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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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.

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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."

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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.

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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 beginn