According to a report commissioned by One Advice, nearly 2000 people in the UK have unsecured debts in excess of £10,000. About half a million have unsecured debt higher than £20,000. People in the lower middle-aged bracket (35 to 44-year-olds) were the most likely to have substantial debts that weren’t secured, with some 650,000 individuals in that demographic owing more than five figure sums.

Similarly, for 18 to 24-year-olds there are about 200,000 people in the UK who owe more than £10,000, which is one in every twenty in that age range. Most of the unsecured debt takes the form of credit card bills, overdrafts and even sums owed to friends and family. In fact slightly less than one million people are thought to owe more than £10,000 due to personal loans, while about 350,000 have accumulated similar debts on credit cards.

Over 80,000 had an overdraft of £10,000 or more. The problem with unsecured loans is that because they are not guaranteed against an asset, they tend to be more expensive and have a higher interest rate than secured loans of the same amount. One Advice said that this left many people in a vicious, debt circle; struggling to pay off the interest alone, and unable to pay off the capital on the loan.

During 2005, some 70,000 people were declared insolvent, due to bad debts, most of whom went on to be declared bankrupt. It should be pointed out, that there is in the UK an alternative to the stigma of bankruptcy, known as an individual voluntary arrangement or IVA, where people can negotiate a reduced payment with their creditors leaving them debt-free after a period typically lasting five years. Debt consolidation is also an option for some people, and individuals should seek professional debt advice.

For anyone struggling to repay their debts and are looking for advice online, have a look at the Myvesta FAQ for details of the differences between debt consolidation, bankruptcy and an IVA agreement.

http://www.myvesta.org.uk

The following petition deposits came into force from 1 April 2006:

Bankruptcy debtor's petition = £325
Bankruptcy creditor's petition = £390
Company petition = £655

The government has admitted it has massively overpaid tax credits to families for the second year in a row.

The Commons Public Accounts Committee estimates that in 2004-05 Revenue & Customs (HMRC) overpaid claimants by £2.2bn, the same amount as in 2003-04.

The MPs also say problems continue to plague the working of the HMRC tax credit computer system.

HMRC said changes to the tax credits systems would help cut future overpayments by one-third.

But a government spokesman admitted that "we expect the total level for the second year to be similar" to the first year in which tax credits started to be paid.

The MPs' report says it is deplorable for hundreds of thousands of families to have to find the money for repayments.

'Gigantic scale'

"An element of overpayment to claimants was an inherent part of the design of the tax credits system," said the committee's chairman Edward Leigh.

"What came out of the blue for the government was that overpayment would routinely occur on such a gigantic scale - an estimated £2.2bn for 2003-04 and probably again for 2004-05.

"Doubts about HMRC's controls over fraud were certainly not lessened when evidence emerged late last year of a serious assault on the system by organised criminals."

The government has previously admitted that around £1bn of the overspend will not be recovered from the first two years of operation of the system.

And last year, the BBC News website revealed that the tax credit computer system was being targeted by gangs of fraudsters, which led to the closure of the online tax credit application system.

This involved the theft of the identities of thousands of job centre workers and staff at Network Rail.

Computer problems

In the last pre-budget report, Chancellor Gordon Brown announced plans to make things easier for claimants by simplifying the system.

From now on claimants only have to notify the HMRC of their pay increases if they exceed £25,000, rather than the £2,500 limit that operated before.

But Mr Leigh said it was too early to tell if this and other measures would be successful in limiting the scope for overpayments and recovery claims.

The committee's report also returned to the first problem publicly identified with tax credits - failures with the specially designed computer system.

Although the contractor responsible for supplying it, EDS, has agreed to refund the HMRC with £70m in compensation, the Public Accounts Committee cast doubt on the probity of the settlement.

It pointed out that £26.5m would not in fact be paid unless EDS won further government contracts.

Mr Leigh described this as "an invidious position."

A spokesman for HM Revenue & Customs said the government continued to believe a "flexible and responsive" system, with the level of award designed to match a family's needs and change as their circumstances did, was preferable to fixed awards.

He said by increasing to £25,000 the amount a family's income can rise in the year before they lose any tax credits, future overpayments would be cut by around one-third.

"As a result there is greater certainty for families who experience changes in their income," he said.

However this change will not have any effect on past overpayments, as it has only co come into effect in the current financial year - the fourth in which the tax credit system has operated.

BBC New
April 25th, 2006

In an effort to help people to better understand the Individual Voluntary Arrangement process and procedure the site http://iva-information-centre.org now provides a wealth of information about the IVA and SIVA, Simple Individual Voluntary Arrangement.

Debt Free Direct Group PLC said it maintained its market share of Individual Voluntary Agreements (IVAs), a simplified form of personal bankruptcy, at just under 20 pct in March 2006.

The wider market continuing its strong growth in the month with volumes up 29 pct on the previous month and 155 pct on March 2005, Debt Free Direct said.

Debt Free Direct said volumes are continuing to grow rapidly and work in progress is at record levels. The AIM-listed company said it is taking on new leasehold premises that will more than double its capacity to process IVAs. These new facilities will become
fully operational in October 2006.

The company added that it has brought on stream facilities in Northern
Ireland capable of completing 150 IVAs per month with immediate effect. This capacity is expected to double over the next 12 months.


HTTP://www.myvesta.org.uk

AFX News Limited 2005

Shares in Individual Voluntary Arrangement (IVA) providers had a strong week after a pair of positive trading updates. Debtmatters said results for the year just ended will be ahead of forecasts. And Debt Free Direct said volumes in March were 155 per cent up on March 2005.

http://www.myvesta.org.uk

Investors Chronicle April 13th, 2006

A third of all British parents are helping their adult children, to the detriment of their retirement plans.

