DebtBytes UK - Bankruptcy, Insolvency, Simple IVA and Bank Charges News UK

Buy Coke without coins

steve.rhode@myvestafoundation.org — 20071220

Buy Coke without coins
Originally uploaded by shimmertje

Just in case you were looking for even more ways to borrow money, now you can let your mobile phone company extend you money for a soda.

Bless Capital One

steve.rhode@myvestafoundation.org — 20071218

I thought you might enjoy this article that I wrote this morning about Capital One and corporate inefficiency.

Steve

It's Beginning to Look a Lot Like Christmas

steve.rhode@myvestafoundation.org — 20071217

It’s getting to be that time of year again. A time for joy, for sadness, for guilt, for pleasures and for bills.

The holiday season comes every year and yet people are annually surprised by holiday bills, and they will be again this year.

But that’s not really what this post is about. On the drive in today I thought about new years resolutions and what I feel like I can do better about next year. I’ve long skipped the usual empty promises of exercise and weight loss. I don’t need another purchased and unused gym membership to tell me I’m fooling myself about actually carrying those goals out.

In fact my desire in 2008 is going to sound completely ass-backwards, my goal is to try to find good ways to embrace credit. Now on face value that statement might look completely hypocritical based on my professional career as a debt expert but let me explain.

My day-to-day life is filled with battles about debt and contemplation of deeper thoughts about the ethics of modern banking or fair treatment of consumers by lenders. And trust me, all those battles and wars will still rage.

But what my thoughts were turning to was that if people are going to engage in credit, which leads to debt, isn’t there a way I can help them to make good and smart choices and decisions about which products to use and what to look for.

Sure, more education about financial products would be good in schools but I still have my doubts that it will make a significant difference. For me its a bit like giving people classroom driver education three years before they get in a car to really drive and how effective is that approach.

Recently I launched I Buy Junk Mail and what I’ve noticed from the offers people are sending in is that creditors are doing an exceptional job of laying out the credit terms and conditions in the fine print of card offers. The good news and bad news of credit offers is all there. The shocker is to see some of the terms laid out.

The other project that has been enlightening has been the Ethical Banker site that I launched to try to have an academic discussion about business ethics, banking ethics and reality. What has emerged out of that site has been a clear understanding, I hope, that modern banking ethics have nothing to do with the “fair” treatment of consumers. Rather the focus of banking ethics seems to be about the “fair” treatment of shareholder returns, market performance and the business.

So if there is little internal consideration for how the product impacts the life of the customer, then what I’m going to try to do for 2008 is a better job of explaining credit through education using actual credit offers. My hope is that if I can educate the consumer before the feast of credit begins that we will be able to eliminate some of the unfortunate debt situations we see on the back end.

At the end of the day I don’t want to live my life in conflict with others or be in a constant battle. I just want in the credit and debt world what we all ask for during the holidays, peace on earth and goodwill towards all people.

Steve

Banking Ethics and Business Ethics

steve.rhode@myvestafoundation.org — 20071211

I might have vanished for a few days off the blog but I was off doing important things. Lately I’ve been so perplexed why banking ethics and normative societal ethics seem so divergent that I started a new blog to talk about these issues on. You can find The Ethical Banker online and I would love and encourage your feedback and input.

This subject has left me at this point puzzled that banking considers their ethical duty to be towards profit rather than towards providing the best care for the customer. I’ve posted a couple of questions here that make you think and are just begging for your input.

Steve

Labels: Bank, Banking, Ethical, Ethics

ICE, ICE, Baby – In Case of Emergency

steve.rhode@myvestafoundation.org — 20071129

Here comes a good tip from the ethersphere.

If you were to keel over tomorrow and someone stumbled across you, who would they contact? Since almost all of us carry mobile phones, one suggestion passing around the world is to enter a contact in you phone that is labeled ICE. ICE stands for In Case of Emergency, logical, makes sense.

While ICE is not a universal approach to figuring out to call to claim you or help you, it is the best approach I’ve seen out there, except for wearing a tag.

The ICE abbreviation helps emergency responders to be able to easily get a clue about who to call, that is unless you’ve got a shortcut for the rapper Vanilla Ice or Ice-T in your contact list.

I am told that the idea was thought up by a paramedic who found that when he went to the scenes of accidents, there were always mobile phones with patients, but he didn't know which number to call. He therefore thought that it would be a good idea if there was a nationally recognized name for this purpose.

For more than one contact name simply enter ICE1, ICE2 and ICE3 etc. It’s a free and easy idea that will make a difference! Let's spread the concept of ICE by storing an ICE number in our Mobile phones today!

Help spread the word by emailing this article, because we all know that when you tell your friends and family things, they never listen to you anyway. :-)

Free Stuff From Condoms to Computer Software, Waiting for You.

steve.rhode@myvestafoundation.org — 20071128

Loads of free stuff on the Internet is just waiting for you.

From condoms to computer software packages, there is a plethora of freebies available from major companies that are just waiting for you to claim or download.

Here are a few of the intriguing free offers that caught my eye today.

Free Anti Virus Protection – If you already have a router that offers you firewall protection or your operating system does, consider using the free anti-virus program you can download.

Condom – The good people at Trojan will help you with anti0virus protection for a different piece of hardware, if you know what I mean. To claim your free condom just pick what kind you want online.

Advanced Education – MITOpenCourseWare while you can’t earn a degree it is just like attending a course at MIT with class information, notes, materials, videos, lectures, etc.

Office Software – While it’s not Microsoft, it is free. Take a look at Sun’s OpenOffice offerings and download, for free, software that will allow you to do word processing, spreadsheets and presentations,

Hate Pay TV - Why not consider Joost to watch what you want, when you want. Surely you can find something to watch from their 15,000 TV shows waiting for you.

Totally Free Money, Credit and Debt Advice - If it is good free video content you want for money, credit and debt issues, then watch the new Myvesta.TV channel online. Not only will you get to see a bunch of money related content but you can chat with a live adviser each weekday between 2PM to 5 PM GMT.

Want to See More Free Offers? - Look here, for a complete look at a whole load of more freebies just waiting for you.

Credit Card Offers

steve.rhode@myvestafoundation.org — 20071125

Credit Card Offers
Originally uploaded by sammo371

Unsolicited credit card offers continue.

Green Christmas

steve.rhode@myvestafoundation.org

Adam Zyglis Cartoon
Originally uploaded by offlxcontactus

Christmas is coming. Christmas is coming.

Debt Collection and Collectors

steve.rhode@myvestafoundation.org

One of the blogs that I enjoy reading recently posted a very interesting article that wanted me to share it with you.

In an effort to help you understand why it is wrong for HSBC, HFC, Citibank, Bank of America, Capital One and all the others to vilify debtors when they can’t pay the bills, it is important to understand that money problems are not about the money, they are about the underlying issues.

As long as the collection companies of professional creditors continue to label problem account owners as liars, cheats, thieve and idiots, we just aren’t going to make a lot of forward progress to creating a kind and compassionate framework to allowing debtors to resolve their debt problems and creditors to get paid.

Many times in my life of helping people I have had clients that have found themselves in financial trouble, for a variety of reasons, and in some cases it has been because of excessive collecting or collecting beyond one’s ability to afford the collecting. That does not make the person an idiot or financially stupid as many debt collectors would say.

In fact, many volunteer advisers or credit counselors simply tell people to stop collecting or stop doing this or that. The point is that more understanding of these underlying issues is necessary to make real changes.

Unfortunately today, what culture labels as acceptable credit counseling, or debt counseling is much like a patient going to a doctor with a medical problem and only the most obvious symptom is treated. Imagine a broken bone protruding from an arm only to be shoved back under the skin and considering that to be fixed. When financial live are wrecked everyone needs to do more than just build that person a budget or give clever advice like “stop collecting tools” or whatever it is.

So with all of that in context, let me turn you over to one of my Twitter friends, purplecar for her wonderful post on the issues of collecting. Be sure to read her blog also.

Popular psychology’s "they" say that 'everyone collects something.'

It took me a while to think about what I collect. I have a pretty big fabric and art supply stash (there probably aren’t very many crafts left in the world that I haven’t tried). I have a pretty filled-up font book on my Mac. But I don’t house my collections in some cabinet like rare coins. I don’t collect anything of any value. They are supplies that can be replaced easily, a means to an end, like keeping a well-stocked food pantry. I’m not too exciting that way.

