty take more than fourfold from £2.5bn to £10bn under Labour.

Tim Crawford, the group economist at Halifax, said: "More and more estates will fall into the inheritance tax net over the next 15 years if the Government fails to index the threshold in line with house price inflation."

http://www.myvesta.org.uk

By John Greenwood (Filed: 22/03/2006)

Credit card companies have been dealt a financial blow after the Court of Appeal ruled that credit-card guarantees for goods and services also cover purchases abroad, as well as at home.

The decision, which overturned a previous High Court ruling, backs an appeal by the Office of Fair Trading and will be welcomed by shoppers who go online.

The latest ruling follows a test case in which the High Court ruled that guarantees didn't extend outside the UK.

Most card companies pick up the tab for unsatisfactory purchases made in the UK if they are between £100 and £30,000. However, these firms stood to save millions by not being liable on purchases made overseas.

Despite the victory for the OFT, the fat lady may be merely clearing her throat rather than getting ready to sing as LloydsTSB - one of three firms which sought the original ruling - considers appealing to the House of Lords. It argues that the latest ruling would, in theory, allow an individual to purchase abroad for £30,000 put just £1 on his/her card and then leave the firm open to substantial claims.

http://www.myvesta.org.uk

23 March 2006
Moneyxtra

Alliance & Leicester is at it again with sneaky mortgage fees. Mortgage rates have been crunched so low that most lenders are now clawing back costs through ramping up their front-end and back-end fees, but some simply defy belief.

My colleague Jo Thornhill, who also writes for Financial Mail, has recently become the proud owner of a flat in south east London. She applied for one of the best mortgage deals on the market, which was with Alliance & Leicester.

When the mortgage offer came through, like any decent financial journalist worth her salt, Jo checked it thoroughly, including what fees were being charged and for what. One £25 fee related to a charge A&L applies to customers who do not take out its buildings insurance.

The administration fee is charged to cover the administration cost for the lender to ensure insurance is in place. Fair enough, Jo thought, until she called A&L's insurance division to get a quote for cover. The thinking was if A&L could provide competitively priced insurance Jo might save herself a needless £25 charge.

However, she was shocked and annoyed to learn on speaking to a member of staff at A&L that the bank does not provide buildings cover for flats. After much wrangling the bank waived the fee on Jo's mortgage account saying it was a mistake. But surely A&L's computer systems should have a default function which means this fee never shows up on the purchase of flats? How many other people have bought a flat using an A&L mortgage and been unknowingly charged this fee? Let us know (or about other mortgage fee problems) by posting a comment.

Richard Dyson, Financial Mail

The Insolvency Service have now extended their Bankruptcy Restriction Orders search facility to include the reasons why a BRO had been put in place. The link to the page is here

Http://www.myvesta.org.uk

An accountant from the North-West of England has won a claim against Lloyds TSB for “illegal” bank account charges after amounting £2000 in penalties for bounced cheques, and exceeding his overdraft limit.

Reported in the Guardian newspaper, Brian Mullen lodged a claim against Lloyds TSB arguing that the penalties were illegal under contract law, and has apparently been successful.

Actually, Lloyds TSB avoided contesting the County Court claim by failing to appear. When Lloyd’s failed to pay, Mr Mullen found himself in the bizarre situation where he had to call in bailiffs to recover his debt. In fact Mr Mullen was awarded a warrant of execution, whereby bailiffs were authorised to seize Lloyds TSB assets to recover the unpaid debt. Lloyds eventually paid Mr Mullen, but in a statement reserved their right to contest the judgement, but said that they were not going to do so, even though they felt that their charges were indeed lawful.

In effect, Lloyds TSB at this time, have side-stepped the issue of the legality of their penalty charges at this time. The banks and credit card lenders might argue that penalty charges are an important deterrent to reckless borrowers. However, many argue that the level of their charges, amounting to some £2 billion each year, far exceeds the amount required to cover their costs, and may well be illegal under UK law.

It seems that in the case of Mr Mullen, Lloyds have managed to duck the issue on this occasion, but this is one problem that’s not going away.

Debtsolver Blog

Credit card companies are clamping down on customers that use their cards to bet on online gambling sites.

A number of card issuers are changing their terms and conditions so that money placed in an online betting account from a credit card will be treated as cash advance and incur a higher rate of interest.

The interest charged on cash advances is usually much higher than normal card purchases. For example, Mint charges 14.9% APR on a normal card purchase, but 17.9% for cash advances.

Online gambling has proliferated over the past three years and many gambling sites are challenging the traditional High Street bookies. Punters enjoy the ease and anonymity of betting at home, and online sites also typically offer better odds.

Royal Bank of Scotland is introducing the change from May 1 for its 11m customers. A spokeswoman said: 'The gambling transactions are to be treated as advances as this is felt to be a more accurate means of reflecting that a gambling transaction is effectively a cash equivalent exchange.'


Egg, which has 3m customers, will introduce its own change from April 1. Spokesman Mark Maguire said: 'Essentially, using your card for gambling is quasi cash and we are changing our rules to reflect that. Basically, you are using your card to buy currency.'

A spokesman for PartyGaming, one of the largest online gambling sites on the web, said that very few of its customers are using credit cards to pay for their bets.

He said: 'There are 23 different ways to load your account. Most of our customers use 'e-wallet' services, such as those provided by Neteller or FireOne.'

Michael Clarke, This is Money
21 March 2006

Banks and card providers love customers that have a laissez faire approach to their credit cards. The kind of customer that takes no interest in the rate of interest they pay, how they use the card or how much they pay off each month.

Withdrawing cash

Withdrawing cash from a cash machine using a credit card is akin to throwing money away and should only be resorted to if you are truly desperate. Most card issuers now charge a 2% to 3% fee for cash withdrawals and charge interest on the withdrawal straight away, rather than giving the customer the standard 50 days-plus interest free period on normal card purchases. It is also likely that you will be charged a higher APR on the card.

Credit card cheques

This is similar to withdrawing cash - you will be charged interest straight away with goods purchased using a credit card cheque. Credit card firms have been heavily criticised by a Government body that reviews the credit industry for sending out unsolicited credit card cheques to customers, particularly ahead of key spending periods, such as Christmas or the school summer holidays. If you are going to use the cheque, why not just use the card instead?

The APR charged on credit card cheques is also usually much higher than the standard APR. For example, NatWest charges 20.89% interest on its Classic credit card cheques – 20% higher than the standard APR of 16.9%. Mike Naylor, a researcher with Which?, says: 'Credit card cheques cost more than paying by card and give less protection and as a result are best avoided.'

Overseas charges

Taking the wrong debit and credit card on your holidays can add nearly £100 in fees to the cost of the trip. It is estimated that banks rake in around £500m in extra charges from the £20bn customers spend when using cards overseas.

Our research shows Nationwide is the cheapest mainstream provider. If you don't get a special 0% interest rate then remember to clear the debt when you return from holiday or move it on to a special deal card, otherwise you will pay Nationwide's APR of 14.9%. Nationwide's debit card on its current account also stands out as being far cheaper than those offered by High Street rivals. Check out what the High Street banks charge here.

Long-term borrowing

Using the wrong credit card for long-term borrowing is only slightly less favourable than visiting the local loan shark. With so many cheap loans around, there is very little point in funding a long-term debt through a credit card that charges interest starting at 12% APR. The cheapest deals on the loans market currently start at 5.6% and there are a number that charge less than 6%.

Michael Clarke, This is Money
16 March 2006

Half of all UK households - 49pc - have either no savings or a maximum of only £1,500 in their savings account, the Department for Work and Pensions has found.

The figure, revealed in a survey, will fuel fears about how prepared households are for financial difficulties, such as rises in unemployment.

The survey coincides with figures showing that seven out of 10 families receive benefits from the government.

Household debt has hit record levels, with the latest evidence suggesting many households are extending their mortgages to pay off credit-card bills and overdrafts.

Economists are increasingly worried that the continued build-up in debt could cause a second, more severe slowdown in the wider economy.

The hope was that the Bank of England's previous round of interest-rate rises had persuaded families to cut back on debts, but recent figures suggest this has not happened.

The numbers suggest that the savings ratio is now gradually increasing as families cut back on their borrowing. As a result, retail sales have fallen in past months as shops struggled to attract customers.

The numbers were published by the Work and Pensions Department as part of its annual survey of households' finances.

The survey also showed that 69pc of households received at least one state benefit, such as incapacity benefit or tax credits. The figure shows how much some families rely on government handouts.

A geographical breakdown of these numbers shows how much different parts of the UK are dependent on the state. In the north-east, about 26pc of families receive council-tax benefits and almost one in 10 families receives incapacity benefits.

The comparable figures in the south-east are 12pc and 3pc respectively. Similarly, only 59pc of families in London receive benefits.

The survey also showed that 57pc of working-age employees have some kind of private pension provision.

By Edmund Conway (Filed: 20/03/2006) - The Telegraph

Half of all UK households - 49pc - have either no savings or a maximum of only £1,500 in their savings account, the Department for Work and Pensions has found.

The figure, revealed in a survey, will fuel fears about how prepared households are for financial difficulties, such as rises in unemployment.

The survey coincides with figures showing that seven out of 10 families receive benefits from the government.

Household debt has hit record levels, with the latest evidence suggesting many households are extending their mortgages to pay off credit-card bills and overdrafts.

Economists are increasingly worried that the continued build-up in debt could cause a second, more severe slowdown in the wider economy.

The hope was that the Bank of England's previous round of interest-rate rises had persuaded families to cut back on debts, but recent figures suggest this has not happened.

The numbers suggest that the savings ratio is now gradually increasing as families cut back on their borrowing. As a result, retail sales have fallen in past months as shops struggled to attract customers.

The numbers were published by the Work and Pensions Department as part of its annual survey of households' finances.

The survey also showed that 69pc of households received at least one state benefit, such as incapacity benefit or tax credits. The figure shows how much some families rely on government handouts.

A geographical breakdown of these numbers shows how much different parts of the UK are dependent on the state. In the north-east, about 26pc of families receive council-tax benefits and almost one in 10 families receives incapacity benefits.

The comparable figures in the south-east are 12pc and 3pc respectively. Similarly, only 59pc of families in London receive benefits.

The survey also showed that 57pc of working-age employees have some kind of private pension provision.

By Edmund Conway (Filed: 20/03/2006) - The Telegraph

So why do Britons hate their banks to be successful? HSBC this week reported record profits, reaping £11.9 billion last year. Cue wailing about excess, accusations of fat-cattery and calls for a windfall tax on banking profits.

HSBC is a global bank producing huge profits on which our pension funds gorge themselves. Surely its success should inspire a satisfied glance towards our pensions and a flutter of pride in a UK company being a global commercial power. Instead, the bank is on the defensive, sending out missives to reassure us that it has been nice this year as well as profitable. So what? Banks are not charities. HSBC’s profits are utterly unrelated to poverty in Africa. It is not the responsibility of Sir John Bond, the chairman, to ensure that the world is a better place before he has the temerity to unveil bumper profits.

All Britain’s big banks racked up strong profits growth, almost £34 billion between the big five. Much of this income is derived from overseas — only 20 per cent of HSBC’s profits are generated in the UK. But a sizeable proportion of all the banks’ profits is down to our apathy and our willingness to buy duff products with huge profit margins because someone at the bank tells us we need them.

How telling it is that the Competition Commission this week intervened in the store card market. In a rational Universe, the cards would have disappeared the moment that consumers realised they were being fleeced by interest rates of 30 per cent. But £2.3 billion is still outstanding on store cards.

The big banks are wise to our insatiable appetite for hopeless products. Overpriced loans, standard variable rates on mortgages, payment protection insurance (PPI) that pays out only when the Moon is in conjunction with Mars — we lap them all up. The Office of Fair Trading is investigating PPI worth an estimated £5 billion a year to the banks, after complaints that it is expensive and mis-sold.

Is it any surprise that we act so irrationally as soon as a financial decision looms? If we are willing to decry the very profits that we help to generate, while simultaneously hoping for decent growth on pension funds, then rational thought has clearly had its day.

Start them young to avoid a life of crippling debt

A TACTIC employed by the banks to great effect is to catch customers young and keep them for ever. Offer a student a free iPod to open an account and he’ll be a customer for life. But the battle for youth’s financial heart is becoming two-sided.

The Financial Services Authority (FSA), the chief City watchdog, this week launched the next stage of its project to improve the financial literacy of young people. The FSA’s mission to educate as well as to regulate has been criticised in the past, and at first glance the criticism is justified.

The grand idea is to encourage organisations with links to young people to be more “proactive” in communicating “financial capability pointers”. It is tempting to dismiss the project as baseless rhetoric, but the regulator is limited by funding and reach in what it can do. Its strategy will be to provide seed capital, training and advice to higher education institutions willing to push financial literacy. A pilot scheme at Roehampton University set up seminars, one-on-one tutorials and a range of other events to encourage students to control their finances.