A survey found that thanks to high house prices and financial hangovers from university, 63 per cent of individuals aged between 25 and 34 still rely on their family for financial help, while 46 per cent of 36 to 44 year olds still take offers of assistance from family members.

Analysts warn that the extra support could be crippling parent's financial independence, reducing the amount of money available for retirement plans. But ever increasing property values and the introduction of tuition fees, many parents may find it difficult to find a way out of the trap.

"Unfortunately, increasing financial pressures… are unlikely to abate any time soon so empty nesters of the future should take heed and plan ahead," said Gordon Phillips of Insight Investment on April 3rd 2006, which commissioned the survey.

http://www.myvesta.org.uk

Following the Office of Fair Trading's ruling on unfair bank charges, John Greenwood details how to make a claim

The Office of Fair Trading's ruling that bank penalty charges of more than £12 are unfair could spark a flood of complaints from customers seeking compensation for unjustified charges over several years.

Earlier this month the OFT ruled that penalty charges for late payments on credit cards, unauthorised overdrafts, unpaid direct debits and standing orders and missed payment fees on store cards and mortgages were deemed unfair if they exceeded £12.

Last weekend, this paper revealed that this could lead to redress for bank customers who have been erroneously charged for the past six years.

The OFT's initiative strengthens the case of anyone who has seen penalty charges automatically deducted from their accounts after falling foul of bank and building society small print. As with any legal proceedings, there is not a 100 per cent guarantee that you will win, but lawyers and consumer groups reckon the OFT's position means judges will be far more likely to accept arguments that penalties of more than £12 amount to unfair contract terms that cannot be enforced.

The process for reclaiming the unfair charges from your bank is straightforward.

First your bank is obliged to supply you on demand with a list of all charges you have paid in the past six years under the Data Protection Act. You then need to write demanding the bank repays the unfair charges. If that is not successful, you can take the matter further by either going to the small claims court of the Financial Ombudsman Service (FOS).

More details on how to claim and pro forma letters are available on the website of Which?, the consumer group.

"Claiming back these unfair charges from the banks is a relatively straightforward process," says Emma Bandey, a personal finance campaigner at Which? "These charges are nothing but an easy money-spinner for the banks."

Here's how to fight back against onerous bank charges.

Avoid unnecessary charges in the first place

If you think you are about to go overdrawn or exceed your agreed overdraft for any reason, contact your bank to agree an overdraft extension.

Assess the size of your claim

You can make a claim for the recovery of any unreasonable charges incurred in the past six years. If you do not have all your bank statements, write to your bank. It must provide this information under the Data Protection Act.

Ask your bank to refund your money.

Write to your bank, telling it that you are a loyal customer and that you are unhappy with the charges it has levied. It may agree to a refund.

Threaten your bank with legal action

If your first letter does not do the trick, send a stronger letter, warning your bank you will take it to court or to the FOS.

Decide how to take the matter further

If you have still not recovered what you are entitled to, you have two options - take your bank to the small claims court or refer your case to the FOS. Which option you choose will depend on your personal situation.

You do not need professional legal assistance to take your case to the small claims court and there is little risk of costs being awarded against you unless your case is unreasonable, such as where you have regularly gone overdrawn in a reckless way without ever contacting your bank.

While there is a fee for going to court, taking a case through the FOS will not cost you anything, although the bank will have to pay £360 unless it settles. Once you complain to the ombudsman, the bank has eight weeks in which to resolve the dispute or incur the fee. This cost may encourage some banks to settle smaller claims early.

Taking your case to the ombudsman does not stop you from going to court at a later date if the FOS's decision is unfavourable. You are only barred from taking a case to court if you accept an ombudsman's decision, although if your case has been rejected by the ombudsman, a judge may take the same view.

To date there are no published decisions from the FOS relating to bank charge cases. This means there is no clear indication as to what view the FOS will take of your claim. However, the FOS will look at whether the charge reflects the administrative burden the bank has incurred or whether it is simply a punitive charge. Conversely, there have been many cases in the small claims court where bank customers have succeeded in getting penalty charges overturned.

Lodge your claim

Small claims court applications incur a fee of 10 per cent of the value of the claim, with a minimum fee of £50. This is paid by the bank if you win your claim. The maximum sum you can claim in small claims courts is £5,000 in England & Wales, £2,000 in Northern Ireland and £750 in Scotland.

You have to fill in a form to claim against your bank. You can do this online at www.moneyclaim.gov.uk, and pay the court fee by credit or debit card. Alternatively, you can fill in the form at your local small claims court.

The form will ask for the bank's name and address, the amount you are claiming and the reasons for your claim. The Which? website gives specific wording on how best to explain your case on the application form.

Once the court receives your claim, it sends details to the bank, which must respond within 21 days. If it does not, you can ask the court to make a judgment in your favour. The bank has three options - admit your claim in full, admit part of your claim or reject it.

If the case is disputed the court will set a date for you and a representative of the bank to attend and will tell you what papers to take with you. Hearings in small claims courts are informal to give ordinary people access to legal redress. Judges encourage use of simple, everyday language and will not penalise you for not having a lawyer with you.

FOS applications must be made within six months of the bank's final letter to you refusing your requests that it refund your bank charges. You must fill in an application form and send it to the FOS, which has a phoneline to help people filling in forms. Again, claims wording from the Which? website can be used.

Once the claim is received, the FOS will ask the bank to settle the dispute and if it does not, it will be referred to an ombudsman, who may request further information from both sides before making a decision.

The Telegraph

Need Help Claiming Back Charges Or Payment Protection Insurance Fees ? – Click Here

Despite UK consumer debt reaching the £1.1 trillion mark, 75% of British borrowers claim to be 'comfortable' with their current level of borrowing - and 85% of all adults generally say they are confident about paying household or credit/store card bills on time and keeping up with any mortgage, loan or other credit agreement repayments they have. That's according to the first Personal Credit Index by CreditExpert , the online credit monitoring service from Experian.