Characters with a collecting habit can be pretty interesting. The plotline can go so many different ways. Is your character poor but saves and saves for a haute couture dress she is never going to wear? Is your character wealthy beyond imagination but loves vintage broken checker sets? Why do they collect? Is it a secret? Do they have friends/competitors that collect the same objects?

The psychology behind collecting isn’t well defined, but this website had a good summary:

For some people collecting is simply the quest, in some cases a life-long pursuit that is never complete. Additional collector motivations include psychological security, filling a void in a sense of self. Or it could be to claim a means to distinction, much as uniforms make the “man.” Collections could be a means to immortality or fame …

For some, the satisfaction comes from experimenting with arranging, re-arranging, and classifying parts of a-big-world-out-there, which can serve as a means of control to elicit a comfort zone in one’s life, e.g., calming fears, erasing insecurity. The motives are not mutually exclusive, as certainly many motives can combine to create a collector – one does not eat just because of hunger.

We are writers; This picture of a harmless collector trying to make sense of the world is lacking drama. Throw some obsession into it (a la Indiana Jones) and you’ll run into some inner and outer conflict when a character has to choose between the collection and something or someone equally as important.

If the collecting obsession truly turns sour, it is known as “hoarding.” Hoarding is the extreme case of collecting. Whereas collecting is a pursuit or a quest as an end in itself, hoarding behavior forsakes all other people and things. Often, a hoarder will harm others in their attempts to gather as much of the object as possible. Hoarders are those types that save every newspaper ever delivered to them or have 200 cats living in their house. It’s a psychological pathology that needs treatment. A hoarding character has the potential of taking over your book. For example, serial killers are thought to be hoarders of people. Entire books are written around this pathology, so make good choices on how obsessive you would like your character to seem.

One of my characters likes antiques. Mostly a very frugal person, she is a big fan of antiques from the Mayflower and Puritan England, and sneaks away to look for expensive pieces to buy any chance she gets. Her family is aware of it; her furniture collecting is pretty harmless, and this character has a mansion to fill anyway. But the want of this particular kind of antique says something about her wants and desires, especially when compared to her 1st generation off-the-boat Italian catholic upbringing. Choose your character’s collection so it shows a deeper, unexpected side of him or her. When do they find time to go searching? How many hours do they spend? Do they keep the treasures or give them away? Is it about the pursuit or the obtaining or both? What sense are they trying to make of the world? There are so many opportunities to show and not tell with a character’s collecting.

Think first of what you might collect now or started to collect as a child. Baseball cards? Matchbooks? Obsolete technology? See what your imagination can do when you collect your thoughts around collecting, and write on. Come back to PC and let me know what you came up with!

So do you get the point? In this case the debt is just the symptom of the underlying issue of the emotional need to collect. As long as debt collectors only demand payment or credit counselors want to make a better budget, the real issues leading to the debt are never ever addressed.

We all need to do a better job with this.

Labels: Collecting, Debt Collection

The Miracle of Manufacturing Credit

steve.rhode@myvestafoundation.org

Irresponsible Credit Card Company

steve.rhode@myvestafoundation.org — 20071124

I could not help but bust out laughing on the phone today to one of my credit card companies. It’s one of those that always proclaims in the media that they are not irresponsible lenders. Worst part is that when consumers get into financial trouble they could care less.

A couple of weeks ago when Pam and I were in Rome, she accidently left her purse in the back of a cab. Yes, a most unfortunate event. Thankfully everything got switched off before anything bad happened but she is still bummed about losing the camera with all the pictures on it and the phone with all the friends numbers.

Since then I have basically been living credit card free since we’ve had to wait for replacement cards to arrive. It has been an awkward experience. Of course everything I had registered my business card with, one of the missing ones now, is being rejected and until the replacement arrives, all I can say to folks is oops. The good news is that the replacement cards arrived today and I called to activate them. That’s where this story really begins.

So it all goes like this. I call bank to activate card. I push a bunch of buttons but still must speak to a representative. The representative sounds like she is in India at a call center, which does not warm my heart, especially after recent examples of personal financial information being sold by some call center staff in India.

It was obvious that the representative was reading from a script.

Rep: Thank you so much for being a valuable customer Mr. Rhode. Before I approve your replacement card for activation I would like to ask you a few questions.

Me: OK.

Rep: In addition to activating your card today I can issue you a PIN number so you can take cash advances from your card at any ATM worldwide. Can I issue you a PIN?

Me: No thank you.

Rep: Would you like for me to send you some blank checks that you can use on your account?

Me: No thank you.

Rep: Do you have some balances you would like to transfer to your cards at this time?

Me: No thank you.

Rep: Would you like for me to go ahead and deposit some cash into your bank account for you to use?

Me: You’ve got to be kidding me. You want to charge a cash advance against my card and deposit that into my bank account?

Rep: Yes, would you like for me to do that?

Me: No way. No. No thank you.

Rep: Would you like to skip making a payment one month each year? You can pick the month. Maybe when things are tight? There is only a small monthly charge for you to be able to be eligible for this.

Me: You want to charge me a monthly fee so I can skip making a payment and you can rack up the interest charge that month?

Rep: Yes, you will be able to skip a month…

Me: Sorry to interrupt, no thank you.

Rep: As a special customer I would like to offer you our special credit and payment protection insurance to cover you in case you are unable to make your payment.

Me. No thank you.

Rep: Mr. Rhode, I can respect your decision but I think you should reconsider. This credit protection plan will …

Me: I’m sorry, I can’t take any more of this. Bye.

Maybe I should have let her finish but I was beginning to gag on all the crap that my bank wanted to shove down my throat as a "special customer".

It didn’t occur to me till I was writing this that my lovely bank was shoving all these crack credit opportunities at me without checking my employment status, checking my current income, or asking me any questions about my current situation. Just shove, shove, shove, push, push, push.

Can any sane and rational person be surprised that some people take advantage of some of these offers? I’m still speechless about the credit card company wanting to deposit cash into my bank account. We’ve got to ask ourselves, at what point is this kind of behavior so reckless that it is illegal? We are way past the line for immoral. Take a look into the mirror Mr. Credit Pusher and ask yourself when does the responsibility for responsible lending start?

Labels: Irresponsible Lending

HFC Bank Feels They Are Above the UK Guidelines

steve.rhode@myvestafoundation.org — 20071123

The other day I wrote an article about a letter that HFC bank was sending out to consumers. The letter appeared to be violating the Office of Fair Trading (OFT) Debt Collection guidelines.

In that article I reveled how HFC Bank, a proud part of HSBC was violating numerous sections of the Debt Collection guidance issued by the OFT. After calls to HFC from ourselves and reading what appeared in This is Money, no other conclusion can be made other than HFC Bank and HSBC feel they are clearly the superior party when it comes to compliance with debt collection guidelines.

It was nice to read the quote from the OFT about HFC Bank and HSBC making an end run around the appointed third party debt representative. “The OFT said it does not comment on individual cases before investigation. However it did state that, in accordance with its guidelines, any bank sending out such letters is partaking in a 'potentially unfair business practice'. It added that banks must deal with a customer's appointed debt manager and not contact them directly.”

Look, this isn’t rocket science here. The OFT debt collection guidelines are either government direction to provide clarity about the treatment consumers should receive when in debt collection or they aren’t. Apparently HFC Bank and HSBC both feel they can intentionally ignore the OFT.

A spokesman for the bank said: 'We still believe we have the right to contact our customers directly.' He added that the bank preferred to work with 'large and reputable' debt advice organisations, not smaller companies of which it has limited experience.

And that’s the whole point isn’t it, the bank does not have that right to do that. The consumer is free to choose who they want to represent them when they are in trouble and HFC Bank and HSBC should have no voice in who the company thinks they should go to. That’s like a car manufacturer tell you that you can only use their lawyers or solicitors to represent you against the manufacturer in case of a complaint as the result of a defect.

HFC Bank and HSBC you get the “You Suck” award for the day.