The flaw in the FSA’s plan is that it depends on the support of universities and charities that work with the unfortunately named Neets (young people not in education, employment or training). But the alternative, a direct campaign to reach young people, would be costly and probably ineffectual. It’s painful enough watching politicians trying to be down with the kids; the idea of the regulator attempting it does not bear thinking about.

Carefully selected statistics accompany the FSA’s glossy vision document, jostling for space alongside pictures of kids having, like, fun, you know, in a financially literate but cool kind of way. One statistic is wrenching: 19 per cent of 22 to 24-year-olds have short-term debts of more than £5,000. As we report on pages 6-11, soaring debt, the runaway housing market and a dearth of savings are all issues for a generation that faces the prospect of higher taxes to fund the long retirement of the baby-boomers. Any attempts to equip young people with the skills to mitigate these problems must be welcomed.


Antonia Senior, Personal Finance Editor - The Times

It has become the great divide, though not quite on the scale of 1981, when 364 economists (including two current members of the Bank of England’s monetary policy committee) wrote in protest over the Thatcher government’s economic policies. That schism, 25 years ago this month, was over Tory “monetarist” policies, which the 364 said would prolong and deepen the recession. Unfortunately for them, the economy began recovering before the ink was dry on their letter.

The current debate is all about debt. On one side are those who think Britain has been on a mad, debt-fuelled binge that is about to end in tears. On the other side are those who see nothing alarming in the rise in household debt.

The debt worriers include Liberal Democrat shadow chancellor Vince Cable, who warned last week that growing numbers were “drowning” in debt, and has devised a 10-point plan to tackle it. They include George Osborne, the Tory shadow chancellor, who has accused Gordon Brown of being the pusher who has created Britain’s “debt addiction”.

Some newspapers are developing a speciality in daily stories of impending debt doom. But in the bigger picture debt hardly seems to figure. The Bank of England, in its latest inflation report, published last month, was relaxed. “Aggregate data suggest that most households are not having difficulties servicing their debts,” it said.

Charlie Bean, the Bank’s chief economist and MPC member (not one of the 364), told me in an interview late last year that household debt was not a pressing macroeconomic issue. Nor, according to the Bank, was it threatening the financial system. “Overall, near-term risks to major UK banks from households, companies and foreign borrowers appear low,” the Bank said in its Financial Stability Review, published in December. “Write-off rates on banks’ mortgage books are very low and losses on unsecured household lending are modest in relation to banks’ profits.”

Rising bad debts, acknowledged by HSBC last week — it said that in 2005 there was “a significant rise in personal bankruptcies following an earlier relaxation in the law and a general expansion in credit availability” — did not stop the bank making a record £12 billion profit last year.

So who’s right? Is debt a problem or not? Let me start with a few facts. Household debt, according to the Bank of England, stands at £1,168 billion. A slightly wider definition, used by the Office for National Statistics for national accounts purposes, puts household financial liabilities at £1,276 billion.

Those are big numbers, but what do they mean? Household debt is similar in size to Britain’s gross domestic product, £1,211 billion last year. On the broader ONS definition it stands at 154% of annual personal disposable income. Debt, in other words, is equivalent to more than 18 months of household income.

The history of this ratio is quite interesting. From 1970 to 1982 debt fluctuated between 60% and 70% of household income. Then, with the abolition of controls on credit and the entry of the banks into the mortgage market, it began to increase quite sharply, reaching 100% by 1988 and more than 110% by 1990.

It then trod water during the 1990s, people having been scared off debt by the housing crash of the early 1990s, before starting to climb again some five years ago. The rise in debt from 110% to 154% of income dates only from around 2001.

There’s another way of looking at debt, which I bring to you courtesy of Michael Saunders, chief UK economist at Citigroup. This is the ratio of household debt to net household wealth, the latter made up of both financial assets and housing. It currently stands at £5,689 billion.

This ratio has been a lot more stable than the others, fluctuating between 13% and 16% from 1970 to 1990 and only creeping above that in recent years to its current 18.3%. Household debts, in other words, are more than five times covered by household assets, though evidence from the Bank and others suggests that the people who have the assets aren’t necessarily the same as those who have the debts. Whichever measure you use, the lion’s share of household debt, about 83%, is in the form of mortgages and only a minor part of it is on plastic cards.

The arguments in this debate are familiar ones. Cable and others point to a 70% increase in repossession orders last year, a rise in personal bankruptcies to a record 67,580 in 2005, a 7% rise in county-court bad-debt judgments, and the Financial Services Authority’s assessment that 2m families are “constantly struggling” with debt, though are not yet in arrears. Every five minutes, household debt rises by more than £1m.

The Bank, while accepting that debt distress is undoubtedly increasing, points out that it remains low by past standards. Last year, for example, about two in every 10,000 homes were repossessed. Without wanting to make light of it, those are about the same odds as dying by electrocution or drowning.

It is not the case, despite the headlines, that most or indeed many households are struggling with debt. It is not the case, either, that we are all stretching ourselves with mortgages of five or six times income. The median mortgage for first-time buyers is 3.1 times income, for home-movers, 2.9 times.

Nor is it the case that many would struggle even if interest rates went within the bounds of what is possible. I’m not of the school that believes a 5.5% base rate would inflict damage on the scale of the 15% interest rate of the late 1980s.

And that, perhaps, is the problem. It looked at the end of last year as though debt aversion was starting to kick in and, wonder of wonders, people were starting to repay debt.

It is early days, but that does not appear to have lasted. Borrowing, particularly mortgage borrowing, has picked up. So has house-price inflation, up to 5.5% last month from a low of 2.3% in July, according to Halifax.

The script was that this would be a year of debt and housing-market consolidation. So far, not for the first time, people aren’t sticking to that script. Debt is not a big problem yet. But in time, if we carry on like this, it could be.


The Sunday Times March 12, 2006

RUNCORN, England — Consumers have an abundance of options in modern times when picking out a credit card, deciding on a mortgage and choosing which loan products are right for them. Individuals also encounter a variety of organisations promising to help if they've spent too much and are deep in debt. With so many debt counselling agencies offering assistance with debt problems, one might think one organisation is just as good as another, and that finding the right solution to deal with all their debts is an easy task. According to Steve Rhode, chairman of the not-for-profit group Myvesta UK, just the opposite is true.

"Not all debt management organisations, be they charitable or commercial, offer the same level or range of services. Most will not actually intervene on behalf of consumers with secured or priority debts such as mortgages or utility bills. Indeed, the majority of 'debt help' organisations simply don't offer a debt management service that will include secured or priority debts," Mr Rhode said. "Organisations, be they commercial or charitable, that offer debt management services should be more transparent to consumers about exactly what type of debts they are willing to take on board as part of a debt management plan."

Mr Rhode said that some debt assistance organisations turn individuals away who don't meet their requirements.

"Many consumers that need help with more complicated priority debt issues are effectively 'fobbed off' with a self-help pack by supposedly helpful groups if the debt situation involves difficult, time consuming priority debt work or if the majority of a person's creditors are not unsecured lenders," Mr Rhode said. "At Myvesta we don't think that approach is reasonable and we certainly do not discriminate about the types of debts we will assist consumers with."

According to Mr Rhode, consumers often solely choose a debt management organisation based on the issue of fees.

"Consumers would be mistaken to select one organisation over another simply because one claims to offer services for 'free'. The offering of free services alone is not an indication of the quality of service on offer or the type of debt help and intervention that a particular organisation is actually willing to provide. Debt is debt, regardless of whether the debt is unsecured debt or not. Organisations offering 'free' debt help should intervene with all types of debt problems."

"At Myvesta we offer a not-for-profit hybrid approach including free intervention services for those individuals that cannot afford to make fee contributions for debt help and intervention and fee-based programmes to those individuals that can. This is fairer, more transparent and allows us to be completely independent from creditor influence."

Mr Rhode said, "Having learned from our many years of assisting people in the United States we understand the fundamentally flawed nature of the 'free debt management plan' argument. In the US, debt counselling organisations that used to be very vocal about offering services for free have 'egg on their faces' because they now all charge fees to remain in existence. As American credit card lenders began to reduce funding to these organisations and also tie their funding contributions to the level of collection performance, those US agencies had to start charging fees to consumers to stay in business. Their claims to be independent from creditor influence have also been shredded. As a result, their focus moved away from assisting consumers to pleasing creditors and they were basically turned into collection agencies for the creditors. We don't want to see that happen in the UK."

With debt levels reaching historic highs in the UK, Mr Rhode recommends reaching out for assistance at the earliest moment and doing some research to find the right organisation to help resolve your situation.

"If you've waited until you're thirty minutes from bankruptcy to seek help, you've lost out on many good options and solutions available," Mr Rhode said. "The key to finding a quality, inclusive solution for your debt issues is to search as early as possible for options and then realise that shopping around for the right organisation to help you just makes good sense."

# # #

Myvesta UK is dedicated to helping people create healthy financial lives. The organisation provides a wide range of materials and services to inspire and inform people so that they can break down their barriers to financial and personal success. For more information visit Myvesta.org.uk online.

Extracts from the Myvesta forum:

Question from dddebt...

I have an IVA meeting coming up in a few days.
My bank phoned my work. Not sure what was said but I was called in today and all of a sudden got a raise....with back pay ( work probably heard about my debt problem)
I have to declare this amount but I feel my privacy was violated....thus doing an IVA.

What's the banks plan into making my employer feel guilty into giving me a raise, and what is my rights now that they've called my employer?
I doubt my employer is going to tell me what they said.

Answer...

dddEBT

Creditors do ring customers employers in an attempt to speak to their customers, but as they have to comply with the Data Protection Act they should only ask to be transferred to you and should not under any circumstances disclose any of your details with anyone other than you.

Is it possible that your employers thought that the bank wanted to speak to you regarding a position with them and to keep you they have given you a rise ??

If you are on an IVA, then you should inform the Insolvency Practitoner dealing with you that your salary has increased and you have had back-pay. He will then decide if any of this should be paid to your creditors.

Regards

Len

Extracts from the Myvesta Forum:

Question from 2indebt:

We are wondering whether we will have to pay an IPA (Income Payment Agreement).

Someone told me that going bankrupt on 28th Feb, we should have heard by now if the O.R. has deemed that we have enough surplus each month to have one. We obviously don't want to pay any monthly fees for 3 years (it's a bit like an IVA don't you think?)

I know it all takes time to process but does anyone know if we should have heard by now or is no news, good news?

Thanks

Answer:

Hi 2indebt,
It will really depend on how busy the Official Receiver is and whether you have a disposable income or not. Typically the OR will want 50% of this.

Hope this helps!
_________________
Kind regards

Sean

http://www.myvesta.org.uk
----------------------
Myvesta UK - A Not-For-Profit Financial Assistance Organisation - "We Can Help!"

Fresh warnings about the dangers of store cards were made last week after a ruling by the Competition Commission was criticised for failing to tackle the problems associated with this type of borrowing.

There are 11m store-card customers in Britain, owing a total of £2.3 billion. Yet with many cards charging interest rates of more than 25%, this is a very expensive form of credit. Credit cards charge an average of 15.9%. The Competition Commission believes that store-card customers are being overcharged by more than £55m a year.

Consumer groups were hoping that the Competition Commission’s two-year investigation into the store- card market would result in card providers being forced to reduce their interest rates. Instead, those charging 25% or more will have to put warnings on monthly statements telling customers they may be able to get a better deal elsewhere. This has been criticised for not going far enough.

Lisa Taylor at Moneyfacts, a comparison service, said: “By the time you receive your statement, the damage is done.”

The consumer group Which believes it is the sales process that needs attention, so consumers will know what they’re getting into. Alena Kozakova at Which said: “Many of the shop staff who sell store cards have little understanding of the financial details, yet they are often given an incentive for each sale. This leaves customers in danger of being badly advised and ending up with a very expensive product they don’t need.”

Moneysupermarket.com, another price-comparison service, says if you spend £1,000 on a Burton card, which charges 29.9%, and pay only the minimum each month, it would take you 13 years to pay off the debt, including £1,158.28 interest.

Store-card providers often try to entice shoppers by offering them a discount — typically 10% — on their first purchase with the card. Moneysupermarket’s Robert Kenley said: “If you are making a big purchase such as a kitchen or spend a large amount on clothes, my advice would be to take advantage of the discount, but pay the full amount off within a month, or transfer the unpaid amount onto a credit card that charges 0% on balance transfers.”

The Halifax One card gives a 12-month interest- free period for balance transfers, although you will be charged a 2% balance- transfer fee. Alternatively, the Post Office’s Platinum card has a six-month interest-free period and no balance-transfer fee.