The inaugural CreditExpert/ Ipsos MORI research polled c2,000 people across Britain and will track consumers' current credit confidence and future expectations on a quarterly basis, establishing Britain's first ever consumer credit confidence index.

For the forthcoming six months, consumer confidence is high, with a third (32%) of borrowers expecting to decrease their current level of debt. Only 11% expect an increase. Of the 13% who are uncomfortable with their level of debt, 51% expect this to decrease in the next six months. Meanwhile, 70% of financially-confident British borrowers, whose debts have decreased in the past six months, expect to reduce their debt even further in the coming months.

London's high house prices, which are on average 50% higher than the UK average, combined with the higher cost of living in the capital, appear to be having a significant impact on credit confidence. The net confidence of Londoners about meeting their monthly household bills and repayments on time is rated as just 47% in contrast to all other regions, where confidence rates range from 74% in the East Midlands to 91% in the South West.

This reported comfort with current borrowing levels is based on low levels of knowledge for some, with 21% of people admitting they have no idea whether they have a good or bad credit score. Although Britons have an average of five credit agreements each, only 5% say they have requested to see their credit report. Credit report information includes peoples recent credit history and strongly influences credit scores and lending decisions.

19 April 2006


http://www.myvesta.org.uk

Three-quarters of British borrowers claim to be comfortable with their debts, while 85% are confident they can meet repayments, according to figures published today.
Despite Bank of England figures showing consumer borrowing in the UK has reached almost £1.2 trillion, the survey by CreditExpert revealed that the majority of debtors were confident about keeping up with repayments on mortgages, loans and credit cards.

Almost one-third (32%) of those questioned said they expected their outstanding debts to decrease over the next six months, while only 11% said they anticipated their borrowing to increase.

In London, however, confidence was lower than elsewhere, perhaps as a result of high house prices and living costs.

Only 47% of respondents who lived in the capital said they felt confident about covering repayments, compared with other regions where the figure ranged from 74% to 91%. The most confident borrowers lived in the south-west.

The money education charity Credit Action puts the average UK household debt - including mortgage borrowing - at £47,546, with every adult owing an average of £25,195.

Government figures show that last year the number of personal insolvencies had reached the highest level since records began, while repossessions were also on the rise.

Advice charities have also reported increase levels of debt among people contacting them for help.

However, Rima Awad-Sanders, a spokeswoman for CreditExpert, said it should not be surprising that 75% of those questioned felt comfortable with their borrowing.

"A lot of people should be given credit for borrowing responsibly," she said. "Around 30 to 40 million people have credit agreements of some sort. Only a small number of the population are in difficulty."

The survey did not ask people what impact rising rates would have on their confidence, but a recent report by Alliance & Leicester claimed that rates would have to double from the present 4.5% to cause the same problems with repayments that were seen in the early 1990s.

The base rate has remained the same since last August's cut and minutes for this month's monetary policy committee meeting released today do not suggest that an increase in the near future is likely.


Hilary Osborne
Wednesday April 19, 2006

http://www.myvesta.org.uk

One in 11 adults have county court judgments (CCJs) registered against them in England and Wales, according to new research.

The figure highlights the rise of debt problems faced by Britons. UK borrowers now collectively owe more than £1 trillion (£1,000bn) on mortgages, credit cards and loans.

A CCJ is a court order against a debtor to pay money owed. It can be used to force payment through bailiffs and makes it far harder for a borrower to get new credit.

Households in certain parts of Yorkshire and the Midlands are most likely to have CCJs registered against them than anywhere else in England or Wales, according to research by online credit report service MyCallcredit.

'These findings are surprising because the post towns that top the tables for CCJ registrations by household are concentrated around the Midlands and the North,' said Alison Nicholson, MyCallcredit director. 'In the 20 worst post towns for CCJ registrations only Plymouth, South East and East London fall outside this geographical area.'

'The Home Counties and other places within commuting distance of London, have some of the lowest levels of CCJ registrations by household with the residents of Stevenage, Reading, Ipswich and Brighton all falling in the bottom 20 post towns for CCJ registrations.'

The Registry Trust, which records CCJs, last month revealed the number of judgments against consumers in 2005 was 573,000, up 7% on a year earlier and bucking a declining trend since 1991.

www.myvesta.org.uk

This is Money
15 April 2006

Some large firms of insolvency practitioners have been misselling debt-repayment plans to people living on benefits, the profession's watchdog has warned.

The Insolvency Practices Council said that welfare claimants in heavy debt and with no hope of keeping up repayments would be better off filing for bankruptcy, but this would mean smaller fees for insolvency practitioners.

Now the IPC wants to crack down on the misselling of individual voluntary arrangements and to make sure that there is an obligation for practitioners always to offer 'best advice'.

Under an IVA, creditors agree a schedule for repayment of a percentage of the money owed.

But while a practitioner recommending bankruptcy could be paid little more than a 'call-out fee' of perhaps £100, arranging an IVA can cost up to £4,000, and the practitioner can earn the same again by supervising it.

In its annual report, the IPC noted: 'Cases have been drawn to our attention this year in which IVAs have been recommended to debtors whose only available source of finance was unemployment or disability benefits and who, in our view, could not reasonably have been expected to meet the payments required.'

In the third quarter of last year, there were 12,043 bankruptcies and 5,519 IVAs in England and Wales.

http://www.myvesta.org.uk

Dan Atkinson, Mail on Sunday
16 April 2006

Charges for consumer banking could be the consequence of yesterday's ruling that banks and credit card companies should cut the penalties they charge defaulting borrowers.