Labels: Debt Collection, HFC Bank, HSBC, OFT

Saying What Matters: Blogging and Writing About Money Problems

steve.rhode@myvestafoundation.org

Sometimes I go back and read an old post and cringe when I see a missed capitalization or punctuation mark. Or used your instead of you’re. That one catches me a lot. Thank God for spell check. I swear that my spelling has become worse because I rely upon it so much. It’s a bit like relying on a calculator rather than being able to do math in your head.

Maybe it is bravery, or stupidity, but I refuse to let my fear of making a small error in the message stop me from getting the message out. There is so much to be said, or shared. So many people around the world need a voice and awareness about financial issues, concerns and problems.

I’m not saying I’m great because there are a lot of people that are smarter and lead lives that are more connected at the most high levels of commerce and government. I guess what I’m saying is that at least I try to do something each day to put one foot in front of the other to raise education and awareness about problems and issues. At the end of the day I’d rather go down fighting with a voice than simply suffer in silence.

I urge and invite you to get involved in issues involving consumer debt by commenting on my articles and blogs and to participate in the discussions that matter. Share something most valuable, your informed opinion. I care what you have to say and others do as well.

Company Loses All Employees in Jellyfish Attack Off Northern Ireland

steve.rhode@myvestafoundation.org — 20071122

A rare and savage attack of Mauve Stinger jellyfish at the massive sea holding pens has all but ended the business of the only salmon farm in Northern Ireland.

This unfortunate story serves as a good example of how people often find themselves in unexpected situations and income is lost or suffers greatly. More than 100,000 salmon were killed by the deadly jellyfish which are normally found in much warmer waters. Until the past decade, the mauve stinger has rarely been spotted so far north in British or Irish waters, and scientists cite this as evidence of global warming.

The attack on the salmon lasted for nearly seven hours with the jellyfish covering a sea area of up to 10 square miles and 35 feet deep. Workers from the salmon farm tried unsuccessfully to reach the sea pens to save the organic salmon and their jobs but the jellyfish were so dense that they could not reach the cages in time.

The financial loss is estimated at £1,000,000 ($2,100,000) and that it will take at least two years to recover. In the meantime the future of the business is uncertain. This is certainly bad news for the new company managing director who started just three days earlier.

Again we are served another classic example of why life is fluid but creditors and banks pin consumers to fixed mandatory absolute repayments which sink debtors in times of trouble. Flexibility and understanding are needed to help people like the dozen guys that are probably now out of a job.

Bank Charges

steve.rhode@myvestafoundation.org — 20071121

Bank Charges
Originally uploaded by The Emperor Dalek

The Great UK Bank Charge Rip Off

steve.rhode@myvestafoundation.org

On Unlawful Bank Charges. The Banks Think You Are Stupid. Are you?

So I just finished reading the 39 page Office of Fair Trading response to the bank charge court case going on against Abbey National, Barclays Bank, Clydesdale Bank, HBOS, HSBC, Lloyds TSB Bank, Nationwide Building Society, and the Royal Bank of Scotland Group. I would not suggest reading the document if you are in need of a nap.

What is quite apparent is that while the banks put on a face of caring about their customers they have clearly been caught with their pants down on banks charges. And don’t even get me started about the “screw the consumer” Payment Protection Insurance issues.

The amount of tax money (your money) that is being spent by the OFT in the investigation of bank charges and the pursuit of this case against the banks is ridiculous stupid. When does the insanity end with banks and financial service providers in the UK? Let me be clear, at no time and in no country is it considered appropriate to rape the consumer just for corporate profits. Banks may do it at will but it is not the mark of good corporate citizenship. I have no problems with banks making a profit, just not through deception and doublespeak.

I get the point that the actual cost of the rejection of a presented item is fractional compared to the actual charge levied and that in essence the banks have been profiting from those activities, and they shouldn’t have been. So the banks current position is to argue about what the definition of this or that is. It is shameful and a smoke screen.

The banks should just sign a no-contest agreement, admit to no blame and put a big deposit into a fund to pay out claims to consumers and be done with it. I’m afraid all they are doing right now is providing even more of a public spectacle of themselves to demonstrate that they could give a crap about the individual consumer and that customers are just an ends to a means. We know that’s the case, at least be adult enough to stand up and say that banks. Because while you keep putting on this face on congeniality and community service only to take grandmas money unlawfully, I can’t see how you’re acting differently than a con-artist.

I still struggle why some banks, like Citibank in Germany, only charge three euro’s or so for a rejected item but in England, not that far away and still part of the EC, it is almost ten times as much. WTF is that all about?

I can see a new advertising slogan. In the US there are slogans like “Milk, Does a Body Good”, “Pork, the Other White Meat” and now in the UK we can “Banks, WTF?” If you don’t know what WTF means, ask around. It’ll be worth it.

Debit Cards Not as Safe

steve.rhode@myvestafoundation.org — 20071112

The debit card has an allure for many because it allows people to make credit card like transactions without the fear of debt but all of that comes at a price and a risk.

A debit card is not a credit card, obviously. With a debit card, transactions are paid from the cold hard cash sitting in your bank account and do not include and extension of credit, that is unless you run into your overdraft account.

The perception that a debit card is safer than a credit card is simply unfounded, especially when you are making online or international purchases.

Here is the problem. If someone gets a hold of your debit card information and uses it fraudulently, those funds get sucked from your available funds in your bank account. Just one incorrect or fraudulent transaction can set off a chain of events that can cause a world of financial hurt, rejected transactions and a heap of bank fees.

Consumers in the U.S. and U.K. both suffer under the illusion that a debit card is as safe as a credit card. It is not but your bank certainly wants you to think so but the law clearly differentiates.

Recent news from the Office of Fair Trading in the UK revels that the House of Lords has made it clear that credit card transactions must now protect consumers against misrepresentation or breach of contract when the good or service purchased is above £100 but no more than £30,000. That is good news for U.K. consumers.

There is no getting around the fact that a debit card is not as safe to use for purchases as a credit card.

Invariably when I talk to people about this they look at me like I’ve got snakes coming out of my head. “Certainly that’s not true”, people say. Their bank has done such a good job of convincing them that they WILL protect them from liability that people are using their debit cards in record numbers on the internet or for foreign purchases. But it is a voluntary obligation and not a legal one to protect you from fraud when you use a debit card. Read what the U.S. Public Interest Research Group has to say about debit cards or maybe the recent Office of Fair Trading release in the U.K. Be sure to look at footnote 2.

When you have a problem with a fraudulent transaction or purchase you made using your credit card, your bank will intervene on your behalf once you have brought the matter to their attention. This means that before you are obligated to pay for that transaction the bank will investigate the issue and may absolve you of any responsibility for it.

With a debit card the funds will be immediately withdrawn from your account and you will have to fight with your bank to get provisional funds replaced in your account while they investigate the issue.

In my investigation of debit cards I discovered that between 1%-5% of debit cards transactions are fraudulent depending on the debit card portfolio. Debit card fraud happens.

So if you want to make sure that you have maximum consumer and legal protection when using a plastic card to make a purchase, make it with a credit card and not a debit card, please.

Oh yes, a week ago I learned another obvious lesson, it is always better to show up at the airport on the day of your reservation, and not the day after. This screw-up left me having to purchase a same day ticket for my travel. Ouch! Thankfully I used my credit card for the ticket because they made a mistake and sold me a ticket to the wrong city. Completely their mistake but the credit from the immediate refund will take up to 7 days to process. If I had used my debit card those funds would have been gone from my bank account until refunded and even if the transaction had only been authorized and not debited, those funds would have been placed on hold until the authorization was released, days latter.

Are Credit Card Airbags Necessary

steve.rhode@myvestafoundation.org — 20071111

Where is my government to protect me from a messy financial accident? It occurs to me that the government has more rules and regulations to protect me from an unintended physical accident in a vehicle than to protect me from an unintended financial accident.

If you take the current bank attitude that people that have financial problems are thieves, liars and cheats we could transfer that to the car and say that people that are ejected and badly injured or killed when the seatbelt fails, deserved it. It makes no sense that in one part of our life the government fights for us when we are in the auto accident but not when we are in a financial accident.

Why does my credit card not have an air bag or seatbelt to protect me but my car does?

Labels: Accident, Credit Card

Debt Car

steve.rhode@myvestafoundation.org

debt
Originally uploaded by selskills

Certainly people are thinking about debt if they will spray it on a train.