If you can’t afford to clear your store-card balance in full and don’t think you will get round to transferring it to a 0% credit card, don’t be tempted to sign up. Instead, apply for a low-rate credit card and use that to make your purchase. Co-operative bank’s Travel card has a seven-month interest-free period on purchases.


http://www.myvesta.org.uk

The Times

GORDON BROWN is being urged to spend an extra £1 billion to help two million "vulnerable" people pay soaring energy bills.

Without the extra spending, the government will fail in its goal of ending fuel poverty by 2010, says a hard-hitting report.

It claims two million elderly and disabled people in England now spend at least £1 out of every £10 on energy - making them "fuel poor".

That's DOUBLE the number three years ago and follows a whopping £350 hike in average gas and electricity bills since 2003.

The Fuel Poverty Action Group is urging the Chancellor to loosen the purse strings - or see the crisis spiral out of control. It says the government has no chance of eliminating fuel poverty among the vulnerable unless more cash flows into energy efficiency schemes.

The group wants him to commit an extra 30 per cent over the next four years. In order to find the money, it's calling for a possible windfall tax on giants such as Scottish Power.

The Chancellor already draws an estimated £13billion from taxes on the oil and gas industry.

Ministers are also being asked to consider new rules to force energy suppliers to offer cut-price tariffs for the needy.

"The significant increase in the number of households in fuel poverty is a very big setback after years of progress," says action group chairman Peter Lehmann.

The call comes days after npower hit six million customers with their second inflation-busting price hike since January.

Bosses blamed a four-fold increase in wholesale energy costs in the past three years. But it pushed up average npower bills by another £114 a year - matching the increase in this year's basic state pension.

Npower's hike followed record-breaking increases from British Gas and Powergen last month. As a consequence, one household is falling into fuel poverty every 44 seconds, uSwitch.com claims.

More than two thirds of the estimated 3.5 million fuel poor across the UK as a whole are "vulnerable" - either drawing disability benefit, in retirement or a low-income family.

FPAG warns that while the government and energy watchdog Ofgem have made progress in tackling the crisis, the reaction has not been "strong enough".

Most low-income customers use prepayment meters and these are typically 10 per cent more expensive than direct debit payments.

But FPAG argues that new, cheaper prepayment meters trialled in Northern Ireland could close the gap - meaning a saving of up to £60 a year on the average bill.

The Chancellor committed an extra £45million to fuel efficiency schemes for pensioners - such as Warm Front - in his pre-Budget report last autumn.

But FPAG claims the increase isn't enough to keep pace with rising bills. It adds that the huge hikes in wholesale energy costs show the market may not be working.

And it argues that intervention, through rules to keep prices down or forcing companies to share savings from mergers or takeovers, should be looked at.

"It's very important for government and Ofgem to strain every sinew to ensure that prices are as low as possible for low-income customers in a high-price environment," says Mr Lehmann.

"There is now little time left and further resources are required to meet the 2010 fuel poverty target."

FOR some of those struggling with ever-rising bills, the government's Warm Front scheme may help.

It awards grants of up to £2,700 to make homes warmer and heat efficient.

With this, you can receive insulation or heating improvements tailored to the needs of your home. Insulation improvements include loft insulation, draught-proofing and cavity wall insulation.

Heating improvements include gas, electric or oil central heating and repairs to your existing system.

You qualify for Warm Front if you receive one of a range of benefits and allowances, from Working Tax Credit to Disability Living Allowance. You can also claim if you're pregnant, have a child under 16 or you're aged over 60 when on income support, or housing benefit, council tax benefit, or draw an income-based jobseeker's allowance.

For more information, call Eaga Partnership, Warm Front on 0800 316 6011.

SAVE IT..

1 Ensure your heating and hot water is only switched on when you need it.


2 Shelves above radiators push heat into the centre of the room rather than letting it collect on the ceiling.


3 Fix dripping taps quickly and turn hot water taps off properly.


4 Regular defrosting of fridges and freezers reduces running costs.


5 Put lids on saucepans and turn down the heat when the food starts to boil.


6 Close your curtains at dusk to keep heat from being lost through the windows.

Energy Smart Site

A FIRM which made its fortune persuading punters to ditch British Gas offered to plug the power giant instead - if it paid them £15million.

Your Money uncovered uSwitch.com's indecent proposal to British Gas yesterday as it was sold to a US firm for £210million.

The takeover by Cincinatti-based media giant Scripps triggers a £100million windfall for founder Lord Milford Haven, the Queen's cousin.

Senior management at the site will share £19million. But a confidential letter seen by Your Money will cause huge embarrassment for bosses of the self-styled "consumer champion" and its new owners.

In a letter to British Gas, managing director Andrew Salmon claimed he could stop up to 100,000 gas and electricity customers ditching the power giant each year.

He admitted uSwitch.com's strategy was to attack market leaders such as British Gas in the hope people would leave them and join a rival. The site earns a commission each time someone switches and claims to have helped a million people find cheaper deals.

But poacher Salmon, who pockets £5m from yesterday's takeover, went on to say he was willing to turn gamekeeper - if British Gas coughed up a minimum £15.2m over three years.

He added that uSwitch.com would also want £80 each time a new customer was persuaded to join British Gas.

And he boasted that uSwitch.com made up to £200 out of each person who used the site.

When Your Money contacted British Gas it would only say that it had rejected the proposal.

USwitch.com was set up six years ago by Lord Milford Haven and expects to make £9m profit this year.

It now runs price comparisons on telephone and broadband packages as well as credit card charges.

Lord Milford Haven said: "The wonderful thing about uSwitch is that we make money by saving people money."

But critics claim its charges to power companies are actually a burden on the industry and lead to higher bills.

Asked about the letter, Salmon said: "I am not going to discuss confidential commercial negotiations.'

WE SAY: FIRMS such as uSwitch have cashed in on spiralling fuel bills by creating a switching frenzy.

Now we discover they have 200 million good reasons to get you on their money merry-go-round.

By Steve Hawkes

The Labour Party confirmed it had received almost £14 million in loans from individual supporters.

A spokesman said in a statement that a total of £13,950,000 was received and that all loans were "in full compliance" with party funding rules.

The total is considerably higher than the £4 million worth of loans already known to have been given to the party by three millionaire backers in the run-up to last year's General Election.

The Labour spokesman said: "The Labour Party has received £13,950,000 in commercial loans from individuals.

"These loans were taken out in full compliance with the rules of the Political Parties, Elections and Referendums Act.

"As set out in our statement yesterday, the National Executive Committee officers will next week propose that all future commercial loans agreed by the party be declared publicly, including their sources.

"The loans will be recorded in our annual accounts 2006 (covering January to December 2005) in the usual way

"These accounts will be published in June."

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Copyright (c) Press Association Ltd 2006, All Rights Reserved

Northern Rock has admitted to making a mistake which has left one customer paying a third more for his £20,000 loan than he was initially meant to.

Joe Kinder had asked the bank for a £20,000 loan over a 23-year term, which he wanted to pay off on an interest-only basis, the Times reports.

However, when the offer arrived it stated a repayment basis. Upon further inspection, Mr Kinder decided that he could manage the size of the repayments so began repaying the loan.

A few months after the start of the term, Mr Kinder received a letter from the bank that stated his loan was interest-only.

He told the newspaper: "The payments it is taking now are about a third higher than those I was paying before. But I understood that loan agreements, once signed, were binding on both the lender and the borrower."

The Derbyshire man contacted the bank, which refused to honour the agreement and subsequently began to take repayments from him that were a third larger than originally promised.

Northern Rock claims that it knows the error was made and has offered Mr Kinder a mortgage review to allow him to refinance his whole loan.

Meanwhile, the Financial Services Authority, who regulates Northern Rock, has advised Mr Kinder to contact the Financial Services Ombudsman if he is unable to reach an agreement with the lender.

http://www.myvesta.org.uk

© Adfero Ltd

A man has sued Lloyds TSB over its overdraft charges and has won the legal right to send bailiffs to his home branch in order to recover the cash.

Brian Mullen took the bank to court after he was charged almost £2,000 for going over his overdraft limit.

Lloyds TSB failed to challenge the claim made by the 29-year-old and he won the case by default on February 14th.

Furthermore, when the bank failed to repay Mr Mullen his money, the court gave him the power to order bailiffs to collect the cash for him at the bank's branch in Reddish.

Mr Mullen originally accumulated the debt in his student days and filed the lawsuit because he believed the charges to be illegal as they were higher than the costs incurred by the bank for the exceeding of the overdraft.

A spokeswoman from Lloyds TSB has said the bank would not appeal the case and that it had repaid Mr Mullen his money.

But it doesn't look like the bank has accepted responsibility as she concluded: "We believe our charges are transparent and fair and to say these charges are unlawful is inaccurate."

http://www.myvesta.org.uk

© Adfero Ltd

Britons are forking out huge sums of money on luxuries, a new report claims.

A study by Morgan Stanley states that the average Brit spent £166 in the last three months of the year on personal treats with their credit card, far more than the £55 spent on other halves.

The younger generations are thought to be the most impulsive, with those in their 20s spending nearly 50 per cent more than the national average.

"Despite reports of a quiet end to 2005 on the high street, our research shows that Britons still found time for the occasional self-indulgent purchase," said Patrick Muir, marketing director for the Morgan Stanley credit card.

Those in the north-east of England were the most generous, with people in the east Midlands most likely to indulge themselves, spending £261 per person in the last three months of the year.

© Adfero Ltd

According to market analysts Datamonitor, the UK's debt mountain has increased by 20% since July 2004 to stand at £1.2 trillion - £1,200bn.

Its report said that lenders are beginning to feel the strain of the high levels of debt consumers have taken on.

The bulk of the nation's consumer debt is from manageable mortgage borrowing, which has risen by around £97bn, but unsecured loans, credit card and store card borrowing has increased by £19bn and this is where the problem lies.

Datamonitor said lenders were being forced to increase their bad debt provisions as consumers struggled to keep up with their borrowings. It added that as the problem of bad debts became more of an issue, consumers with high levels of borrowings could find it increasingly difficult to get cheap credit.


Last month, Barclaycard reported it was turning down increasing numbers of applicants because of their poor credit ratings, while many of the High Street banks admitted they are writing off higher levels of debt in their recent round of financial results.

Datamonitor said there was increasing evidence that such a high level of indebtedness was taking its toll on people's ability to meet their repayments.

It said figures from the Bank of England showed the level of unsecured consumer debt written off by banks had soared from £2.9bn during the first nine months of 2004 to £3.7bn during the same period of 2005.

It estimates that at the end of last year the average adult owed £4,021 in unsecured debt, around a third more than they owed in 2001.

The group said lenders it interviewed for the report expressed concern about bad debts, but stressed the situation was under control. It found an increasing number of lenders were tightening their lending criteria and turning away more customers.

Author of the report Karina Purang said: 'As a result of increased indebtedness and lenders adopting a more precautionary approach to lending, consumers with a less-than-good credit history may find it more difficult to get access to cheap credit.'

http://www.myvesta.org.uk

Michael Clarke, This is Money
15 March 2006

Only a few households are having problems repaying their debts and these tend to be low income people with unsecured borrowing, according to research published by the Bank of England on Monday.

In its Quarterly Bulletin, the central bank said households that devoted a large part of their income to servicing debt typically had low incomes and therefore a disproportionately small share of consumption and the debt stock.

"So if a fraction of these households cut back on spending or defaulted on their debts, the impact on monetary and financial stability would be smaller than if their spending and debts matched those of the average UK household," the article said.

The article, which uses a survey of just under 2,000 people, may lend justification to policymakers' views that the recent jump in consumer bankruptcies to record levels is a social problem rather than one that could affect financial stability.

Many commentators have expressed concerns that very low interest rates had encouraged a borrowing binge in Britain -- consumer debt tops a trillion pounds -- which was now hurting consumers both in the form of bankruptcies and a retail slowdown.

The BoE survey indicated that most consumer debt was secured on property and very few people reported problems servicing that debt.

"The survey indicated that very few people viewed bankruptcy as a solution to their debt problems," the article said.


© Reuters 2006. All Rights Reserved.

Credit card companies will be forced to slash their late payment charges by up to 40%, it emerged last night.

An 18-month investigation by the Office of Fair Trading will make all credit card providers cut the fees, which can be up to £25.

Late payment charges affect all customers who miss a payment deadline, exceed a credit limit or if a payment bounces.

The timing is controversial as it comes only weeks after Britain's 'big five' banks revealed profits of more than £33bn last year. The late payment penalties, which have been attacked by consumer groups, are thought to earn banks around £400m a year.

Last summer, the OFT said that it had written to eight companies - including Barclaycard, HSBC, Halifax and Lloyds TSB - warning it believed their charges were ' excessive'. But the ruling, which is expected in the next few weeks, will affect all credit card companies, not only those involved in the investigation.