The companies, which routinely charge up to £25 for late card repayments and unauthorised overdraft, were told by the Office of Fair Trading (OFT) that they must cut the fees to a maximum of £12. There are fears that they may seek new ways of making the millions generated by these charges.

Richard Thompson, the author of PricewaterhouseCoopers' annual study of the credit card market, warned yesterday that if providers were forced to reduce penalties there could be "a waterbed effect, whereby costs are simply transferred from one group of consumers to another".

The banks were unwilling to comment on what impact the ruling may have on their charging structures. Two involved in the OFT's research, HBOS and Lloyds TSB, said they would examine the ruling before making any decisions.

And analysts have said they do not expect any announcements before the banks give trading statements in early June.

But if the companies do cut charges, many expect other costs to be introduced.

Nick White, head of personal finance at price comparison website uswitch.com, agreed that it was "unlikely" credit card providers would write off the money they would lose through reducing penalties and that interest rate rises could be in the pipeline.

"Consumers could see the APR on their credit cards being raised by at least 2%," he said.

In March, analysts from Credit Suisse said they suspected that increases in penalty charges had been "an important driver" of non-interest income earned by UK banks. Companies may look to introduce other charges if they were told to reduce fees, they added.

Several banks had increased charges by around 10% in the second half of 2005, driving up non-interest profits, Credit Suisse said.

"The banks could look to partly offset any detrimental ruling by, for example, increasing interest rates," its report concluded. "Another option would be to introduce charges for owning a current account - extremely uncommon in the UK but prevalent in many other countries."

Outrage

The research said that charging for current accounts "would be likely to result in public outrage", but some say that universal charging would be fairer.

The Consumer Credit Counselling Service (CCCS) said yesterday that consumers who had fallen into debt had been subsidising some of the better deals on the credit card market.

"We have been worried for some time that the burden of sustaining the credit card system was falling too heavily on people in debt while most of us were happy to enjoy a free service at their expense," said its chairman, Malcolm Hurlston.

"Of course, turkeys don't vote for Christmas and the high proportion of consumers who enjoy a free service now won't want to be charged, but we hope the end result may be a return to annual fees which spread the costs more fairly among users."

Meanwhile, uswitch.com's Nick White said increasing APRs across the board would be fairer for everyone.

"While this may seem like a step backwards for consumers at first, we believe that it is important that they are told how much they are going to be charged for their borrowing upfront, therefore allowing them to make a more informed decision when choosing a credit card provider," he said.

"We welcome any developments that improve the transparency of charges, and make it easier for consumers to compare products and how much they are likely to cost."

http://myvesta.org.uk

The Guardian
Thursday April 6, 2006

Citizens Advice today welcomed the announcement by the Office of Fair Trading that many credit card and banking late payment charges were higher than is legally fair.

The OFT announcement means that fees for late payment of credit card bills, bank overdrafts or mortgages must not be set at a punitive level by banks, and can only be priced to recover the costs legitimately involved. Specifically, it said that charges of over £12.00 for late payment of a credit card bill could be deemed unlawful.

Cases seen by Citizens Advice Bureaux have included:

A Suffolk woman in receipt of benefits totaling £65.52 per week, who had no money to live on for a fortnight because of bank charges. She had set up an account to pay four monthly direct debits of about £5 to £10 each. On four occasions she did not have sufficient funds to cover the direct debit, and she was charged £32 for each npaid direct debit - a total of £128. The bank deducted two whole weeks benefit to cover these charges, as the cash went into her account.


A Sussex woman on Income Support was charged £20 for making a payment to her storecard that was one day late. She was then charged another £20 for going 65p over her credit limit. This was at a time when she was paying off her existing balance at a rate of £29 per month, and the charges meant that she was dragged further into debt.

Sue Edwards, Senior Social Policy Officer for Citizens Advice, said:

“This announcement from the OFT is excellent news for the many millions of people in the UK who pay banking charges every year.

“The Citizens Advice service helped people with 1,250,000 debt problems last year, and a large proportion of those people will have seen their debt increased by late payment charges.

“We have been particularly concerned about the magnitude of charges on basic bank accounts - which are aimed at the poorest of people. These accounts enable those who have previously had difficulty opening a bank account to take advantage of the financial incentives of paying utility bills by direct debt. However, we have found that some basic bank accounts charge as much as £39 for ‘bouncing’ a direct debit - which is very nearly a whole week’s money for a person under the age of 25 on Income Support.”

Citizens Advice Site

Need Help Claiming Back Charges Or Payment Protection Insurance Fees ? – Click Here

The Office of Fair Trading is to impose a £12 limit on late payment and other credit card charges after branding the penalties imposed by companies such as Barclaycard as excessive and unfair.

The move is good news for the one in five credit card holders hit with an average penalty charge of £22 last year but will be bad news for profits at the UK's leading financial institutions.

The announcement means that companies such as Alliance and Leicester, which charges customers £25 for a late payment and £25 for exceeding a credit limit, will have to reduce their fees or face the embarrassment of legal action by the OFT.

The regulator said credit card fees have been set "at a significantly higher level than is legally fair" and estimated that consumers paid £300 million more than was reasonable last year.

The OFT said it expects all credit card issuers to recalculate their charges and that fees should only be used to recover administrative costs. It added that the same principle would eventually also apply to default charges on overdrafts, store cards and mortgage products.

John Fingleton, the chief executive of the OFT, said: "Our statement of principles provides practical guidance to banks which increases their incentives to compete vigorously while protecting consumers from being charged unfair amounts.

"Our threshold approach is a spur to changes in market practice. We expect credit card issuers to adjust their default fee levels quickly. We have not ruled out future legal action if the market does not respond positively."

Investment bank Credit Suisse has estimated that UK banks generate about £2 billion of revenue from penalty charges across bank accounts and credit cards.