There is a Lender for Everyone

steve.rhode@myvestafoundation.org — 20071110

Michigan loan sharks
Originally uploaded by Brian Teutsch

Just when you thought you could not qualify for a loan.

Credit Card Tombstone

steve.rhode@myvestafoundation.org

Credit Card Tombstone
Originally uploaded by thomastoons

I'm sure this will exist one day. Let me know when you find it.

Is the Soulless Banker Alive And Well, Everywhere?

steve.rhode@myvestafoundation.org — 20071109

A little read story recently may be a precursor of events to come in the credit card world if a conscience and personal responsibility carry any weight with credit card company executives.

For far too long credit card issuers have placed profits ahead of social responsibility and have spewed credit cards over the past recent years to people that never should have had them in the first place.

While the benefits of having easy access to credit helps us all by boosting the performance of an economy based on the power of consumption, we can’t lose sight of the fact that the collective “we” is made up of lots of individuals known as you and me. We are the people.

When credit card lenders, hell, all extenders of credit, open the spigot to easy credit, what they do is shift the need for this quarter’s corporate performance onto the backs of people that either don’t want to recognize or can’t recognize when they should or should not take advantage of access to credit.

Extending credit to sub-prime candidates comes with a risk of ruining lives but credit card companies never seem to take that into account. If these companies insist on mainlining credit into the veins of everyday people they should be legally required to offer a real way for people to get out of excessive debt without bankruptcy.

Let’s look at former BestBank owner Edward Mattar who swung a hammer with force the other day and shattered the window of his 27th story apartment window so he could leap to his death. What was left of his disfigured body was positively identified using fingerprint records.

Mattar was facing 14 years in prison and the forfeiture of millions of dollars at his fraud sentencing Friday. The bank he once owned was seduced into what felt like a magic solution for easy profits as his bank paid high rates of interest to attract deposits, then turned around and issued more than 500,000 credit cards to credit-challenged borrowers. As losses mounted, Mattar and fellow defendants hid the numbers from regulators while receiving performance bonuses.

With the wind of subprime troubles blowing it is only a matter of time before a major bank begins to disclose the funds they will need to set aside for their portfolios of bad and poorly extended loans and credit cards. BestBank won’t be the last bank to be caught up in this mess.

What truly hurts is that banks make poorly thought through decisions by chasing profits and then put the burden of responsibility on the sore shoulders of consumers, requiring them to bear the burden of responsibility for excessive debt. In fact what the banks are doing is nothing less than abdicating their moral and corporate responsibility of proper loan underwriting onto the lives of the very consumers they once approved as good candidates for their interest based products.

Consumers are then made to feel like second-class citizens when they find themselves in financial trouble and unable to meet the obligations the banks placed them under by allowing them to suckle at the teet of easy credit. People laboring under the burden of financial misfortune suffer from depression, damaging stress, ruination of relationships, dissolution of marriage, loss of employment, suicide and much, much worse, and for what, so banks can maximize their profits?

The loss of a single human life unnecessarily is tragic but wouldn’t it be nice if the tables were turned on lenders and instead of the lives of consumers being ruined and castrated by irresponsible lenders, it was the lenders that suffered the loss of respect of their children, personal shame, loss of self-esteem, loss of self-confidence and made to feel like the loser.

I challenge all lenders to stop for a moment and contemplate your role and responsibility in the easy extension of credit and to look yourself in a mirror and ask if this is the way you want your precious children to be treated when they grow up. Will you be proud and feel comfortable when your pride and joy is the target of a slick advertising campaign to put easy credit into their hand and the lender will not offer a reasonable way out of debt when they fall into the trap of easy credit?

Mr. and Mrs. Banker, what role do you individually have to protect your customers rather than sacrifice them over the pit of profits?

Penniless & Poor But Free

steve.rhode@myvestafoundation.org

Penniless & Poor But Free
Originally uploaded by Steve Rhode

Interesting message on this T-shirt outside the Pantheon in Rome.

Being Poor Without Poverty

steve.rhode@myvestafoundation.org — 20071022

Have you ever noticed that society seems to define people with money troubles as only those that can’t make the monthly payment? What about the functionally poor. Those people that make enough money to pay their bills but pay so little attention to their spending or finances that they are never late, but never ahead either.

A person can be a debtor without making friends with the collection people. It is possible to do so horribly with your finances that you rob yourself of life opportunities and fun and after all isn’t that the major consequence of debt, lost opportunity?

It is interesting that people see no problem with hiring live-in caregivers to raise their children, personal chefs to cook meals, gardeners to manicure the lawn and housekeepers to help keep things tidy. But when it comes to our finances; who keeps those neat and clean for us?

People of wealth have financial professionals that watch over the books for them and keep things headed in the right direction but people in the rest of society feel that professional money management is unnecessary and an expense not worth paying for. I wonder if that belief is why they can’t make their money go further and have to work harder for it?

In the past, the daily money management in the U.S. or the AllPaid approach in the U.K. has worked best for busy professionals and attorneys, doctors and police officers. The lawyers and medical doctors often worked long hours and just wanted their finances managed well. They also understand the value of a professional service. Police officers on the other hand, I guess it is just a stress elimination thing for them. Coming home after a hard shift dealing with bad people, who wants to deal with the bills after that?

So what shall we call this concept of debting without poverty? Anyone got a good name for it? I’m open to suggestions.

The major problem with debt is not that you get collection calls and a bad credit report. Nope, the big problem is that debt robs you of life. When you go into debt or spend recklessly, you have to earn more and all you are doing is sacrificing future labor to make up for your financial management inefficiencies. At the end of the day all that is lost is the opportunities and possibilities that you would have had if you kept a grip on money that need not have been spent.

Now I’m not talking about labeling expenses like cut flowers as a ridiculous expense, in fact, quite the contrary. If you can use money to bring joy into your life then that’s a great use of money. But in my belief, unconscious and self-medicated shopping does not fall into the same category.

When we overspend in an effort to hide or medicate ourselves from the underlying issues, that just becomes like yet another bottle to crawl in to. It’s an escape and a numbing agent and not a bringer of joy and happiness. As one client told me once, “Shopping is my heroin and the credit card is the needle.” Oh so true.

Another example of this concept of debting without poverty is the therapist that was so busy with her practice that when I examined her bills in detail I found out that she was paying double for a home alarm service, paying for satellite television she was not receiving, was on a high rate long distance plan and was spending way too much for her mobile phone because she was using additional minutes.

When I pointed out all of this to her she kept saying that she had not paid attention to these issues or even looked at her bills because she was so busy earning money to make ends meet. The amount of money she wasted was huge, but she was not delinquent on her bills.

So let’s stop thinking about debt as delinquency and instead focus on debt as a sacrifice of future life energy. If you could, wouldn’t you rather work less so you can take longer vacations or have more time to do the things you want? I would.

You can be a debtor without poverty. Are you?

Income Cut For Insolvency Practitioners by Capital One Bank

stever@myvesta.org — 20070611

In a move that will likely go down as one of the most short-sighted in UK debt management history, Insolvency Practitioners have missed the boat on protecting income by not speaking up early enough about unfair and unreasonable creditor behaviour and losing control over the fees charged in Individual Voluntary Arrangements. [Read More]

Labels: get out of debt, Individual Voluntary Arrangement, Insolvency Practitioner, IVA

The IVA Market Prepares to Suffer

stever@myvesta.org

Consumers are due to suffer from new pressure in the marketing of IVAs. Pressure from creditors, that fund Individual Voluntary Arrangments, and increased competition between IVA providers will lead to changes. [Read More]

Labels: debt, get out of debt, IVA, UK individual voluntary agreement

OFT Delay

stever@myvesta.org — 20070402

Consumers will have to be patient until the end of this year to hear what the Office of Fair Trading (OFT) deems a fair fee amount for bank charges. This will extend the time limit for those who wish to reclaim charges to declare their case.

After the decision, banks will only be obligated to pay back the difference between what the OFT decides is fair and what the bank charged. For example, the OFT listed a ‘fair’ charge for those who missed monthly payments as £12 when some banks were charging £30, meaning the person reclaiming would get the difference (£18) back.