The OFT said the fees, which have helped plunge millions of families into debt, are ' disproportionately high'. The late payment charge, also known as a 'default charge', could be cut to £15 and possibly even lower. Most banks currently charge £20.

Yesterday critics said that even the reduced charge was too high compared to the minor costs incurred by the banks when customers miss payment deadlines. Eddy Weatherill, from the Independent Banking Advisory Service, said: 'Every time a person gets into a problem with their bank, they are repeatedly whacked with huge charges.'

He described the £15 fee as ' horrendous' and said that a maximum charge of £5 would be a better deal.

He said that late payment charges are the tip of the iceberg of a long list of penalties banks impose on their customers, from charges for unauthorised overdrafts to costs for transferring money to overseas accounts.

Yesterday Which? welcomed the decision to clamp down on fees. A spokesman for the consumer champion said: 'We would hope that charges would be representative of the actual cost of processing what happens when someone misses a payment. It should be reflective of the cost. We don't think that £25 is reflective of the cost.'

Andrew Hagger, from Moneyfacts, the financial data experts, said it is 'a punitive charge' which does not reflect the costs involved. He added: 'Any cut is going to be great news for the consumer but I wonder where the banks will try to make up the money. They are not going to be happy to lose this revenue.'

Barclaycard, the biggest credit card company, defended its £20 charge. A spokesman said: 'We believe that it is fair that when people break the terms of their agreement with us, we recover the cost.'

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Becky Barrow, Daily Mail
13 March 2006

The Office of Fair Trading is seen telling banks in the next few weeks to cut or cap the penalties it imposes on customers, like those for credit card late payments, which an analyst said could reduce their revenues by up to 1.5 billion pounds.

The OFT is expected to announce its ruling on late payment and other charges in the next few weeks, and it has said the principles set out will apply to other bank charges like those for bounced cheques.

The OFT said last July it had provisionally concluded the default fees applied by credit card firms were excessive, and the watchdog is expected to tell them to cut fees or cap them.

Investment bank Credit Suisse estimated UK banks generate about 2 billion pounds of revenue from penalty charges across bank accounts and credit cards and said it expects the OFT to rule against the banks.

"At the extreme we estimate that up to 1.5 billion pounds of this (revenue) might disappear," Jonathan Pierce, Credit Suisse analyst, said in a research note.

He said the worst affected banks, in terms of the impact as a percentage of group profit, were Lloyds TSB, Barclays and Alliance & Leicester.

A report last November by Moneyexpert.com, the financial comparison website, said average bank charges had increased by over 30 percent for some products over the past two years.

It said a bounced cheque will on average cost the customer 32 pounds compared to 24 pounds two years ago and an unpaid direct debit and an unpaid standing order both cost the customer 31 pounds on average.

Some consumer bodies argue that banks should not charge more than the cost of administration.

Banks are under fire for their charges in a number of areas, most notably for charging customers high prices for insurance to cover the repayment of loans (payment protection insurance or PPI) if they fall ill or lose their jobs.

"We don't have too much sympathy if they are overcharging their customers and not making much effort to make sure customers are making informed choices," John Fingleton, chief executive of the OFT, told Reuters last month about the PPI investigation.


© Reuters 2006. All Rights Reserved.

People as young as 19 are running up debts that are three times as high as their annual income.

Professional services firm KPMG said the number of people setting up debt-managing individual voluntary arrangements last year soared by nearly 75% to more 16,000.

Around 45,000 people went bankrupt during the same period, estimates suggested.

Under an IVA, people reach an agreement with their creditors for interest on their debts to be frozen, in exchange for them paying back a set amount each month.

KPMG, which analysed data on IVAs for 2005, said the average person setting up one of the arrangements owed £60,000, but creditors expected to recoup just 38% of this sum.
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As a result it claimed creditors, such as financial institutions, were likely to write off at least £600m in bad debts from people taking out IVAs last year.

The group said the youngest person to take out an IVA among the cases it looked at was 19.

One other 19-year-old owed £25,000 after borrowing money to keep up with her friends' lifestyles.

Several people aged 21 owed around £40,000, with anecdotal evidence showing one man had racked up a substantial debt after buying three new cars in a year.

"The sort of debts we are talking about here are personal loans, credit card balances and other forms of buy now, pay later unsecured loans," said KPMG's Steve Treharne.

"Most of the money is borrowed to meet current expenditure, including lifestyle (purchases) such as holidays, rather than to acquire assets.

"Given the average level of debt, too many people are borrowing money that they have no realistic hope of repaying."

http://www.myvesta.org.uk

Sky News

As many students fear the burden of debt upon leaving university, one in five is now opting to live at home with their parents.

Student unions, whose plight has been well publicised over recent years, are facing the difficulty of students who stay socialising with their "old" group of friends, rather than spending time at university with their new acquaintances.

But the future is looking brighter for these financially savvy students, with almost a quarter saying they expect to graduate with no debt at all.

However, some believe that this lifestyle is taking away from what the university experience is traditionally meant to be.

Boris Johnson, the higher education spokesman for the Conservatives, told the Times Higher Education Supplement: "We all lived in foul and pestilential student squats – but that was a far better experience than staying at home."

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The first rise in bad debt in 15 years has occurred this year with seven per cent more people appearing in court over debt problems.

After a fifteen-year decline in bad debt the number of country court judgements (CCJs) has risen by over 500,000 appearances, according to annual statistics from the Registry Trust.

The figures have been attributed to an increase in bad debt gained from the overuse of credit cards and also a crackdown by financial institutions on getting rid of harmful bad debt.

Malcolm Hurlston, chairman of the Registry Trust, said: "The rise in CCJs provides further evidence of difficulties in the personal lending sector.

"It shows that lenders are increasingly prepared to use the courts to recover bad debts which places the CCJ as a key element of a healthy, responsible credit industry."

British citizens currently have the highest level of personal debt in Europe. This has been blamed on an ethos of personal debt being accepted as the norm.

Many financial institutions have started adopting a more hard line approach when it comes to bad debt as it is becoming a growing problem for bank balance sheets.

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If you have ever wondered who to call about bankruptcy, where to get bankruptcy forms or what actually happens at bankruptcy court, wonder no more. All your answers can be found in the Bankruptcy FAQ section of the not-for-profit Myvesta site.

See http://myvesta.org.uk/faq/faq_bankruptcy_uk.html

Borrowers planning to take on a mortgage with a partner or friend should make sure they know whether their co-signatory has big debts, advisers warn.

If the friend's debts become unsustainable and the courts become involved, the whole house could be sold off to repay them.

According to government statistics, personal debt in Britain stands at 1.13 trillion pounds, with the average household non-mortgage debt 7,650 pounds.

Alarmingly, two-thirds of EU credit card debt is British and perhaps more worrying is that 40 percent of women and 34 percent of men keep their debts secret from their spouse.

This high level of secrecy is one reason the Consumer Credit Counselling Service (CCCS) is warning people to read the small print of all credit and loan agreements they sign.

A CCCS spokesman said that if credit card debts were not seriously tackled, couples could potentially lose all their savings or even the house they were living in.

"If a partner runs up debt on their own credit card then that is solely their debt, in their name," he said.

"However, the situation changes if the couple share a mortgage or a current account. In that case, their credit records would be linked and it is likely that a credit card debt run up by one partner would appear on the credit record of the other."

CCJs

But the bad news does not just stop at poor credit ratings -- which could affect future loan or mortgage applications.

If a debt is not tackled, the credit or loan company could apply for a County Court Judgement (CCJ) which could see the forced sale of a property.

As to what happens then to the innocent party -- the spouse or partner who did not run up the debt -- the waters are not entirely clear.

There are two types of house ownership: Joint, where each partner owns the entire house; and tenants-in-common, where each owns 50 percent, or some other percentage.

If they are tenants in common, things are a lot clearer.

When the house is sold, the debt will be repaid from the proceeds of the 50 percent that belongs to the indebted partner.

In the case of joint ownership, the spouse who does not run up the debt loses out as the debt will be discharged when the house is sold and the settlement amount will come out of the equity, despite it being one spouse's debt only.

Joint credit cards can cause problems too.

With a joint credit card, the debt is inevitably shared but in many cases one party is unaware of how much the other is spending and does not see the monthly statements.

The CCCS often sees cases where people have found that their partner has run up secret debts on joint credit cards.

"In some instances, the partner has left the relationship, leaving the one who did not run up the debt to pay for it," said the spokesman.

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LONDON (Reuters)

More than 7 per cent of borrowers who took out mortgages in 1989 have had their properties repossessed, according to Moody's Investors Service, the rating agency.

A study by the agency of the mortgages taken out between 1985 and 2003 showed how home-buyers at the peak of the housing boom were much more likely to get into financial trouble.

Jonathan Livingstone, analyst and co-author of the report, said mortgages taken out between 1985 and 1987 were less than half as likely to fall into default as loans taken out between 1988 and 1990.

People who had taken out mortgages in 1989 had just a few months to benefit from rising house prices before the property market crashed.

According to the Nationwide house price index, house prices started falling in the last quarter of 1989.

Interest rates then rose to a peak of 15 per cent, and in the early 1990s recession unemployment reached 3m.

Home repossession peaked in 1991 when they reached 75,540, according to the Council of Mortgage Lenders. By 2003, that figure had fallen to just 7,830.

There has subsequently been a modest pick-up, but the CML has said it expects repossessions to "remain at historically low levels" - about 10,000 a year.

The Moody's report showed that the level of mortgage defaults and losses to lenders depended largely on the loan-to-value ratios used, determining how much of a deposit borrowers put down.

Mortgages taken out in 1989 with a loan-to-value ratio of more than 95 per cent showed losses to lenders of more than 9.5 per cent. For people borrowing less than 75 per cent of the value of the property that year, the loss has been less than 2 per cent.

Banks now use more sophisticated technology to model how many consumers might get into financial difficulty if the economy falters.

In the past four weeks British banks have reported strong growth in pre-tax profits. Mortgage defaults have hardly risen at all, but rising numbers of consumers struggle to repay unsecured loans and credit cards.

Separately Euristix, an information consultancy, estimated that more than £1.3bn of the total bad debt charge for the retail lending sector was related to fraud.

Martin Rowe, partner at Euristix, said last year saw an increased rise in incidences of fraud ranging from internal staff fraud to identity theft, where fraudsters steal data from customers.

He said financial crime had reached a 10-year high.

The Association for Payment Clearing Services, the industry body, said it be-lieved this figure was a "bit high". It said fraud involving credit and debit cards totalled £439.4m in 2005.


www.myvesta.org.uk

By Jane Croft
FT

Optimism about the state of the economy has crashed to its lowest level for nearly three years, Britain's biggest building society said yesterday.

Burdened by bills, consumers continue to rein in their spending - and that is hitting businesses hard, warn economists.

In its influential monthly report, the Nationwide said confidence has been crumbling for nine out of the past 12 months.

It was one of several alarm bells sounded yesterday about the economy and the knock-on effects on the consumer.

The CBI, the voice of British business, said companies selling services to consumers are also at their most pessimistic for three years.

Ian McCafferty, the body's chief economic adviser, said: 'The burst of increased retail spending around Christmas did not endure. We can see the same sluggishness spreading to other areas of the economy previously more immune, such as consumer services.

'Higher household bills are now making their impact well and truly felt on those companies offering leisure and entertainment services.'

The gloomy outlook comes as calls grow for the Bank of England to lower interest rates for the first time since August last year. Stuart Bernau, executive director of the Nationwide, said: 'Bad news on jobs, retail sales, rising fuel and energy prices have combined to undermine consumers' confidence.'

He added that confidence in the housing market, the biggest asset owned by most families, has also taken a hit, having fallen in February for the second month in a row. Soaring energy bills, which are likely to top £1,000 for the average family this year, are putting extraordinary pressure on household income.

To make matters worse, unemployment is now above 1.5million, a jump of more than 100,000 in the past year.

Mark Byers, a partner at accountants Grant Thornton, said: 'The overall increase in the cost of living, as a result of higher utility bills and petrol prices, is eating into UK disposable income and making consumers think twice about the services they choose to spend their hard-earned cash on.'

The Bank of England's Monetary Policy Committee, which begins its two-day monthly meeting today, has so far resisted calls by business groups to cut rates.

www.myvesta.org.uk

Sam Fleming, Daily Mail
8 March 2006

Small firms are under pressure to take up factoring services from the big four High Street banks, or find the plug pulled on borrowing such as overdrafts, loans and commercial mortgages. About 42,000 companies use factoring and invoice discounting, receiving cash in advance on unpaid invoices.