It said that if the credit card default fee were capped at £15 gross profits in the banking sector would be reduced by about £800 million. A £10 cap would cut profits by £1.2 billion. Profits at Lloyds TSB, Alliance & Leicester, Barclays and HBOS would bit hit hardest by the move, the investment bank said.

Consumer groups welcomed today's decision. Robert Kenley, head of credit cards at price comparison website moneysupermarket.com, said: "This OFT news cannot come soon enough.

"Encouraging the card providers to comply with the £12 cap can only lead to increased transparency and clarity across the credit card industry. It will ensure consumers are better able to understand the fees for which they could be liable and subsequently less likely to make payments late or exceed their credit limit."

The credit card industry has until May 31 to respond to the OFT statement.

Need Help Claiming Back Charges Or Payment Protection Insurance Fees ? – Click Here


By Andrew Ellson
The Times

Late repayment of credit card debt is the main cause of penalties
Charges for failing to make the minimum payment on a credit card bill on time are too high, the Office of Fair Trading (OFT) has said.
A default charge, as it is called, of more than £12 will be considered unfair, the OFT said.

The OFT added it wanted firms to recalculate their charges and only under "exceptional" circumstances would a charge in excess of £12 be allowed.

Consumers pay more than £300m a year in "unlawful" charges, the OFT added.

"Credit card default charges have generally been set at a significantly higher level than is legally fair, " the OFT statement said.

The OFT added that if a credit card firm levied a default charge of more than £12 then it would consider challenging the fee in the courts.

An OFT spokeswoman told BBC News that she hoped that firms would put their own house in order.

"This statement is an attempt to move the market quickly, so consumers can benefit," the spokeswoman said.

"Default charges should only reflect the administrative costs of dealing with the default."

The principle that default charges should only reflect company costs is set to have wider implications for many UK banks and building societies.

Ultimately, the OFT said, this principle would apply to default charges on overdrafts, store cards and mortgage products.

A spokeswoman for Barclaycard, the UK's biggest credit card provider, with 11.2 million cardholders, said it was "seeking further clarification from the OFT and will consider the implications fully before responding any further."

The credit card industry has until 31 May to respond to the OFT statement. The OFT began its investigation into credit card charges in 2004.

http://www.myvesta.org.uk

BBC
Wednesday April 5th, 2006

With surveys showing the under-40s handle money badly, Faith Archer looks at initiatives to instil financial awareness early

Young people are making a mess of their money and need urgent help, research released this week by the Financial Services Authority (FSA) has found.

Give them more than money: educating children about finances will stand them in good stead

Even allowing for lower incomes and limited experience, those aged 18 to 40 are less financially capable than their elders, the study says.

Students are graduating with ever-increasing debts after the removal of grants, and money will be even tighter with the introduction of £3,000-a-year top-up fees from September.

The average student debt has already jumped from £9,373 in 2001 to £13,500 last year, Barclays' Annual Graduate Survey found.

Bankruptcies among young people have also soared, with the proportion accounted for by people aged 18 to 29 rising from eight per cent in 2001 to 19 per cent last year, figures released this week by the Insolvency Service show.

The FSA is now launching an £80 million financial capability programme to reach more than 10 million people over the next five years, not just in schools and universities, but also targeting employers and prospective parents.

Parents see the importance of children learning about money, and rate personal finance education, as more important than traditional subjects such as history and geography, research by the Association of Investment Trust Companies found.

Personal finance will be introduced as part of the national curriculum from 2008, but parents can also help their children.

Vola Parker from the Personal Finance Education Group said: "Most children gain their first knowledge of personal finance from their family, whether their parents, siblings or grandparents. For example, children tend to bank with the same bank as their parents."

Parents can play a key role in interpreting the mixed messages children pick up from their environment.

Ms Parker said: "Children going supermarket shopping with their parents see them paying with plastic cards and getting not just goods but also money. Parents need to convey the fact that you have to earn the money first, or at least pay it back afterwards."

There are a number of websites that will help your children learn about money in a fun way, and several are listed below. Younger children can, for example, help robot Xerbie to mend his spaceship by answering questions on finance, allowing him to escape from Moneyopolis. This, you may be surprised to learn, is the brainchild of the serious, big-four accountancy firm Ernst & Young.

School leavers can also get information on banks and budgeting from

Adults who would feel like a rabbit in headlights talking to their children about money without help can brush up on their financial facts by visiting the FSA's "money laid bare" website, which includes a jargon buster.

The FSA said: "Any help that can be given to the young on how to plan ahead and manage their money is urgently needed. We are working to get this information into schools, and parents can also play a part."

We have put together a list of top tips to help you teach your children about money, and asked the experts what they did for their children, to give you a few pointers.

htp://www.myvesta.org.uk

The Telegraph

Thousands of pensioners are stuck in a cycle of debt, with many owing more than £50,000, a report warned yesterday.

Insolvency experts said 'unscrupulous' lending by credit card companies is dragging growing numbers into taking on debts they cannot afford.

And many others are being targeted by mailshots offering bogus prize draws and other scams which dupe them into sending money to win prizes which don't exist.

NancollasGreer, a firm which offers debt advice, said that of those who approached them, the over-60s had bigger liabilities than any other age group. With an average debt of £52,000, they owed more than three times the £15,000 owed by under-30s.

The oldest person who had come to them for advice was an 80-year-old woman who had debts of £30,000. The company said debt was a much bigger problem for the elderly, who are mostly on fixed incomes with little chance of earning a good wage.

While younger people are able to get a better job or promotion to help them repay loans or credit cards, pensioners are stuck with few such options.

Sarah Nancollas, founder of NancollasGreer, said: 'I have seen some really sad cases of retired people who have found themselves stuck in a cycle of debt and have no way out of it.