A fair payment is seen as just paying for the service the bank performs and that the bank should make zero profit on the charge. However, since banks have been using these charges to rake in profits, they will need to either start charging people monthly for accounts or other ways to make up for their losses.

Myvesta UK

Generation Debt

stever@myvesta.org — 20070323

A recent study conducted by the Personal Finance Education Group (pfeg) revealed that the younger generation of the world may have a firm understanding about financial literacy but they have what seem to be extremely relaxed views when it comes to debt matters.

The study showed that one in twenty teenagers think that credit cards are free and that they don't have to pay the money back. While one-fourth of youngsters under 18 think that credit cards are only for goods and services and that it is the duty of the parents to pay the bill. Nine-tenths of teenagers worry about finances but think that credit cards and overdrafts are the easy way out. One in four teenagers think that the reasoning behind overdrafts are so that people won't have to worry going over their limit, while another 23% think it's so that you can spend more than one is allowed.

The study concluded that more young people (two-thirds) want to learn about investing their money versus the half of teenagers that are more interested in saving and controlling spending.

Myvesta UK

Flying the Coop, Nesting the Wallet

stever@myvesta.org

Contrary to popular belief, the parental fiscal ties between parents and their children does not end for sometime after they become of-age as an adult.

A new study suggests that on average more than 10 million adult children have taken £12,300 from parents in financially tough situations. 29% of adult children look to borrow money from their parents. 14% are joined to their parents' savings accounting, giving them access to funding.

Leaving 45% of parents that won't be able to make up for the loss of money that they have lent to their children, while 13% have to cut back on their daily allowances to make ends meet.

Myvesta UK

Debit Cards Win Popularity Contest

stever@myvesta.org — 20070207

As shown by the December 2006 spending figures, purchases on credit and debit cards made up for 63% of festive retail sales.

In the final month of 2006’s festive season there were a total of 669 million credit and debit card transactions, equating to 250 transactions per second every day of December!

However, debit card spending made up 462 million of those 669 million transactions; roughly 69%. Debit cards far surpassing credit cards in popularity, resulting in a 15.3% increase in debit card charges from 2005.

Credit card spending only accounted for 197 million transactions, falling by 4% mirrored against 2005’s figures.

However, with credit and debit’s forces combined they totaled £31 billion, £19.6 billion of that sum belonging to debit cards.

Myvesta UK

Judge Challenges Lloyds Over Bank Charges

stever@myvesta.org — 20070128

A judge has threatened to strike out the defence put forward by banks in bank charges cases unless they can prove they will contest them in court.

District Judge Toombs believes some banks are abusing the legal process.

Although banks begin legal action, so far all cases have been settled ahead of a formal hearing.

Consumer groups which advise people on reclaiming charges have welcomed the judge's intervention.

In orders seen by BBC Radio 4's Money Box programme, the Lincolnshire district judge has given one bank, Lloyds TSB, 14 days to detail all the claims it has pursued in the past and whether and when it has settled each of them.

We believe that the order was legally flawed. Had we not settled we would have applied to set the order aside.

Lloyds TSB confirmed it chose to settle the cases under discussion but in a statement questioned the judge's right to threaten to strike out its defence.

"The judge made his order without a hearing so we were not given a chance to make representations. We believe that the order was legally flawed.

"We judge cases on an individual basis and in this case made a decision to settle. Had we not settled we would have applied to set the order aside."

Thousands of customers have successfully used the county courts to reclaim their bank charges. But as settlements are typically reached at the eleventh hour, no legal precedent on the issue has yet been set.

The people who are claiming are being led a song and dance through the procedural obstacles of small claims litigation.
Marc Gander, the Consumer Action Group

The orders were welcomed by Marc Gander from the Consumer Action Group website which campaigns on behalf of customers reclaiming their charges. He said the judge's action was significant.

"The people who are claiming are being led a song and dance through the procedural obstacles of small claims litigation. Finally this judge is putting a stop to it."

Peter Cable from Newark in Nottinghamshire has received one of at least six orders believed to have been made by the same judge, and hopes others will follow suit.

"I think it would be a wake-up call for the banks. It would certainly make them realise they have to treat this issue seriously and it's not just an annoying instance which they hope will go away."

Judge Toombs' actions have been noted by other district judges, as they decide how best to deal with the thousands of bank charge cases reaching their courts.

Speaking on behalf of county court judges in London, Judge Paul Collins said: "Nobody can approve of the situation that exists at the moment which leaves so many people in the dark as to what the banks' real intentions are going to be.

"It would be very desirable to have a test case to see whether the arguments being put forward by the banks are sustainable or not."

Myvesta UK

Bank Charges Are Unlawful

stever@myvesta.org

Banks are using underhand tactics to deter customers from challenging bank charges and fees incurred for exceeding overdraft limits, consumer group Which? has claimed.

A report by the consumer campaign group says some banks have threatened to close accounts or charged too much for statements needed for claims.

It comes as the Office of Fair Trading is preparing to report on bank fees.

The British Bankers' Association called the research "unfounded" and said bank account fees were "perfectly legal".

Doug Taylor, the personal finance campaigner for Which?, said: "In an attempt to avoid paying consumers what they are due, we have found that banks are employing increasingly underhand methods to avoid their responsibility to treat their customers fairly and refund the charges."

He said Which? believes banks have been over-charging customers who exceed their overdraft limit "for years" and "charging billions" in the process.

He told BBC Radio's Five Live that Which?'s research had found delays in answering letters and some banks closing accounts "if consumers challenge these charges".

'Put off'

"Many consumers, we know, have successfully challenged their charges, but we're a bit concerned that maybe some people are being put off by the length of time and the difficulties that they're facing," he said.

The consumer campaign group said it heard evidence of several cases of banks charging between £3 and £5 per page for duplicate statements to start their claims. The law states they can charge a maximum of £10 in total.

However, Eric Leenders from the British Bankers' Association told BBC Breakfast that bank account fees were "perfectly justifiable and perfectly legal".

"We would say that if people feel that they, in turn, have been charged unfairly, they should always speak to the bank manager first.

"The information that's provided by Which? is unfounded and, in fact, could potentially be quite misleading."

Last year the top six High Street banks in the UK made an estimated £4.5bn from penalty charges, which include charges incurred for unauthorized overdrafts and bounced cheques.

Myvesta UK

What To Expect in 2007

stever@myvesta.org — 20070126

The UK can expect to see a whopping 30,000 people declare themselves insolvent in the first three month quarter of 2007. Of this number it is predicted that 10,000 of these people will declare insolvency due to debts acquired over the 2006 festive season.

2006 brought on many fiscal changes for the UK. Unemployment figures were high, utility bills rose, interest rates sky-rocketed and 110,000 claimed cases of insolvency occurred resulting in £1,268 billion of debt. All of these ongoing changes have resulted in adding an average £1 million to the nation’s debt every four minutes. That’s £340 million every day!

It may come as a shock to most people that 27% of 2006’s debt will pile up before 25% of 2007 is over. One can only assume that the rest of the year’s figures will continue to rise, making 2007 an even higher year for insolvency.

Myvesta UK

IVA Factories Come Under Fire

stever@myvesta.org — 20061125

Debt Free Direct, the largest IVA factory in the UK, has approached the Advertising Standards Association (ASA) requesting that they investigate competing firms of IVA factories.

The IVA or Individual Voluntary Arrangement give them their full name are a formal alternative to bankruptcy that allow individuals to write off a portion of the debts after a 5 year period. The process leaves the individual debt free after the IVA period comes to an end and enables the debtor to avoid bankruptcy.

Although the IVA process represents a better deal for creditors any organisations have been concerned that the IVA strategy has been mis-sold by large commercial IVA factories looking to make a quick profit from the process. The concern being that the IVA factories are omitting to present the debtor with all of the options open to them and are simply 'pushing' the IVA option.

Money advisors stress the need for individuals facing debt problems to firstly speak with a not for profit debt help organisation first in order to obtain impartial debt advice and to discuss all of the available debt strategies comprehensively.

Myvesta UK

Watch out for an increase in charges from credit card issuers

stever@myvesta.org — 20061115

Credit card companies are facing a huge loss in revenue through the course of the past 5 years. With revenue practically splitting in half, credit card companies find themselves about £1 billion in the red.