But independent factors and invoice discounters are concerned at the aggressive tactics of Royal Bank of Scotland, Barclays, Lloyds TSB and HSBC and claim many of their clients have been told that other borrowing is conditional on taking up the bank's own factoring services.

David Smith, chief executive of independent firm Eurofactor, says: 'The big four are hungry to retain market share and clients have been told their facilities are under threat if they don't use the bank's factoring. Market choice is fine, but this is unfair leverage.'

The banks' enthusiasm for moving customers from overdraft and loan borrowing to factoring stems from a House of Lords ruling last year in a case between paint company Spectrum Plus and NatWest. The Lords ruled that an overdraft was a fixed rather than floating charge. This means that if a firm goes bust the bank would be behind preferential creditors when it came to payouts.

Factoring offers the banks more security. Barclays has 18 per cent of the factoring industry, as does Royal Bank of Scotland, while Lloyds TSB has 14 per cent and HSBC 11 per cent. The Factors & Discounters Association, representing the big banks' factoring arms as well as smaller players, estimates that the industry turned over up to £150 billion in 2005.

Kate Sharp, chief executive of the association, says: 'If small firms are unhappy, they should go shopping. There are other banks that will offer an overdraft or loan.'

Neil Hammond, 38, and wife Zena, 47, from Rayleigh, Essex, used factoring to expand their business, Wren Printed Packaging, based in Southend-on-Sea. Though they banked with Barclays, Neil went with Close Invoice Finance as it offered the best deal.

'Barclays was keen to do more business with us and talked about factoring,' Neil says. But he was told his overdraft would be withdrawn if he did not use Barclays' factoring. 'We didn't like the bank's attitude. Finally they removed our overdraft,' he says.

Stewart Dickey of the British Bankers' Association says: 'It is understandable that the banks want to introduce customers to their factoring arms, but, perhaps, that introduction is being confused with undue pressure by some customers.'

The banks deny pressuring customers to switch services, but admit that the Spectrum ruling has seen them move towards factoring rather than overdrafts. They insist that this can be a cheaper way for businesses to manage cashflow.

Fraser Mackay, head of marketing at Barclays, says: 'Barclays does not drive customers towards factoring, it's simply available as a niche product if the customer requires it, as factoring is specifically geared for very fast growth companies who would use a debtor book to maximise cash flow.'

www.myvesta.org.uk

Jenny Little, Mail on Sunday
8 March 2006

Banks across the UK are being accused of selecting well-off Britons to be their customers, while ignoring the needs of those with less money.

In a bid to put an end to this practice, the New Economics Foundation (NEF) has called for banks to have a "universal service obligation".

Whitni Thomas, head of access to finance at NEF, said: "The banks are cherry picking the most profitable customers – only paying lip service to tackling financial exclusion."

Ms Thomas went on to say that such actions from banks were marginalising the "most vulnerable" from mainstream financial services as well as forcing them to opt for loan sharks.

Some 11 per cent of Britons have no bank account, which is three times as many as the average number for a European country.

For more information contact www.myvesta.org.uk

Adfero Ltd

The government has not met its target of lifting 1m children out of poverty
The government has failed to meet its targets to reduce child poverty, new figures are expected to reveal.

Tony Blair has pledged to eradicate child poverty by 2020.

But it is believed the government has fallen short of achieving its first milestone - a 25% reduction in child poverty from 1999 levels.

Employment Minister Margaret Hodge acknowledged that the government had "missed the target a little bit" but denied that it was a "failure".

It is a goal, in which we can take a whole concerted series of action which will move us towards eradicating poverty

Campaigners say good progress has been made but they want further investment in benefits schemes to help lift more families above the breadline.

A family is considered to be officially poor if they are living on less than 60% of Britain's average household income, once housing costs are taken into account.


Ms Hodge told BBC Radio 4's Today programme the government had set the "right goal" but it was an "incredibly tough ambitious" target.

"It is a goal in which we can take a whole concerted series of action which will move us towards eradicating poverty," she said.

"I am bold and confident that we have a lot of the building blocks in place ... We are making the progress that we want to make."

We need to invest at least an extra £2bn a year in those if the government is to continue making good progress

The definition of poverty for a single person was having an income of less than £100 per week, said Peter Kenway from the New Policy Institute think tank.

A household of two adults with two children was living in poverty if they had a weekly income of less than £260.

According to its pledge, the government should have now lifted one million children out of poverty, but by last year it had only achieved just over half of that.

Under the government's welfare-to-work policies, more than 300,000 extra lone mothers have found employment.

But campaigners believe these strategies have left behind large families or those with disabled children.

Sir Jeremy Beecham, vice-chairman of the Local Government Association, said there had been a significant reduction in child poverty but there was "still much to be done".

He said enhancing the take-up of council tax benefit by the low paid would help reduce poverty numbers further.

"The current system is too complicated and fails to provide an adequate safety net for many of the poorest families in the country," he said.

"Ministers should embrace the opportunity to ensure that those most in need get the entitlements to help them out of poverty."

Ms Hodge said the government had inherited "the poorest record in Europe" when it came to power with one in three children growing up in poverty.

She said it had managed to "break the cycle of deprivation" and helped six million families and 10 million children.

Conservative work and pensions' spokesman Philip Hammond said employment for parents was the key to ending child poverty, and that people could not rely on the state to solve the problem.

"The state is not the only engine of social justice," he said. "We need to engage the private sector, the voluntary sector in a collaborative effort to tackle the scourge of child poverty."

Jim Bennett, a child poverty expert at left-wing think tank for the Institute for Public Policy Research, told BBC Five Live more resources were needed.

"We need further investment in the tax credit and child benefits and we need to invest at least an extra £2bn a year in those if the government is to continue making good progress."

Mr Bennett said other measures to help large families, families of disabled children and families in London were also needed, along with Child Support Agency reform, better access to affordable and quality childcare, and an increased supply of flexible jobs.

"Really we'd like to see the chancellor make a renewed commitment to... eradicating child poverty by 2020 and delivering those resources for the tax credits and child benefit increases that our analysis shows are needed," he added.

Today's MoneyHelp Radio show is now online.

08/03/2006 — MoneyHelp UK Show #22 - Bad Jokes, Good Advice (http://myvesta.org.uk/moneyhelp/)

An individual voluntary arrangement (IVA) working party has been set up to deal with concerns within the insolvency industry surrounding the increase in demand for IVAs.

In February, KPMG held an insolvency practitioners' conference where many organisations admitted concerns that they would struggle to deal with the huge volume of paper work generated by the 117 per cent increase in IVAs in 2005.

Steve Treharne, head of personal insolvency at KPMG, said: "This causes major problems for creditors in the processing of IVAs.

"The same proposal quite often can be sent out as many as six times to creditors who may have customers with multiple accounts and the insolvency practitioner firms have to pay for the paper, post and packaging, increasing unnecessary costs."

Mr Treharne added that a second forum would be organised for later in the year to ensure that the concerns raised would not lose momentum.

For more information contact: http://www.myvesta.org.uk

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Myvesta UK has lanched an online exhibit that explians the history of credit and debt. The exhibit can be viewed at http://myvesta.org.uk/history/

Leading business and financial advisers, Grant Thornton today welcome the response to Government plans that will make it easier for heavily indebted consumers to take out Individual Voluntary Arrangements (IVAs), which are an alternative to bankruptcy and debt management plans.

The government today formally published the responses to the Insolvency Service's Working Party consultation recommending a Simple IVA (SIVA). The SIVA is designed to speed up and simplify the process of applying for an IVA, which will make the debt repayment programme more accessible for debt-laden consumers. It is expected that the Insolvency Party's proposals will become law in Autumn 2007.

For an existing IVA to be approved, three quarters of the value of the creditors' voting must be agreed to enter the proposal. New legislation means that this figure will be reduced to 50.1% (or the majority of the creditors) for people with debts up to £75,000. The Working Party consultation also proposed the introduction of a second SIVA (SIVA 2) for people with debts below £25,000. However, the second SIVA will not be implemented for fears that another set of legislation would complicate matters.

Mark Allen, partner within Grant Thornton's personal insolvency practice commented: "As a member of the Insolvency Service's Working Party, I welcome the consultation responses which will ensure that both the creditor and the consumer get a fair deal."

"IVAs offer a less severe form of debt maintenance than a debt management programme, and they mitigate the stigma associated with bankruptcy. An IVA arrangement usually lasts for five years, during which time an insolvency practitioner will take the surplus of the client's salary and distribute it among creditors on a pro-rata basis. When it expires, the rest of the debt is written off. If an individual enters a debt management programme they are generally tied to the scheme for three times the length of an IVA, and there is no guarantee that their home will be safeguarded during this timeframe," he continued.

"As UK personal insolvencies reach epic proportions, the simplification of IVAs will doubtless be a welcome relief for many who find themselves burdened with unmanageable and seemingly insurmountable debts," Allen concluded.

During 2005, there were 67,580* personal insolvencies, of which 20,293 were IVAs. During the final quarter of 2005 there were 6,960 IVAs which represents an increase of 23.9% on the previous quarter and an increase of 117.1% on the corresponding quarter of the previous year.

Grant Thornton Website, March 3rd

The Competition Commission (CC) has today confirmed its provisional conclusions reached in September 2005 that there is an adverse effect on competition in connection with the supply of consumer credit through store cards and associated insurance in the UK. It is imposing remedies to address specific problems.

CC Deputy Chairman Christopher Clarke, who chaired the inquiry, said: Retailers and store card credit providers are, we have found, effectively insulated from competitive pressures. The consequence is that store cardholders who take up credit and associated insurance pay too much.

Specifically, we estimate that for the period 1999 to 2003, APRs have been some 10 to 20 per cent above what they would have been had they reflected providers' costs across the sector as a whole, including a reasonable return on capital. Thus, average sector APRs have averaged some 26.5 per cent compared with our calculation for cost reflective APRs of some 22 to 24 per cent. (The 'excess' of 10 to 20 per cent reduces slightly if we extend the period to include less comprehensive data for 2004 and 2005.)

We estimate that the detriment in terms of the excess prices paid for credit and insurance on store cards has been at least £55 million a year and possibly significantly more.

The store card market is changing but remains an important source of credit and associated insurance. There are more than 11 million store cardholders with outstanding balances of well over £2 billion. Many store card programmes have APRs clustered around 30 per cent and we have found that there has been little competitive pressure to reduce them. Even though lower APRs have recently been, or are being, introduced for some store card programmes, even by the end of 2006 more than 90 per cent of store card accounts (whether measured by the number of active accounts or by the size of credit balances) are projected to continue to pay APRs of more than 25 per cent.2

To encourage greater competition in this important market and bring pressure to bear on APRs and the terms for insurance, we are imposing a number of remedial measures. Specifically, we are requiring all credit providers:

* where store card APRs are 25 per cent or above, to include a prominent warning on cardholders' monthly statements that cheaper credit may be available elsewhere;

* to display prominently more and better information on all monthly statements, including the APR, the interest payable next month, the level of fees and charges, a wealth warning and insurance details;

* to give cardholders the option of paying the account balance on their monthly statements by direct debit;

* where insurance packages are offered which contain a bundle of payment, price and purchase payment protection, also to offer, as separate items, payment protection alone and a package of price and purchase protection; and

* where insurance packages are offered which contain a bundle of either payment and price protection, or payment and purchase protection, also to offer payment protection as a separate item

Background to the inquiry and to the market

The CC identified some 70 retailers operating store card services-mostly department stores and clothing retailers-mainly provided by six store card issuers: Arg Card Services, Creation Financial Services, General Electric Consumer Finance UK, HSBC Group, Ikano Financial Services and Style Financial Services.

Although the numbers of active store card accounts have been declining (there were 11.4 million such accounts at the end of 2005 compared with 17.5 million at the end of 2002), the CC considers that store cards will continue to be important for some time to come-for retailers as one of their marketing tools and for the providers of store cards as a route to market for their financial products.

The CC found that some 57 per cent of store cardholders who used their card in a particular month took on interest-bearing credit. The remaining 43 per cent settled their balance in full and did not incur interest changes. The CC noted that most of those who generally incurred interest on their accounts also had access to other sources of credit.

The CC's investigation, which is based on data relating to the period from 1999 to 2003, supplemented by relevant information for 2004 and projections for 2005 and 2006, has focused on the functioning of the market as a whole rather than on the conduct of individual companies.

Detailed findings

After careful consideration of the large amount of evidence from retailers, store card providers, government bodies, consumer organizations and trade associations, as well as the data gathered by consumer surveys, the CC has concluded that there are two relevant economic markets: an 'upstream' market, where providers compete for retailers' store card contracts; and a 'downstream' market for the supply of credit and insurance through store cards to retailers' customers. It has confirmed the conclusion in its provisional findings published on 14 September 2005 that the upstream market displays no feature that prevents, restricts or distorts competition and that it is competitive.