'Many are embarrassed by their financial problems and don't tell their families because they don't want to be a burden. A lot of them are scared of leaving massive debts for their loved ones to pay off but simply have no means to repay the money they have borrowed.'

The firm's figures are for unsecured debt and do not include mortgage borrowings. Nearly 70% of pensioners have a credit card, according to the trade body the Association of Payment Clearing Services. Of these, nearly 15% have four or more credit cards.

And some credit card companies are setting pensioners' credit card limits at three times above the average, according to a recent report by BBC Radio 4's Money Box programme.

Pensioners are also vulnerable to the bogus 'prize draws' which drop through their letter box every day.

David Sinclair, policy manager at Help the Aged, said: 'As soon as someone pays the first £20 to 'guarantee' a prize which does not exist, they get put on a list of people who will fall for this sort of thing.'

The charity has heard from many vulnerable elderly people who get 'tens, even hundreds' of offers through their letter box every week.

Mr Sinclair said: 'There is a culture of trust among older people and a sense of duty about responding to 'official' letters.'

Mark Neal, managing director of Economic Lifestyle, the retirement housing specialist, said: 'We regularly see clients who are heavily in debt. Generally speaking, they are not senselessly running up debts - they are simply doing whatever they can in order to survive.

'Credit card and loan companies should perhaps take more consideration when offering credit to older customers.'

Mounting debts are forcing many more pensioners to work beyond the state pension age, currently 60 for women and 65 for men. A record 1.1m pensioners are working, a number which has jumped by nearly 150,000 over the last two years.

Many are 'part-time pensioners' who work a few days a week but are able to enjoy their retirement for the rest of the time.

£130,000 owed on 23 credit cards

RICHARD Cullen took his life after running up more than £ 130,000 of credit card debt. The 65-year-old grandfather borrowed the money over six years using 23 cards, four from the same bank.

He first used the cash to pay household expenses when he took time off to care for his wife Wendy, who had breast cancer. But the debts spiralled out of control as the interest charges mounted and he was forced to borrow money on one card to meet the payments on another.

In the run-up to Christmas 2004 he was being bombarded with letters and phone calls from debt collection agencies, sometimes up to 20 a day.

Until then the self-employed mechanic had managed to keep his financial problems a secret from his wife. It was only after his death in January 2005 that she discovered their full extent.

Mr Cullen was found slumped in his car with the engine running in the garage of the couple's home in Trowbridge, Wiltshire.

Mrs Cullen blamed 'greedy' credit card companies for her husband's death. She said: 'These credit card companies don't care about the effect they have on people's lives. It's such a mess.

'He told me we were in debt but I didn't know it was anything like £130,000. He even cut up ten credit cards in front of me and said he'd never use them again.

'He was such a proud man, he didn't tell anyone the trouble he was in. If only he'd told me, we could have sorted it out together.'

Mr Cullen borrowed from companies including Barclays Bank, where he had four cards, and Tesco, on whose card he had a £10,000 balance.

http://www.myvesta.org.uk

Becky Barrow, Daily Mail
4 April 2006

Zopa, the online borrowing and lending exchange, is to start charging customers for using the service, taking some of the shine off its offer.

Both borrowers and lenders will pay a 0.5% fee on the amount of the transaction. Borrowers will pay upfront on the loan, while lenders' payments will be spread over the first year of repayments.

Borrowers will start paying the fee from April 6, while lenders will pay from April 13. However, founder members of the service will still be able to lend fee-free for life.

Previously, Zopa – zone of possible agreement – has made its money through Payment Protection Insurance. It did have a 1% charging structure for borrowers in place but this has been waived for the past 11 months.

The service has proved popular since being launched in March last year. So far, around 63,000 members have used the service and it is growing at a rapid rate.

James Alexander, UK chief operating officer, said: 'We wanted to make the charge fair, simple and not 'banky'. This charge is upfront and transparent and means we still have the most competitive rates on the market.'

It works by putting lenders and borrowers in touch with each other to avoid having to use a bank or building society.

The nature of the service means that it is often possible to borrow small sums at much better interest rates than High Street banks would be able to offer.

Loans can be for as little as £1,000 or as much as £25,000, although the average sum is £5,000. Lenders can put up between £500 and £25,000, but can only loan £250 to any one individual to limit the risk of defaults.

The average return for lenders is 7% gross, a better rate than most saving accounts offer.

Borrowers are split into two groups depending on their credit rating. Those with solid credit records are classed as A borrowers, while those with slightly tarnished records are put in the B category.

If a member lends or borrows money before the cut-off point then they will avoid the fees.

http://www.myvesta.org.uk

Michael Clarke, This is Money
3 April 2006

It is being predicted that debt could be bringing families closer together.

The Lasting Lifestyles report commissioned by FTSE 100 life and pensions company Friends Provident suggests that, despite an increase in family breakups in recent times, the burdens of debt could see families move back in together to get themselves back on track.

The report has led to trend forecasters The Trend Laboratory predicting a new tendency of clubbing together, where parents and their adult children come together to share the burdens of cost.

"As 30-somethings fail to invest in pensions and an ageing population spends its children's inheritance, we are seeing families moving back in with each other and sharing the cost of home and mortgage," according to the Lasting Lifestyles report.

Fractional pensions are being cited as the way forward for these family groups, allowing them to make equal contributions and receive the benefits of a larger pension.

The predicted move is a result of poor planning by the children and apparent over spending by their parents.

http://www.myvesta.org.uk

Adaptations to the Banking Code could give extra security to consumers borrowing from banks, building societies and credit card companies, according to the Banking Code Standards Board (BCSB).

New guidance on the code covers consolidation loans, joint income borrowing and a general addition of consumer information on the borrowing process.