The biggest problems credit card issuers face are:

People who swap debts from one card to another that has an introductory deal of 0%; this costs companies about £600 million a year.
With the national debt rising people are having troubles to meet their monthly payments.
The Office of Fair Trading (OFT) is forcing companies to reduce the fines for late or missing payments and unauthorised borrowing to a £12 fee per offense from the original £20-£25.

Companies now need an extra £32 a year from each credit-card holder in the UK which means customers need to keep their eyes peeled for ploys for extra money companies may imply.

What to look out for….

Higher:

Fees for cash withdrawals

avoid this by never using credit cards to take out cash.

Interest rates

with the new 5% from the Bank of England, expect card’s APR to rise.

Premiums for payment protection insurance (PPI)

avoid PPIs altogether, in the long run it’s not worth it.

Balance-transfer fees

expect to pay up to 3% per transfer.

Foreign transactions

when overseas avoid this by paying with cards that don’t add up the foreign-currency fees.

Less:

Cash back and reward programmes
Interest-free periods

Implementing:

Annual fees

keep an eye on your statements to see if your company tries to sneak in an annual fee.

Extraneous add-ons

avoid unnecessary charges.

MyvestaUK

Opening eyes for homeowners

stever@myvesta.org — 20061113

Homeowners should be on special watch of their funds with the new interest rate raised to 5% by the Bank of England. On average, this rate will raise the typical £120,000 mortgage to an extra £20 per month, adding up to an extra £240 pounds a year.

A survey released by HBOS this week’s past, showed that the average house price jumped by 1.7% in October resulting in the annual 8.7%, leaving the average house costing around £184,593.

Homeowners and borrowers are advised to become educated about how interest rates affect them. Start looking toward the future now, since the threat of yet another raise in rate lingers in the crisp fall air. Borrowers should hope for the best but expect the worst; factor in the increases of rates now and plan accordingly. Homeowners should consider their mortgage options to prevent unexpected proceedings. These precautions measures could lead to less stress and readiness for when news hits the press on whether rates will rise or not.

http://www.myvesta.org.uk

Medical Student Debts at Large

stever@myvesta.org — 20061110

According to the British Medical Association (BMA), the cost of studying medicine in the UK is growing heavier and heavier. On average the debt for a fifth-year medical student has risen 16% within the past year and is now more than £21,000; about £1,000 more than the basic annual salary of a first year doctor, which is around £20,741.

Medical students’ debts are so high because unlike other areas of study they stay in University for two to three years longer. Also, students with medical as a second degree have to pay funds upfront at the beginning of the year.

The BMA conducted a study of around 2,000 students about their expenses and acquired debt. From this study they conducted that the average debt for a medical student rose about £792 to £21,755 this past year. The study also showed that 13% of students had debts higher than £25,000 and more than 100 owed over £30,000.

As for loans taken out, about 60% attained an overdraft on student loans and 17% on bank loans. Let alone the credit card debt which grew to over £1,000 for over 60% of students.

The outlook for these students’ debts is grim while University’s can now charge up to £3,000 a year in fees single-handedly. The cost of schooling is creating unevenness in the social scheme for students; some students from poorer income families are obliged to take time away from training in the medical field because prices are so high.

The government does have a maintenance grant for students coming from families with or less than a £17,500 yearly income. These students will get £2,700 financial aid and a minimum of £300 taken out of their yearly fees. Partial grants are also offered for families with higher financial standings.

http://www.myvesta.org.uk

Interest rates strike an all time high in five years

stever@myvesta.org

The Bank of England has put into effect the increase of interest rates to 5%. Raising rates by a quarter of a percentage sent the rates peaking at an all time high in five years.

The bank raised the rates with the threat of inflation hovering over their shoulders. In the midst of the numbers reported from the Insolvency Service showing the intensifying number of people with debt troubles it came as no surprise that the rates were bound to rise.

The rates will cause a calming effect on the housing market by raising mortgage costs but will in turn prevent the bullying of inflation. This suggests a negative effect for investors but beneficial for savers. It is said to shave off 0.3% of economic growth come next year.

Home owners will not be the only to suffer; borrowers of personal loans will take the hit as well. Borrowers’ repayments are likely to ascend with the new rates. Businesses alike will be financially tried, especially firms looking to invest.

The inflation rate is currently 0.4% over the intended 2% target and is expected to rise yet again to around 2.7% by January. This has many analysts talking about expecting to see another quarter of a percent rise in interest rates around the launch of 2007.

http://www.myvesta.org.uk

The Debt Threat Soars

stever@myvesta.org — 20061108

Debt is rising to be (if not already) the main concern of citizens in the UK. According to the Insolvency Service’s third quarter numbers from the Insolvency Service a total of 31,670 United Kingdom citizens have filed for insolvency from July to September.

England & Wales:

The numbers are at an all time high for England and Wales with a 55% boost in insolvencies and bankruptcies mirrored against 2005’s third quarter (Q3) numbers. The numbers of people who have cases of bankruptcies are at 15,416, a 27% increase from Q3 in 2005. However, the numbers reflecting the number of citizens choosing an individual voluntary arrangement (IVA) are booming. In quarter three 12,228 people now have IVAs which is a 118% increase from last. On the horizon of 2007, IVA’s appear to take over as the leading form of personal insolvency. It is expected that by New Years, 2006’s numbers of insolvencies and bankruptcies are to reach 100,000. This being stated means that about 1 in 540 people are going to go bankrupt in England and Wales this year. Even though the numbers per quarter are steep they are growing more and more consistent to each other and resulting in only a 6% quarterly difference. However, even though personal insolvencies are sky-rocketing, the number of liquidations in companies looks to be diminishing. In quarter three alone there has been a 4.3% decrease. From 2005’s Q3 numbers until this recently past quarter only 0.7% of companies went into liquidation, which is about 1 in 143.

Northern Ireland:

Northern Ireland’s standards of bankruptcy and IVA’s mirror that of England and Wales’. Out of the 1.7 million people, only about 1 to 987 people became insolvent, with 241 bankruptcies and 184 IVAs.

Scotland:

On the other hand, Scotland’s standards are a bit different than the rest of the UK. Instead of bankruptcy they file for sequestrations and instead of IVAs: protected trust deeds. The Sequestrations remained steady throughout the year, only rising by 5% in quarter three with 1,528; while, filing for protected trust deeds dropped by 3% with 2,073 cases.

The Future of the UK:

Overall, about 1 in 530 of UK citizens has cases of insolvencies. Individuals are advised to stray away from untrustworthy adverts that show IVAs as the “easy way out”, because there is no “simple” way out of this tricky conundrum. Consumers are suggested to contact a financial counselling service that has the individual’s best interests in mind. This being said, the future of the UK’s debt scene looks to get worse before it will get better, especially after the rumored increase of rates rising to 5% by the Bank of England scheduled to occur at this weeks’ end.

http://www.myvesta.org.uk

Why Has It Taken The Individual Voluntary Arrangement (IVA) So Long To Take Off? (Part 1)

stever@myvesta.org — 20061029

Until the last fews years the most preferred debt help strategy was, for many people, the debt management plan.

Debt management plans (DMP's) are essentially an informal arrangement between an individual and their creditors to repay what is owed in full over a longer period of time than the original contractual agreement.

For many individuals that found themselves unable to service their unsecured debts contractually, the ability of being able to pay a reduced monthly payment in a DMP based on realistic affordability was often appealing. To this end many thousands of people signed up for debt management arrangements offered by third party debt management companies (DMC's)

Indeed throught the lates 1990's and into 2000+ debt management companies mushroomed in number. Commercial organisations such as Baines and Ernst, Payplan and Gregory Pennington saw an opportunity to capitalise on britain's growing consumer debt problem by offering debt management plans to over indebted consumers accordingly.

Also, business minded charities such as the Consumer Credit Counselling Service (CCCS) that had essentially copied the American model of consumer credit counseling also saw the need to expand their operations to offer debt management plans to the UK's ever swelling population of debtors.

Surprisingly however, a little known formal insolvency procedures called the individual Voluntary Arrangement or IVA never really gathered much momentum despite the growing numbers of individuals suffering from problem debt.