In contrast, in the downstream market the CC has found that there is a combination of features which, by insulating store card credit and insurance services, prevent, restrict or distort competition in that market and that there is an adverse effect on competition in that market.

These features are:

(a) providers and retailers structure the store card offer in such a way that many store cardholders take out such cards to obtain the retail benefits they offer rather than the credit available on them;

(b) most retailers offering store cards do not exert competitive pressure on APRs;

(c) most retailers' customers do not exert competitive pressure on store card APRs (either at the take up stage or when they take credit) because their sensitivity to them is low;

(d) most retailers offering store cards do not exert competitive pressure on the level of, or the provider's policy in relation to, the levying of late payment fees;

(e) most retailers' customers do not exert competitive pressure on the level of late payment fees levied on store cards because their sensitivity to them is low;

(f) many providers combine different insurance products into packages (that is, payment protection insurance with one or both of purchase protection insurance and price protection insurance) which they sell in association with store cards;

(g) most retailers offering store cards do not exert competitive pressure on providers to lower their insurance premiums to cardholders, or to offer the components of PPI separately;

(h) most retailers' customers do not exert competitive pressure on premiums for insurance purchased in association with the provision and use of store cards because their sensitivity to the price of such insurance cover is low and they have a poor understanding of the terms of the cover they are purchasing; and

(i) providers do not include sufficient information on their store card statements, leading to a lack of transparency in the provision of store card credit and card-related insurance.

As a result, customers suffer the following detriments:

(a) most store cardholders who take credit pay higher prices for that credit than would be expected in a competitive market;

(b) most store cardholders have less choice in relation to the individual elements of insurance cover sold in association with the provision and use of store cards than would be expected in a competitive market;

(c) some customers who revolve their store card balance will continue to pay for elements of the insurance package (purchase and/or price) that they no longer require or which no longer provide them with cover; and

(d) a lack of transparency in the provision of store card credit and insurance leads to cardholders taking credit or insurance on terms which are not clear to them.

Detailed information on remedies

In the light of the above findings, the CC has decided on the following action to address the adverse effect on competition and the consequent detrimental effects on customers.

Full information on statements

Certain key items of information must be prominently displayed on the front page of store card statements and the font size employed for these details must not be less than the largest font size used for transaction and balance details. These items are as follows:

(a) the current annual percentage rate (APR) applicable to purchases (shown in bold);

(b) an estimate of interest payable next month in the event that the cardholder only makes a minimum payment;

(c) a 'wealth warning' outlining the consequences of only making minimum payments;

(d) the basis of insurance charges shown alongside each insurance charge appearing in the transaction box; and

(e) a reference to the reverse side of the statement for details of how to pay and contact details to amend or check insurance cover.

If providers wish to show a monthly interest rate on the front of a statement in addition to an APR, then we require that this must not be shown in a greater font size than the APR and must not be in bold type.
Other details that must be shown on the statement (but may be displayed on the reverse side either in a summary box format or elsewhere) are as follows:

(a) late payment or default charges and the policy for levying these charges;

(b) the basic assumptions used in calculating the estimate of interest payable next month;

(c) other interest rates, if applicable, for example rates chargeable on cash withdrawals;

(d) a 'how to pay' section and contact details for setting up or amending a direct debit, prominently displayed within the 'how to pay' section; and

(e) contact details for amending or cancelling insurance cover sold with the store card and a brief summary of insurance cover. The said summary must inform customers that they should refer to their policy of insurance for full details of their insurance protection and of any applicable exclusions.

APR warning on store card statements

An APR warning must be prominently displayed on the front page of each monthly statement for store card programmes using a single APR for purchases where the APR is 25 per cent or more. An APR warning is not required where the APR is less than 25 per cent.3

For store card risk-based programmes using multi-tier APRs, the APR warning is required on all statements for tiers where the APR is 25 per cent or more if the average APR for the store card programme as a whole is also 25 per cent or more. An APR warning is not required on a store card programme with multiple APR tiers if the average APR for the store card programme as a whole is less than 25 per cent.

The average APR for a store card programme with multi-tier APRs will be calculated by weighting each APR tier by the aggregate interest-bearing balances within that tier in relation to the total interest-bearing balances for the store card programme. This average must be calculated at regular intervals of no more than three months and undertaken on a consistent basis on each occasion, using the most recent available data on interest-bearing balances.

The required wording of the APR warning is as follows: 'The rate of interest charged on your account may be higher than on other sources of credit available to you. It may be costly for you to leave balances owing on your account after the interest free period.' The warning must be displayed on the front page of the statement above the transaction box in bold lettering and in a font size no smaller than the largest font size used for transaction and balance details.

The APR warning remedy should remain in force for a minimum period of three years from the date of the applicable order implementing this measure. We recommend that at the end of this period, its continuance should be reviewed by the OFT during which time it would remain in force. Following this review, the OFT would advise the CC on whether to remove it or keep it in place for a further period, at the end of which period we recommend that there should be a further review by the OFT.

Provision and prominent display of facility to pay outstanding balances by direct debit

Store card providers must provide an option for all store cardholders to pay the account balance on their cards by direct debit. This option should be displayed in monthly statements.

Customers should also be provided with documentation to set up a direct debit with initial contractual information. This requirement may be satisfied by providing a direct debit mandate either with the initial store card application form or in a welcome pack sent to each new store card customer. However, in the latter case, the card application form must prominently display the question 'Do you want the option of paying amounts owing on your card by direct debit?' which must be ticked 'yes' or 'no' by the customer to ensure that this possibility has been brought to the customer's attention. In this case the application form must also inform the customer that a direct debit mandate will be available in their welcome pack or can be set up by telephone. The 'wealth warning' regarding minimum payments should be provided with direct debit mandates and also communicated to customers when they set up a direct debit by telephone.

Separation of payment protection insurance from the PPI package Where store card providers offer insurance packages containing payment, price and purchase protection, they must also offer, as separate items, (a) payment protection cover alone and (b) a package of price and purchase protection. Where store card providers offer a package of payment and price protection or payment and purchase protection, they must offer payment protection alone as a separate item. There will be no requirement, in those circumstances, to offer either price or purchase protection as separate elements.

Next steps

The CC expects to implement these remedies by way of statutory orders to take effect in about 12 months from now.

The CC's report is available on the CC website:
www.competition-commission.org.uk/
inquiries/current/storecard/index.htm

Notes
1. The reference was made by the Office of Fair Trading (OFT) on 18 March 2004. The CC was required to consider whether there existed features of each relevant market or markets which prevented, restricted or distorted competition in the supply or acquisition of any goods or services in the UK or a part of the UK; if so, it would find an adverse effect on competition and consider whether action should be taken to remedy or prevent the adverse effect or any resulting adverse effect on consumers. The CC was required to publish its final report by 17 March 2006

HSBC has unveiled the biggest profits ever by a UK High Street bank, making a pre-tax profit of £11.5bn($20.97bn) in 2005, aided by growth in new markets.
Much of the profit has been made abroad by the global bank, which operates in the UK, Europe, Asia and the Americas.

The news comes after HSBC's peers also recorded strong profits and amid claims from some economic and consumer groups that major banks make too much profit.

Less than one-fifth of HSBC's profits are made in the UK.

HSBC reports its profits in US dollars, which at today's conversion rate would be £11.91bn, however the bank takes the average exchange rate from over the year in reaching its sterling figure.

HSBC, which has 110 million customers in 79 countries, was largely an Asian bank until it took over the UK's Midland Bank in 1992.

Analyst David Buick of Cantor Index said: "HSBC has an array of branches in Asia, Hong Kong, China, Brazil, and the US - which has probably been its main growth market over the past decade."

He said banks now had their "best opportunity" to drive up their custom by offering mortgages and credit cards as well as customer accounts.

Last month Barclays reported record pre-tax profits of £5.28bn, up 15% on the year before. This was followed by Royal Bank of Scotland, which reported a 21% rise in annual pre-tax profits to nearly £8bn, and by Lloyds - up 4% to £3.47bn, and HBOS - up 17% to £4.8bn.

The UK's big five banks are expected to unveil combined profits of... more than the gross domestic product of Luxembourg

But think-tank New Economics Foundation claims the poorest 10% of people in the UK who do not have bank accounts are being ignored.

And consumer group Which? says that despite appearing to offer choice to customers this was not the reality, and that there was a high level of dissatisfaction with the big High Street names.

However HSBC, the world's third-biggest bank by market value said growth was led by its personal financial services unit, which provides savings accounts, mortgages and other services to more than 100 million personal customers.

"They look like a strong set of results," said Richard Staite at SG Securities. "One pleasing aspect is to see revenue growth steadily accelerating in the second half."

The bank said it had benefited from a strong US economy, a resilient UK economy, buoyant emerging markets, and recoveries in Japan and Germany.

It also said the near-term outlook was positive but there were long term uncertainties caused by "the unprecedented level of trade imbalances" and under-funded pension plans around the world.

BBC

The British consumer’s love affair with credit cards appears to have been revived with official figures showing a sharp increase in spending on plastic last month.

The data reduces the likelihood of the Bank of England cutting interest rates this month.

The Bank reported that credit card debt increased by £733 million in January, far higher than the £200 million increase in December and the biggest rise since January last year.

The post-Christmas credit binge leaves consumers owing a total of nearly £57 billion on their cards – the equivalent of about £1,000 for every man, woman and child in the country.

Total lending, which includes loans secured against property, rose by £10.5 billion, up from £9.6 billion in December. It was the biggest increase since July 2004 and higher than the £9.1 billion average over the past six months.

Further evidence of a resurgent housing market also emerged with the Bank reporting that mortgage lending in January rose by £9.2 billion, the biggest increase since April 2004 - a time when house prices were rising rapidly.

The number of approvals for house purchases - which are seen as a good indicator of future demand - also remained strong, holding steady at 122,000, unchanged from December’s figure, which was the highest since March 2004 and above analysts’ expectations.

But Vicky Redwood at Capital Economics cautioned that the figures did not necessarily mean house price inflation would return to pre-2005 levels.

"Not all households who have agreed a mortgage will move house," she said. "What’s more, this may well turn out to be as far as the rebound in approvals gets, given that overall consumer activity remains weak and the release of pent-up demand following last August’s interest rate cut is probably exhausted."

Other analysts said the upbeat credit figures lent weight to the Bank of England’s theory that consumer spending would help the economy recover momentum this year with economic growth moving above its historic average by the end of 2006.

But many economists still believe the Bank’s growth projections are too optimistic.

They argue that consumer spending will remain subdued and that the Bank will have to reduce the cost of borrowing from its current 4.5 per cent level to boost the economy.

Howard Archer, chief UK and European economist at Global Insight, said: "While consumer credit picked up in January, it was still relatively muted by recent standards.

"Record high debt levels and rising unemployment means that there is an increased need for many consumers to try to repair their balance sheets," he added.

Mr Archer expects the Bank to reduce interest rates by a quarter point in the early summer.

By Andrew Ellson
The Times

The Government is set to unveil plans that will make it easier for consumers to take out Individual Voluntary Arrangements - the debt-laden's alternative to bankruptcy.

Under plans currently being rubber stamped, a 'Simple IVA' will be introduced later this year that will help speed up the application process and allow more people to apply for the debt repayment programme.

Currently, for an IVA to be approved, creditors responsible for 75% of the value of the debt have to give the green light. It is expected that this will be reduced to 51% for people with debts below £75,000.

A standard application process and contract will also be introduced to speed up the time it takes to complete an IVA. However, it is believed plans to introduce another tier of IVA, which would have allowed anyone with debts below £25,000 to be automatically approved, have been rejected.

It is thought the Government will unveil its plans later this month, with a change to the law implemented before the end of the year.

An IVA is a legal contract between an individual and creditors that is less restrictive than choosing bankruptcy. Lenders agree to wipe out a proportion of the balance, usually up to 65p in the pound, if the creditor agrees to make a regular monthly repayment.

Existing IVA laws were introduced by the 1986 Insolvency Act and were designed for more complex business-generated debts incurred by entrepreneurs. However, in recent years they have increasingly become a tool for ordinary over-indebted consumers.

Charles Howson, chief executive of Accuma, a personal insolvency specialist, said: 'The existing laws are outdated and don't apply to the vast majority of people applying for an IVA today. These rule changes would simplify the process and make taking out an IVA more viable for people in debt.'

The Government wants to make it easier to take out IVAs in a bid to stem the number of consumers choosing bankruptcy. More than 47,000 declared themselves bankrupt last year, up from 35,000 in 2004, and the International Monetary Fund has warned that the UK economy could be damaged if the rate of growth continues.

Ironically, insolvency experts blame the rising bankruptcy rate on the 'quickie' bankruptcy law of 2002. It cut the discharge period - when a bankrupt cannot lead a normal financial life - from three years to one, making bankruptcy less damaging and embarrassing.