Subscribers have been told to take more care when providing consolidation loans to those with perceived financial difficulties and lenders should assess the purpose of the borrowing in relation to the period of repayment. Another change includes granting loans in joint names if two incomes have been considered in the repayment process.

Ian Mullen, chief executive of the British Bankers' Association, said: "One of the key attributes of the Banking Code guidance is its ability to be adapted to reflect new developments in the market place.

"The introduction of the new guidance is a prime example of this in action and formalises good practices that are already widely employed by the industry."

Seymour Fortescue, chief executive of the BCSB, added that its recommendations should "encourage responsible lending". He also stated that due to the new guidance, borrowers should have "fewer problems" and banks should have "lower bad debt".

The Financial Services Authority (FSA) said earlier this week that young people in particular need to assess their financial situations. As a result, the FSA has begun an initiative to improve the public's financial awareness.

http://www.myvesta.org.uk

Hindus and Sikhs are the best at managing money, an official study into Britain's personal finances said this week. Puzzled researchers said it was 'for reasons that are hard to explain.' So we asked residents of one of Britain's biggest Hindu communities for the answer

it was billed as the biggest ever survey of consumer attitudes to money. But while the headlines generated by the publication earlier this week of the Financial services Authority's massive research on "financial capability "focused on the problems of the 18-40 age group, the smaller print on the 6,000-person quiz generated a wealth of fascinating facts.

The results show that among Britain's major faith groups, Hindus and Sikhs come out tops on "making ends meet" - they are better than others at managing their money.

Hinduism stresses that increasing the family's wealth is a duty and a blessing from the goddess Lakshmi, the consort or wife of Lord Vishnu. She is the goddess whose four hands represent prosperity, purity, chastity and generosity.

As two of her four virtues are to do with money, every family tries to manage with care and to be more prosperous than the previous generation without compromising spiritual virtues.

But when Money Guardian talked to residents of Harrow, northwest London, home to the UK's biggest Hindu community, we found more emphasis on the practical than the spiritual.

Rita Patel owns a newsagent's shop, working long hours.

"It was a real struggle when I came here as a little girl over 30 years ago. My family emphasised that you paid cash and did not borrow - except for the mortgage. I have to be a good money manager both for my business and for my two children," she says.

"I've already planned for their higher education with a series of investments that will pay out lump sums when they reach 18 to 21. I've told them that I don't like borrowing but if I have to - for a mortgage or the business - I pay it back as soon as possible even if it means going without other things."

Geeta Nanda, a housing association director says:"I've inherited a different ethos to my contemporaries. My parents were immigrants who came here with very little but had a real will to succeed. And part of that was to ensure their children did better than they did. In turn, I want my children - both at primary school - to do even better. I'm putting money aside for their university education so they will be debt-free when they graduate and they won't have to interrupt their studies with working.

"It's all part of our ethos. We save before we buy - you can have a big car or flashy jewellery but you get them with cash and not through debt. You have what you can afford. I'm paying off the mortgage as fast as I can," she says.

Pharmacist Prakesh Desai was also brought up to learn how to provide for tomorrow by saving today. But he fears for the next generation even though his 20-year-old son still has not succumbed to the "lure of credit cards."

"My generation is better at managing their finances but I worry that the younger generation will be more influenced by the 'spend now and don't worry about tomorrow attitude' that is so prevalent in general. Sadly, they think the state safety net will be there for them - and all too often it is so taking away from responsibility," he says.

Convenience store owner Bharati Davda says: "I try to save for my old age and for rainy days. It's a formal thinking process which I learned from my parents back in east Africa. I have three grown-up children and it was very important to get them on the right track. We saved for their university time but made them work in vacations - they had to learn life is not easy."

Dentist Rajen Vadher believes the Hindu mentality is to be "savvy." He says: "I was brought up to save and not to waste. I have a credit card but always pay it off each month. I don't have formal regular savings plans because dentists are self-employed and my income fluctuates. But I put away as much as I can."

Dental nurse Alka Malkan says she "does not mix religion with my daily life. But generally, you are brought up to work hard and not splash out."

Sikhism, which also figures highly in the FSA financial capability study, is vastly different as a religion but has a similar ethos - living in a family environment and serving the community enables truth and God to be realised.

Areas where Sikhs predominate actually have low credit ratings - because so few residents have credit cards or credit records. Among other religions, Muslims are also better than average at managing money. Practising Christians are just above average - but there was no correlation between the Jewish faith and managing money.

http://www.myvesta.org.uk

Tony Levene
Saturday April 1, 2006
The Guardian

Your current account has just picked up the financial equivalent of an anti-social behaviour order.

The Which? consumer group today launches its own Asbo campaign - substituting the word "banking" for "behaviour". The aim is to name and shame the big banks and the high charges they impose on customers who stray into unauthorised overdrafts.

These can be as much as £35 for a bounced cheque. Recent research by the moneysupermarket.com price-comparison website shows that, on average, the cost has risen by a third over the past year to £32.22.

In 2004, unauthorised overdrafts cost personal account holders £3bn.

"These charges are nothing but an easy money-spinner for the banks," says Doug Taylor of Which?. "Charges should be fair and reflect the costs involved - not, as they are now, an arbitrary figure picked to make the most money out of unsuspecting customers."

Which? has written to the Financial Services Authority asking the regulator to investigate the legality of the practice.

Pressure on banks to reduce their charges has increased in recent months. Consumer websites such as bankchargeshell.co.uk and penaltycharges.co.uk have already gained huge support from customers fed up with high penalty fees for what is often a small transgression.

Many people have threatened to take their banks to court in protest at the charges - and in some cases, lenders have backed down ahead of legal proceedings.

So far, the industry has refused to contest cases in court. Protesters, including Vince Cable, the Liberal Democrats' Treasury spokesman, believe that's because it is on shaky legal ground over the size of un- authorised overdraft fees.