The IVA strategy offered debtors a fixed repayment term (typically 5 years) unlike debt management plans that could often go on for 15 to 20 years and was also a binding agreement on a persons creditors unlike the DMP.

Additionally, the IVA was administered by a highly regulated Insolvency Practitioner unlike debt management plans that are administered by a largely unregulated third party industry.

Other benefits offered via an IVA was the fact that all interest and other charges would be completely frozen as the Individual Voluntary Arrangement was a legally binding strategy stamped by a County Court. This is in stark contrast to the informal debt management plan as creditors were not obliged to accept the terms proposed in a DMP and often did not agree to reduce or freeze interest costs and other charges as part of the DMP proposal. Hence many individuals that entered into a debt management plan often found themselves in a worse financial situation than before as their debt had increased due to creditors refusing to accept the repayment terms proposed in a DMP.

So why did it take so long for the IVA strategy to be viewed as a better alternative to the the DMP for many people with large unmanagable debts?

Well one reason is certainly the fact that the IVA is a more complicated procedure than the DMP. Hence larger commercial debt management organisation's operating within a relatively unskilled call centre environment did not really gets to grips with identifying the suitability of the IVA and hence the awareness of the versatility of the product remained low in many organisations.

AS IVA's can only be proposed and supervised by a licensed insolvency practitioner another reason for the general lack of consumer awareness about the voluntary arrangement option can be attributed to the lethargy of traditional firms of chartered accountants offering IVA's to grasp the opportunity of promoting the benefits of the IVA over the DMP with more vigour.

Myvesta UK

Families Opting For IVA's To Get Out Of Debt

stever@myvesta.org — 20061018

Increasingl, younger families living in terraces in the M4 corridor are more likely to file for individual voluntary arrangements(IVAs) – an alternative to bankruptcy than the rest of the population, according to research out today.

The report, from credit-reference firm Experian, revealed that IVAs are fast becoming an acceptable lifestyle option for young families struggling with their debts.

The research found that people in a group called ‘happy families’ are 60 per cent more likely to be tempted by an IVA.

They tend to live in mid-market terraces or semi-detached houses in council tax band B – properties worth between £126,000 and £150,000. The M4 corridor is a particular hotspot, according to Experian.

The ‘happy families’ group is broken down further into ‘fledgling nurseries’ – those with young children – and ‘middle rung families’ – those who are climbing the corporate ladder. Both groups are twice as likely to opt for an IVA rather than bankruptcy because they think no one will find out.

IVAs were introduced in 1986 to help entrepreneurs avoid the stigma of bankruptcy. Banks and creditors agree to ‘forgive a portion of you debt – up to 75 per cent – and you repay the rest over five years. You are not formally bankrupted and do no lose your home or your job if you keep up repayments.

Richard Fiddis of Experian said: "Since the introduction of IVAs, the stigma of bankruptcy amongst the general population has greatly diminished. In some respects, this is a good thing because it encourages risk taking and entrepreneurs. However, insolvency is now increasingly being seen as an easy way out of debt, particularly among the young, who often do not consider the longer-term consequences – or are misled into believing there are none."

Experian said an IVA would appear on your credit report for six years.

The Times
October 16th, 2006

http://myvesta.org.uk

Government Gives Lenders A Dressing Down

stever@myvesta.org — 20061016

Attempts by certain banks to deflect attention away from their own irresponsible lending policies and on to debt management companies have failed.

The Government has commented that the rise in consumers taking out Individual Voluntary Arrangements (IVA's) in recent years is simply 'cause and effect' and is directly linked to the willingness of banks to lend without checking the ability of the customer to repay.

Questions are also being asked about banks that have set an arbitary minimum divided level for consumers proposing to repay some of what they owe via an IVA as oppose to going bankrupt. These moves by banks are seen to be a direct contradiction to the banking code.

Myvesta UK

Northern Rocks Profits Increase While More People Are Denied IVA Option by 45% Dividend Policy

stever@myvesta.org — 20061015

I have just seen this artice in The Times and it is apparent that profits are booming at Northern Rock. So why does Northern Rock feel that it is perfectly ethical to treat over-indebted consumers seeking to enter into an IVA to avoid bankruptcy with so much contempt?

By having an arbitary policy of saying "no" to all IVA proposals that offer a dividend of less than 45% this is forcing many people into bankruptcy when they would rather repay what they can to their creditors over a 5 year period. This reflects a very poor approach to corporate governance and is arguably in direct contradiction to the Banking Code.

Still, profits are up boys!!

Northern Rock on track for bumper profits
By Miles Costello and Agencies

Northern Rock, the UK's seventh-largest listed lender, is on course to post a 15.9 per cent increase in full-year profits to £357 million, thanks to strong lending and the resilient housing market.

The continued rise in lending comes despite the fact that Adam Applegarth, the chief executive, remains one of the more cautious banking heads

The bank said today that it was on track to meet its full-year targets and was "comfortable" with analysts recently upgraded forecasts.

Northern Rock said it was expecting to grow underlying profits by 20 per cent over the full year and push up its loan assets by the same amount.

In an upbeat trading update for the nine months to the end of September, Northern Rock said its pipeline of new lending business, either arranged or imminent, had increased by 18 per cent since the end of June to £6.5 billion.

Adam Applegarth, the chief executive, insisted that customers' ability to service their debts was resilient.

"Credit quality - in each of our loan books - has remained good and shows no deterioration since the half-year results," Mr Applegarth said.

"We remain on track to deliver against all of our strategic targets for the full year."

Northern Rock, traditionally a conservative lender, said it was on target with its strategy of increasing costs at between half and two-thirds the rate of asset growth. It also said it expected its 29.8 per cent cost:income ratio to improve. The shares, which have risen by 25 per cent this year, value the bank at 5 billion.

Analysts at Keefe, Bruyette & Woods said Northern Rock's trading statement "confirms all the positive trends we have come to expect from the company - excellent volume growth, stable margins, good control of costs and better than peers credit."

Northern Rock Blames IVA Providers For Increasing Bad Debt Figures

stever@myvesta.org — 20061013

Lender Norther Rock yesterday reported that its adverse debt costs had almost doubled, but the increase failed to take the gloss off a forecast-beating set of first-half results.

The Newcastle-based mortgage lender kicked off the latest round of banking results by lifting its profit growth target from 15 to 20 per cent, after unveiling a 14.4 per cent rise in underlying pre-tax profits to £273.7 million, fuelled by the strong housing market.

First-half growth was underpinned by record net lending of £7.3 billion, up 22 per cent from a year ago. The low-cost mortgage lender also managed to reduce further its cost-to- income ratio to 28.9 per cent, from 29.8 per cent a year ago.

The company played down the rise in bad debt charges, which spiralled from £22.5 million to £44.5 million, arguing that they represented just 0.12 per cent of mean customer advances and would fall in the second half. Loan arrears also ticked up after Northern Rock wrote a larger proportion of higher risk mortgages, targeted at first-time buyers, under its “together” family of products. Nevertheless, the company said that the level of arrears in this higher risk element of its loan portfolio were still below the industry average for all secured residential loans.

Adam Applegarth, the chief executive, said: “Unemployment is the main driver for arrears and that is drifting higher, so we are seeing a drift up in arrears. But I wouldn’t use a verb more racy than drift.”

He said that the rise in bad debt charges was prudent, given Northern Rock’s expectation of a “moderate deterioration” in credit risk across the retail banking sector amid slowing economic conditions, rising interest rates and higher energy costs. The company went on to say that it planned to work in partnership with Lehman Brothers to enter the self-certification and so-called “near and sub-prime” mortgage market, which is targeted at borrowers with patchier credit records.

Britain’s eight biggest banks said that the loans would be off balance sheet and would not involve any credit risk, but it would earn fee income from the arrangement.

The news came as Mr Applegarth launched a blistering attack on the recent liberalisation of the UK bankruptcy laws. “The goals it was trying to achieve were good — the Government was trying to encourage entrepreneurs — but the way it has been implemented has been lousy,” he said.

Mr Applegarth added that the bankruptcy reforms had triggered a knock-on effect on the number of people entering so-called individual voluntary arrangements (IVAs). Under an IVA, interest on debt is frozen in exchange for an agreed amount being repaid each month for a set period.