Michael Clarke, This is Money
2 March 2006

The government has announced it will unveil plans enabling people to make simple individual voluntary arrangements (IVAs).

Simple IVAs will make the application process quicker for those looking for an alternative to bankruptcy as well as allowing more people to apply for a debt repayment programme.

It is believed that the level of debt that debtors have to be responsible for will be reduced from 75 per cent to 51 per cent, for those owing less than £75,000, reports This is Money.

However, plans have been rejected for automatic approval for all those applying for an IVA with debts of less than £25,000.

An IVA sees debtors making an agreement with creditors that usually sees them wiping out a part of the dept – up to 65 pence in the pound – in return for a regular monthly repayment.

It is seen by most as a more flexible and less restrictive option than bankruptcy. The government plans are expected to be announced later this month.

track© Adfero Ltd

A year or two ago, I remember writing an article about doorstep lending, in which I suggested that while doorstep lenders might provide you with credit at a time of need, the interest they charge can be scary.

What I didn’t imagine was that, quite apart from the heavy charges themselves, the doorstep lenders’ own debt collection tactics might also be terrifying.
Yet, for clients of Kim Cornfield and his wife Lynne, scary meant exactly that – and more.

Cornfield, aged 52, was recently jailed for two years after admitting blackmail and illegal money lending. His wife Lynne, 43, received a 12-month community rehabilitation order. The Cornfields lent fairly small amounts of cash, £50 to £5,000, sometimes known as tide-you-by money. However, they charged extortionate interest rates, in one case 15,000%, on their debt.

Moreover, their typical strategy of persuading clients – mostly vulnerable single mothers in Redditch, Worcestershire – to pay up included threatening to beat them up and burn down their homes.

In one case, Worcester crown court was told, Kim Cornfield grabbed a heavily pregnant woman round the throat. In a number of other cases, he sent abusive text messages, including one saying: “Ur going to have the crap beaten out of u”.

Alternatively, Cornfield would demand sexual favours as payment in kind from female debtors.

Is this kind of violence typical?

Certainly not typical of the mainstream lending industry, or of doorstep lenders either, for that matter – although there are plenty of other examples where similar violence is meted out on hapless borrowers.

The Department of Trade and Industry is carrying out a nationwide study to map the extent of loan sharking, and already has in to try to stamp it out. More than 100 suspected loan sharks in both Glasgow and Birmingham are under investigation from pilot units set up by the DTI.

Indeed, it was the Birmingham unit which investigated the Cornfields and brought them to justice. The problem, however is one which affects a massive number of people across the UK. And the reason only a handful of cases get to court is because witnesses are often too scared to testify – although it is understood that they were queuing up to dob on the Cornfields.

The scale of the problem

Official statistics suggest one in five UK borrowers is refused mainstream credit.
Those unable to borrow from official sources are forced to go to illegal money lenders.

According to the National Consumer Council (NCC), which has made an extensive study of the problem, the doorstep loans industry is huge, with an annual £2 billion turnover, catering for 3 million people.
The NCC study, some 18 months ago, found that:

* Just over half of current or recent home credit customers had annual incomes
below £9,500 and two-thirds earn less than £13,500.
* Two-thirds of borrowers are semi-skilled or manual workers, even though they make up fewer than three in 10 of the population as a whole.
* Almost a third of customers were people who stay at home to look after their families, three times more than their proportion within the UK’s general population.

The problem for borrowers is that they don’t really understand what is happening to them:

* In 8 out of 10 cases, those who borrow the money have no idea of the annual percentage rate (APR) of interest they are paying.
* Three in 10 don’t know how much they will have repaid, in total, at the end of the loan.
* Three in 20 don’t actually know the term of their loan.

The result was that:

* Some borrowers were being charged interest rates of up to 900%, with average interest charges by doorstep lenders averaging a whopping 177%.
* Home credit companies use a variety of techniques to entangle their borrowers in further debt, including roll-overs where money already owed, plus the interest payable, is added to a new loan, which generates even more debt.

In September 2004, the NCC made use of its powers to make a super-complaint to the Office of Fair Trading, the credit watchdog.

Under the recent Enterprise Act, the NCC is one of a number of bodies entitled to make super-complaints to the Office of Fair Trading if an aspect of the market is harming consumers.

The OFT decided there were aspects of the market that required further investigation and an inquiry has been launched. It is expected to report later this year.

What are the key issues?

Aside from the heavy charges, one of them is the uncompetitive nature of the home loans market.

* The UK’s four main lenders in this area control a 70% market share, compared with 60% five years ago.
* Moreover, the NCC argues, borrowers often stay with a given lender because of the psychological ties they develop with their collector, whom they get to know well in the course of numerous visits.

* Details of the NCC report can be found here:

What does the National Consumer Council want?

* More encouragement for non-commercial alternatives such as credit unions, community-based networks of savers and borrowers where loans can cost as little as 1% a month, or 12.7% APR a year.

* More effective use of the government’s Social Fund Budgeting Loan scheme – currently available to people on certain state benefits.

How does the home loans industry defend itself?

The home credit industry – as opposed to doorstep lending – is grouped into the Consumer Credit Association.
The CCA says it provides a social service to people who have very specific needs that are not easily met elsewhere.

* It gives customers access to credit in a way that suits them.
* What you see is what you get: there are no hidden or extra charges whatsoever - even if people are late in repaying their loans. There are rarely penalties for deferred or delayed payments.
* The industry is not a monopoly: more than 140 new organisations have joined the market in the past five years, ranging from locally-based sole traders to large French banks.
* The stereotype of hard-faced foot-in-door merchants is simply not true: the overwhelming majority of the 28,000 or so doorstep collectors are women. They are willing to accept reduced payments in times of difficulty.

It also says that doorstep loans are cheap – or so the CCA says.
A typical £200 loan from a CCA member over six months might cost £280 including interest payments, an effective APR of 258%.

But a bank overdraft at an APR of 19.5%, in which only £10 a week is paid off, would entail total payments of £273 over the same period.

Of course, that ignores the fact that, even if only £10 was repaid each week, actual charges would be far smaller because a person’s income would have been paid into the account, effectively reducing the overdraft for part of that month.

By Nic Cicutti, MSN Money Special Correspondent

If there were a prize for the most inefficient, incompetent and ineffective government body ever devised, there is virtually no doubt that the winner, by a long margin, would be the Child Support Agency.

By common consent, the CSA, set up in 1993 to assess and enforce child maintenance payments by separated parents, usually fathers, has failed to deliver a fraction of what it intended to do.

In the process, it has forced many hundreds of thousands of mothers with young children to rely on inadequate state benefits or on a single income – while the kids’ fathers got off scot-free.

Work and Pensions Secretary John Hutton has finally called time on the CSA. He announced that he is asking David Henshaw, former chief executive of Liverpool City Council, to head a review into the CSA and the way it works.

The report will be published in July. However, Mr Hutton is already indicating that the CSA, in its current form, will cease to exist.
In the meantime, the CSA will – supposedly – be implementing new rules to squeeze more money out of the 88% of dads who should be paying proper maintenance – but don’t.

By Nic Cicutti, MSN Money Special Correspondent

The Office of Fair Trading has demanded a change in the law to restrict the use of credit card cheques.

These allow people to spend money on their credit card accounts without using a piece of plastic.

The OFT says purchases made with them often lead to higher interest charges, the imposition of a one-off fee and no interest-free period.

Last November the government asked for views on how people could be given clearer information about the cheques.

Consumers need good quality information about the costs and other potential disadvantages of credit card cheques before they consider using them
John Fingleton, OFT

The Department of Trade & Industry wants to ensure that people who use credit card cheques know the implications of doing so and do not have to pay unnecessary charges.

This was backed up today by the OFT's chief executive John Fingleton, who said the current lack of information was unacceptable.

"Consumers need good quality information about the costs and other potential disadvantages of credit card cheques before they consider using them," he said.

"This isn't always happening and we urge the government to introduce legislation to protect consumers."

The problem with credit card cheques, in the view of the OFT and other critics, is that customers simply do not know how much they will be charged for using them.

Research has suggested that only a third of users know that they start paying interest straight away, and many people are apparently unaware that the interest rate they will be charged is higher than for conventional plastic card purchases.

As a result, the OFT is demanding changes to the way the cheques are marketed. It wants people to be told clearly:

* how the use of credit card cheques differs from the use of a credit card, for example when such cheques are treated as cash advances rather than purchases.

* the interest rate that applies and whether this differs from the rate charged for card purchases.

* when interest is charged and that there is no interest free period (if that is the case).

* whether additional fees or charges apply and how much.

* whether purchases using a credit card cheque benefit from the same protection as using a credit card.

The new banking code requires lenders to be more transparent about charges, the OFT research pre-dates this initiative
Sandra Quinn, Apacs

The OFT's comments were welcomed by the consumers organisation Which? which called credit card cheques a rip-off.

It has been particularly critical of the industry practice of sending unsolicited cheques in the post.

"Cheques are sent to cardholders whether they want them or not," said Mike Naylor of Which?

"We want unsolicited credit card cheques to be banned, especially as we have found that companies use them to encourage indebtedness, for example cheques have been sent out with marketing literature suggesting they can be used to pay for holidays or gifts."

The OFT agrees with this and as part of its proposed changes to the law suggests that they should not be sent out without the card holder's consent.

But in response, the Association of Payment Clearing Services (Apacs) told BBC News that lenders were already putting their own house in order.

"The new banking code requires lenders to be more transparent about charges, the OFT research pre-dates this initiative," Sandra Quinn, Apacs spokeswoman said.

"In fact, the only area that the industry disagrees with what the OFT says is over its proposal that consumers should have to actively sign an opt-in if they want to receive credit card cheques," Ms Quinn added.

BBC
March 1st, 2006

Total UK personal debt

At the end of January 2006 the total UK personal debt was £1,168bn. The growth rate remains strong at 10.3% for the previous 12 months which equates to an increase of £100bn.

Total secured lending on homes in January 2006 was £974.6bn. This has increased 10.6% in the last 12 months.

Total consumer credit lending to individuals in January 2006 was £193.2bn. This has increased 8.7% in the last 12 months.

Total lending in January 2006 grew by £10.5bn. Secured lending grew by £9.2bn in the month and consumer credit lending grew by £1.3bn in the month.

Average household debt in the UK is approximately £7,821 (excluding mortgages) and £47,278 including mortgages.

Average owed by every UK adult is approximately £25,052 (including mortgages). This grew by ~ £220 last month.

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,144 per average UK adult at the end of January 2006. This has grown 52% in 5 years.

Britain's personal debt is increasing by ~ £1 million every four minutes.

Plastic card / Personal Loans: Total credit card debt in January 2006 was £56.98bn.

US consumer borrowing is rising more slowly than at any time since 1992 as consumers feel the pinch from higher interest rates which have risen from 1% to 4.5% in the past 18 months. US consumer debt (unsecured) totalled $2.162 trillion (£1.2 trillion) at the end of 2005, 3% higher than in December 2004. Credit card borrowing saw its smallest annual increase since 1980 as consumers became more cautious.

Spending on credit cards has shown a year-on-year fall (3%) for the first time, according to figures from Visa, indicating that consumers are taking on board warnings about running up too much debt. Instead, shoppers are using their debit cards for their spending.

A new study by uSwitch highlights serious failures in the lending practices of UK banks when issuing credit cards. With UK credit card debt standing at £56.35 billion, and UK consumers accounting for two-thirds of total credit card debt in the whole of the EU, one of the most shocking statistics revealed by the survey is that nine out of ten credit card borrowers were issued cards without the lender carrying out any checks to verify that they could afford to repay the debt. The study reveals that the majority of people (88 per cent) who successfully applied for a credit card during the last year were not asked for proof of their annual income beyond the figures stated on the application, and 95 per cent were not asked to show evidence of their outgoings in order to provide a true picture of affordability.

According to the BBA the proportion of credit card balances bearing interest was 75.4% in December 2005.

The average interest rate on credit card lending is currently 15.44%, around 11 percentage points above base rate.

According to the latest annual report from APACS nearly two thirds of adults have a credit card and multiple card holding is a growing phenomenon in the UK. More than six in ten card holders held more than one card in 2004, with one in ten holding at least five.

Plastic cards in issue were 190m in 2004. This works out at an average of 4.1 plastic cards for every adult in the UK.

There are more credit cards in the UK than people according to APACS. At the end of 2004 there were 74.3m credit and charge cards in the UK compared with around 59 million people in the country.

270 plastic transactions took place every second in the UK in 2004.

Servicing Debt: There were 20,461 individual insolvencies in England and Wales in the fourth quarter of 2005 on a seasonally adjusted basis. This was an increase of 15.0% on the previous quarter and an increase of 57.1% on the same period a year ago.