Which? is counting on this. Its campaign website (www.which.co.uk/bankingcharges) includes a template that can be downloaded to challenge the banks - through the small claims court, in the first instance - and help you reclaim your money.

Meanwhile, separate research from uswitch.com, another price-comparison website, suggests that nearly half of all current account users don't know the interest rate charged by their bank for an authorised overdraft. The average is 12.25 per cent, it says. With the size of the average overdraft hovering around £677, that means consumers are paying more than £1.1bn a year in interest charges.

Among lenders offering the lowest interest rates on overdrafts are Alliance & Leicester (5.9 per cent on its Premier Direct online account) and Nationwide (7.75 per cent).

Your current account has just picked up the financial equivalent of an anti-social behaviour order.

The Which? consumer group today launches its own Asbo campaign - substituting the word "banking" for "behaviour". The aim is to name and shame the big banks and the high charges they impose on customers who stray into unauthorised overdrafts.

These can be as much as £35 for a bounced cheque. Recent research by the moneysupermarket.com price-comparison website shows that, on average, the cost has risen by a third over the past year to £32.22.

In 2004, unauthorised overdrafts cost personal account holders £3bn.

"These charges are nothing but an easy money-spinner for the banks," says Doug Taylor of Which?. "Charges should be fair and reflect the costs involved - not, as they are now, an arbitrary figure picked to make the most money out of unsuspecting customers."

Which? has written to the Financial Services Authority asking the regulator to investigate the legality of the practice.

Pressure on banks to reduce their charges has increased in recent months. Consumer websites such as bankchargeshell.co.uk and penaltycharges.co.uk have already gained huge support from customers fed up with high penalty fees for what is often a small transgression.
Many people have threatened to take their banks to court in protest at the charges - and in some cases, lenders have backed down ahead of legal proceedings.

So far, the industry has refused to contest cases in court. Protesters, including Vince Cable, the Liberal Democrats' Treasury spokesman, believe that's because it is on shaky legal ground over the size of un- authorised overdraft fees.

Which? is counting on this. Its campaign website (www.which.co.uk/bankingcharges) includes a template that can be downloaded to challenge the banks - through the small claims court, in the first instance - and help you reclaim your money.

Meanwhile, separate research from uswitch.com, another price-comparison website, suggests that nearly half of all current account users don't know the interest rate charged by their bank for an authorised overdraft. The average is 12.25 per cent, it says. With the size of the average overdraft hovering around £677, that means consumers are paying more than £1.1bn a year in interest charges.

Among lenders offering the lowest interest rates on overdrafts are Alliance & Leicester (5.9 per cent on its Premier Direct online account) and Nationwide (7.75 per cent).

http://www.myvesta.org.uk

By Sam Dunn
Published: 02 April 2006
The Independent

UK credit card holders are paying millions in penalty fees.

Late payments and exceeding credit limits cost UK credit card holders £116 million a year, new figures reveal.

And with so many Britons hit by these charges, experts are arguing that credit card applicants need to pay far more attention to how much lapses will cost them.

Currently one UK credit card holder in six is hit by penalty fees, figures from price comparison site moneysupermarket.com reveal, costing an average of £22.68 a time.

But these fees vary by as much as 66 per cent, meaning even careless customers can cut their costs with a little homework.

However, some simple steps can ensure that these charges hit as few people as possible.

"It is vital that consumers are scrupulous with their credit card payments," said Robert Kenley, head of credit cards at moneysupermarket.com.

"At present, deals from credit card providers are becoming remarkably less appealing as they attempt to recoup financial losses.

"Customers would do well to set up a direct debit for the full payment or, at the very least, pay the minimum repayment and then make additional payments when they can. This way they can be assured they won’t miss a payment.

"I also urge credit card holders to be aware of the fees associated with going over their credit limit. Arguably, providers should not allow your payment to go through the credit limit, but they do and instead, you are slapped with a fee for the action."

The lucrative payment protection insurance offered by banks and credit card companies will be investigated by the Office of Fair Trading, it announced today.
Financial services companies make more than £5bn annually selling PPI alongside mortgages, credit cards and loans and up to 7m policies are taken out each year.

The insurance covers borrowers if they lose their job or become sick and unable to work.

However, last September the charity Citizen's Advice claimed that it was being sold to people who were ineligible to make a claim or later found that their circumstances were excluded.

A super-complaint, made by the charity to the OFT, said consumers were paying too much for the cover and often fell victim to unfair sales tactics.

In December, the OFT responded to the complaint, saying it had identified that the sector was not working well for consumers.

It was particularly concerned that consumers were not being told they could shop around, that the information they were being given was too technical and that the profit margins for providers appeared high.

As well as investigating those issues, the study launched today will consider the relationship between PPI providers, customers' experiences of making claims and their awareness of the exclusions on different policies.

The OFT will consult with the industry and consider studies of PPI by the Financial Services Authority and the Competition Commission, which has investigated sales of PPI for store cards.

It expects to publish its report by the end of the year. If the OFT finds evidence of mis-selling or profiteering in the sector, it could recommend that the government take action or refer the industry to the Competition Commission.

Last year, the price comparison website uswitch.com published research that showed PPI from a loan provider could more than double the cost of the loan.

Cheaper, standalone policies are available, but according to the OFT's initial findings, the complexity of PPI policies mean people are much less likely to shop around for cover as they do when they take out a loan.

Emma Bandey, spokesperson for the consumer group Which?, welcomed today's announcement. "Which? has been saying for many years that the PPI market is seriously flawed.

"There are problems with how the products are sold and how the market itself is set up so we are pleased that the OFT will be conducting this study and look forward to contributing our evidence."


Hilary Osborne
Monday April 3, 2006

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