PricewaterhouseCoopers (PwC) insolvency experts looked at 80% of the IVA applications made in July 2005. 75% of the debtors put down "living beyond their means" as the main reason for being in trouble. Only 20% said they had lost their jobs or had suffered a breakdown in their marriages - two of the events traditionally assumed most likely to trigger personal insolvency.

Monday 6th February 2006 has been dubbed ‘Debt Freedom Day’ by IFA Promotion. It would take the average UK earner 35 days’ solid pay just to clear the £2,350 interest on the average level of credit card and loan debt.

Three quarters (74%) of British couples find money the hardest subject to talk about with their partners according to a recent survey by the Financial Services Authority (FSA). They also found that over a quarter (27%) of couples regularly argue when they try to discuss their finances; about a third (32%) of couples lie to their partners about how much they spend on their credit cards; over a third (35%) of British couples are kept awake at night worrying about their money situation

A MORI survey carried out for CCCS estimated that eight per cent of the adult population were in financial difficulty.

More than 20 million Britons are in debt, according to a survey by Mintel that reveals the extent of the country's "spend now, pay later" lifestyle. It says the nation is gripped by a borrowing culture, with the vast majority of those in debt showing no concern about the amount they owe. Almost half of adults (44 per cent) owe money on a variety of credit and loan products, not including mortgages. While a quarter of borrowers have debts of less than £500, eight per cent owe between £10,001 and £20,000, and a further five per cent have borrowed more than £20,000. That adds up to around one in eight (13 per cent) borrowers - or 2.5 million adults - having total unsecured debts in excess of £10,000.

Debts taken on by British families have overtaken the size of the economy for the first time. People have borrowed so much their total debt outstripped Britain's gross domestic product at the end of 2005.

One in 10 single people says their finances are out of control whilst 41% have already suffered a financial crisis at some point in their lives, compared to 28% of married people

Research from AXA shows money worries are a significant cause of worry, anxiety and stress according to GP and leading mental health expert, Dr Roger Henderson, who recently published a paper identifying the condition Money Sickness Syndrome (MSS). Almost half (43%) of the UK adult population is affected by money worries and have experienced MSS symptoms. 3.8m people admit money worries have caused them to take time off work and more than 10.76m people suffer relationship problems because of money worries, with almost one in five complaining of a sex life slump.

The Debt Counsellors Annual UK Debt Survey 2006 shows that 63% of those with bad debt problems believe their health has suffered as a direct result of their debt.

Record numbers of people were calling debt advisory services after finding they were struggling to pay back what they owe. The Consumer Credit Counselling Service took 9,310 calls in the first nine working days of 2006 - up almost 14% on the same period in 2005.

Grant Thornton says that UK consumers are the most over-indebted in Europe.

According to the latest Department of Trade and Industry (DTI) Survey:

8% of Individuals have monthly repayments on unsecured borrowing > 25% of gross income

9% of Individuals have monthly repayments on secured and unsecured borrowing > 50% of gross income

5% of Individuals are finding their household’s debt repayments a ‘heavy burden’

4% of Individuals currently in arrears on at least one credit commitment/ domestic bill for more than 3 months

A quarter of those in debt are receiving treatment for stress, depression and anxiety from their GP.

Students / Youth: In a survey of 1,000 16-19 year olds in England, 81% said they had given serious thought to what occupation they wanted to do in five years' time, and 95% said they had taken some action to achieve an ambition. But 41% said they would like more control over their lives, with many citing money as an issue.

MyEquifax recent survey revealed that 22-24 year olds have more short-term debts than 18-21 year olds, with 19% owing over £5,000 (only 11 per cent of 18-21 year olds owe this amount). This suggests that within the first five years of being credit active, young consumers are already building up significant debts and risking
overburdening themselves.

According to the National Union of Students (NUS) the estimated average student expenditure for academic year 2005/06 (39 weeks) is £10,493 in London and £8,810 outside London

Pensioners / Pensions: Over 8 million British workers (21%) don’t have any pension provision according to a recent report issued by Virgin Money. This is despite continued warnings from the Government and the pension industry of the need to save now to avoid inadequate income at retirement.

One in three households are now liable to have to pay inheritance tax on their estate when they die following soaring property price growth. An estimated 8.2 million households own property and other assets that are worth more than the current £275,000 inheritance tax threshold, according to life insurer Scottish Widows.

According to the Prudential one in five pensioners struggle to make ends meet. 17% of OAPs live on under £5,000 a year. A third of pensioners live on under £7,500 per year. Nearly one in five pensioners goes back to work after retiring.

Up to nine million old folk across the UK will struggle to pay fuel bills this winter according to Age Concern.

One in 10 pensioners calling Age Concern, some in their 80s, is struggling to clear mortgages and pay bills such as council tax.

Housing: According to the Office of Deputy Prime Minister the average house price in the UK in December 2005 stood at £185,848 (£194,569 in England). UK annual house price inflation rose by 2.9%. Annual house price inflation in London was 3.8%.

The value of Britain's homes has trebled in the past 10 years, from £1.1 trillion in 1995 to £3.4 trillion in 2005.

The latest Hometrack report says that the supply of homes for sale is not keeping pace with demand which has resulted in a strong rise in average prices of 0.4% in February.

Nationwide said that house prices fell by 0.2% in February following a strong 1.5% increase in January. This is a 3.7% increase in 12 months. They expect the weaker economic factors to begin to dominate over the next 2-3 months and to prevent strong house price rises in 2006.

A shortage of sellers and increased demand from buyers pushed the average property asking price above £200,000 for the first time (£201,600) in February 2006 according to property website Rightmove.

The Council of Mortgage Lenders (CML) said that gross mortgage lending in 2005 reached £287.5bn, down just 1% on the total for 2004 and that they expect house prices to remain resilient in the coming months.

In line with previous years, the average loan approval for house purchase fell in January, to £126,800.

Housing 1st Time Buyers: The average house price in the UK in December 2005 for first time buyers now stands at £152,683 which is an annual increase of 4.1%. This is approximately 4.2 times their average household income (In 1990 the average price paid by first time buyers was £45,000, 2.7 times their average household income).

The number of first-time buyers in the UK reached its lowest level for 25 years in 2005 as rising house prices meant a continued struggle to afford a home according to the Halifax. An estimated 320,000 buyers stepped on to the housing ladder in 2005, the lowest annual total since 1980. The number was down 10% on the previous year and 40% lower than in 2002, when 532,000 people became homeowners. They also estimate that it now takes the typical first time buyer five years to save a deposit.

New research from the Council of Mortgage Lenders reveals that up to half of all young first-time buyers may be getting help from their parents to fund their deposits.

In the UK, the average deposit required by first time buyers in the third quarter of 2005 was 18.9% of the purchase price which equates to £28,800. This compares with just 8.8% in the second quarter of 1997.

High Street Spending: Parents typically spend £165,668 on raising a child from birth to the age of 21, according to friendly society Liverpool Victoria's most recent annual Cost of a Child survey. This works out at £7,889 a year and represents a rise of 7.8 per cent on last year's survey, more than three times the rate of inflation, and up 18 per cent on the 2003 survey.

The cost of running the average new car has grown to nearly £5,000 a year, or £14 a day, according to the latest RAC Cost of Motoring Index.

The average wedding costs around £19,595. 45% of couples - some 117,000 nationwide - have no financial planning to pay for the big day, a study by stockbrokers Brewin Dolphin Securities found.

Money Education / Financial Literacy: Around 15 per cent of 18 to 24- year-olds think an individual savings account (ISA) is an iPod accessory, and one in 10 reckon it's an energy drink. With rising personal debt levels in Britain, and a lack of long-term savings, better money management seems a pressing issue.

According to Standard Life over half (57 per cent) of UK adults say they have not drawn up a will meaning they would die 'intestate'. A further 19 per cent have had a change in circumstances since drawing up their will, meaning it could now be out of date.

Nearly four out of five people do not know that APR refers to the interest and other costs of a loan, four in ten admit they do not understand mortgages or ISAs, and a third lack confidence in their financial affairs. These are some of the results of a survey conducted recently by Mori. One in five did not understand the concept of inflation. Nearly a third did not know that insurance products are designed to protect their owners from unforeseen events. Only 30 per cent could calculate four per cent interest on £2,000 over two years.

Savings / Pension: IFA Promotion’s annual ‘Get Saving!’ study’ shows that just over half of the UK adult population (24 million people) are not prepared to cut back on spending to save more for retirement, and nearly three quarters (70%) claim they cannot save a penny more than they currently do. This is despite the widely reported UK savings gap and the possibility of a rising state retirement age.

The Building Societies Association said net savings inflows in 2005 were the highest since 1997 and the second highest since 1988.

Whilst the concept of ‘spending the kids’ inheritance’ may be nothing new, it appears that many of those in their forties or fifties are prepared to spend their own retirement funds to finance their current lifestyles. According to Insight Investment, well over a quarter of forty and fifty somethings (29 per cent) say that enjoying their money now is more of a priority than investing for the future. This ‘live for the moment’ attitude is despite well over a third (39 per cent) of those aged 45-54 admitting to having no investments other than residential property, a situation in which more than one in four (27 per cent) of the over 55s also find themselves.

The majority of Britons would be unable to cope financially in the event of a minor household emergency according to the Alliance & Leicester. Just 28% said they had money put aside which could be used to replace household appliances, such as a cooker or fridge.

These excellent statistics are courtesy of Credit Action and Richard Talbot.

02/03/2006 16:30:00

A Cheshire Citizens Advice Bureau (CAB) has become the first to be awarded extra money by the chancellor to give out more debt advice.

According to local reports, Halton CAB in Widnes and Runcorn is to receive nearly £200,000 for a two-year pilot project.

Under a scheme announced by Gordon Brown in his 2004 budget, CABs across the country can apply to the £120 million Financial Inclusion Fund to help advise people on debt management.

Cheshire Online says that Halton CAB is the first in the country to be awarded such funding and will provide two extra volunteers to help locals control their debt.

It is reported that Halton CAB helped manage £6.6 million of debt by local people between last April and December as the nation's debt level continues to rise.

At the time of the chancellor's announcement, the CAB said it had already seen a rise of 74 per cent in the number of debt problems it had dealt with nationally over seven years.

Councillor Mark Dennett, who sits on Halton CAB's board of trustees, was quoted as saying that the advice would be available to all who were in debt, whether from bad borrowing or a change in circumstances.

The money pays for two more debt welfare rights specialists to be employed at Halton CAB, a bureau that already has its own online referral system for those seeking debt advice.

01/03/2006 15:50:00

Residents of Luton are the most likely in the UK to declare bankruptcy, according to new figures.

Over the last year 327 people in the region petitioned for bankruptcy, while across Bedfordshire the number of people declaring themselves bankrupt has risen by 50 per cent, Bedford Today reports.

The news comes at a time when debt across the UK continues to rise and KPMG calculates that the average debtor that declares themself bankrupt owes £60,000.

Marks Sands, head of court work for KPMG, who carried out the research, said: "Since Christmas we have seen a dramatic increase in the number of people calling debt helplines, which demonstrates the continued build up of over-indebtedness."

He went on to say that as a result of the increase in debt, it is expected that some 50,000 people will declare themselves bankrupt in 2006, "by far the highest levels ever seen".

Lucky for Luton though – the town is also statistically the luckiest in the country for bingo players!

© Adfero Ltd

Borrowing by individuals on credit cards, bank loans and hire purchase agreements is growing at its slowest pace for nearly 12 years.

Figures from the Bank of England show that in January consumer credit was growing at an annual rate of just 8.7%.

The numbers put consumer credit growth at its slowest pace since June 1994.

But other Bank figures show the amount of money being borrowed for mortgages rose by £9.2bn in January, the biggest increase in almost two years.

The divergent trend means the overall rate at which people are borrowing more money, from all sources, has been steady at 10.3% since September last year.

The continued growth of personal borrowing has now pushed up the total stock of outstanding debt owed by UK consumers to £1.168 trillion.

Mortgages

The Bank of England's figures showed that 122,000 new mortgages were approved in January for people wanting to buy a home, a 49% rise over the same month a year ago.

New mortgage approvals are widely regarded as a good indicator of activity in the property market.

Till now, the number of approvals has been growing steadily as it recovers from a sudden slump in the second half of 2004.

But Kelvin Davidson, property economist at Capital Economics, pointed out that the number of approvals had not changed between December and January,

"Strong annual growth rates were always inevitable given that late 2004-early 2005 was the trough of mortgage demand," he said.

"More noteworthy was the fact that January was the first month in which mortgage approvals did not increase since November 2004."

On Tuesday, the Nationwide building society, one of the country's biggest mortgage lenders, reported that annual house price inflation dipped slightly in February to 3.7%.