“We have seen a number of ambulance-chasers springing up and chasing business for IVAs by advertising on television,” he said.

The Enterprise Act reduced the time that it takes for someone to be discharged from bankruptcy from three years to just one year, making it more attractive to people struggling with bad debts. Northern Rock said that the legislative changes had not made a big impact on its business, because it has only a small book of unsecured loans.

The Times

Debt Mountain Levels Out

stever@myvesta.org — 20061010

Talk that the UK's debt mountain is about to topple has been challenged by the release of figures showing that credit card borrowing has fallen for the first time in 12 years.

British borrowers owe more than £1 trillion on mortgages, overdrafts, personal loans and other types of debt, and research company Datamonitor recently published a report that branded the British as the spendthrifts of Europe. We now each owe an average of £3,175, compared with £1,558 for other Europeans. But figures released by the Bank of England show that UK credit card customers paid off £311m more than they borrowed last month, the first time there has been a net fall in borrowing since May 1994.

Vicky Redwood, UK economist for analyst Capital Economics, says the fall in credit card borrowing could be the result of two factors. 'Banks are tightening their lending criteria so people can't borrow so easily, but at the same time demand for credit is weakening, possibly because of the rise in interest rates and the slowdown in the housing market.'

Sandra Quinn, spokeswoman for the Association of Payment and Clearing Services, says borrowing on credit cards has levelled off over the last 18 months; more people are paying off their credit card balances in full each month - 59 per cent now compared with 54 per cent in 2002-03; and more people are using debit rather than credit cards to make purchases. 'Three years ago, spending on debit compared to credit was split about 50:50. Now this has changed to 70:30. People are spending money that they have in their bank accounts, rather than money that they might have in the future,' she says.

Credit rating agencies, which collate information on people's credit usage and payment habits, say although more people are running into difficulty with monthly minimum payments on their credit cards, the increase is in proportion to the rise in credit borrowing. 'We're not seeing a lot more people falling off the edge,' says Neil Monroe of Equifax. 'If you compare the numbers to the growth in credit, it's not out of kilter.' He says a recent study showed that even though the British borrow more than their European counterparts, we have the second lowest default rate on repayments.

Lenders are gradually introducing new techniques to reduce bad debts and to lend more responsibly. Barclaycard, the UK's biggest credit card issuer, reduced the credit limits of 200,000 customers it believed were in danger of becoming over-indebted and declined one in every two applications for credit last year. It also launched a Flexi-Rate card, which reduces your interest the more you pay off your outstanding balance each month, to encourage cardholders to reduce their debt.

Frances Walker, of debt charity the Consumer Credit Counselling Service (CCCS), says many people get into difficulties with debt by paying back just the minimum amount each month. In the past lenders have only shared information about customers if they have missed payments or become bad debtors, and as long as they met the minimum demand, other card issuers continued to lend to them, pushing them further into debt.

But Equifax's Monroe says most of Britain's card issuers, including store card companies, are now sharing 'positive' information about credit card customers' borrowing, spending and repayment records, regardless of whether they are repaying the monthly minimum. This should enable lenders to judge whether applicants are in danger of overextending themselves.

Walker says: 'If a borrower is just paying the minimum for three or more credit cards for six months or more, we would like that to start ringing alarm bells.'

Just because our love aff air with the credit card seems to be fizzling out, there is no room for complacency - we still owe more than £1 trillion in secured and unsecured debt. So how do you know if your debts are reaching epic proportions - and what should you do about it?

The CCCS says you could soon face trouble if you are spending more than 20 per cent of your net monthly income on repayments for unsecured debt (personal loans, credit cards); using credit cards to pay for everyday essentials without paying off the card balance in full each month; and struggling to meet the monthly minimum repayments. If this sounds like you, try to pay off the loans or credit cards that charge the highest interest first. Consider applying for credit cards offering 0 per cent interest on balance transfers , but don't use the cleared cards to build up more debt.

http://myvesta.org.uk

Lloyds TSB to withdraw overdraft buffer

stever@myvesta.org — 20061003

Big banks are putting the squeeze on customers in attempt to boost their revenues in anticipation of a clampdown on charges by the Office of Fair Trading (OFT).

Financial institutions are preparing for a clampdown on overdraft charges, following a ruling by the OFT in April, which stated that credit card fees were excessive and should be capped at £12. The OFT has turned its attention to current accounts and it is expected to make a similar ruling on overdraft charges early next year.

If the banks are forced to reduce these fees it will impact their profits as customers pay an estimated £4.6billion a year in current account charges. Many are therefore pre-empting the OFT’s decision by hiking rates and increasing the number of circumstances in which customers will be charged for going overdrawn.

From next month, Lloyds TSB customers who slip into the red will be given no leeway to avoid a £30 penalty. Like many other banks, Lloyds currently gives customers a £10 buffer in case they slip into the red by mistake. Those who go overdrawn by a couple of pounds will not be charged a fee, although interest will be charged.

However, from November 1, Lloyds is removing this buffer. Any customer that goes overdrawn without permission or exceeds their agreed overdraft limit will be charged £30 a day. If a direct debit or cheque is bounced, the fee is £35.

A spokeswoman for Lloyds said: "The majority of customers won’t be affected as they stay within their agreed limits. We also make it very clear that it is easy to arrange an overdraft facility."

However, the bank is accused of using this as a sneaky way of boosting its revenues. Nick Whit at Uswitch.com, a comparison site, said: "This is clearly a tactic from Lloyds TSB to increase revenue before the OFT finalises the overdraft investigation."

Lloyds has also recently increased its overdraft rates. The authorised borrowing rate on its Classic Plus account has gone up from 15.9 per cent to 18.4 percent. It is not alone. Natwest, HSBC, Royal Bank of Scotland, Smile, Yorkshire Bank and Clydesdale also hiked their rates last month.

Lisa Taylor at Moneyfacts, another comparison service, said: "The likely cause of these increases is the threat that the OFT will force them to cut their fees. Increased overdraft rates may go unnoticed by consumers. But with many reliant on their overdraft facility for their day-to-day living, these small increases could prove to be a large revenue earner for the banks."

The Times
October 3rd, 2006

Confess Your Debts To The World

stever@myvesta.org — 20060929

Myvesta has launched an online debt confessional facility online. People can use the facility to 'get things off their chest' anonomously. The link to debt confessional resource is below:

Confess Your Debts - Click Here

Land' As Debt Runs Out Of Control

stever@myvesta.org — 20060928

UK borrowers account for one third of unsecured debt in western Europe
On average, a Briton has twice the debt of a European
Total consumer debt in the UK is at a record £1.3 trillion
New debt last year came to an unprecedented £215bn
Citizens Advice faced 1.25 million new debt cases last year - the figure is rising
By David Prosser, Personal Finance Editor
Published: 28 September 2006

Britain's "buy now, pay later" consumer culture has led to unprecedented levels of personal debt. The average Briton now has more than twice as much unsecured borrowing - including overdrafts, personal loans and credit card debt - as the typical European, according to a report published by Datamonitor.

The market research analysts said yesterday that even before mortgage borrowing was considered, the average Briton owes £3,175, compared to the average debt in Europe of £1,588. Datamonitor said Britons had "an insatiable appetite for credit", taking on new unsecured loans of £215bn last year alone.

Borrowers from the UK now account for a third of all unsecured debt in western Europe, Datamonitor added. Paul Marsh, author of the report, said: "While the UK enjoys a buy-now pay-later culture ... many major European countries have a culture of saving and frugality. Countries such as France and Germany are particularly debt adverse."

The boom in unsecured lending has boosted total consumer debt, including mortgages, to almost £1.3trn, close to three times the level of borrowing in 1997, when Labour came to power.

The consumer borrowing crisis is set to become the most pressing concern for Gordon Brown's successor as Chancellor of the Exchequer. George Osborne, the shadow Chancellor, said: "Gordon Brown is presiding over an economy increasingly built on debt. This has left many families vulnerable to the triple blow of rising mortgage rates, taxes and energy bills."

The debt crisis is even hitting young borrowers, according to separate research published yesterday by One Advice, the debt advisers. The company said the average 18 to 24-year-old now owes £2,860 in unsecured borrowing. One Advice said the average figures obscured worrying individual cases. It said 108,000 18 to 24-year-olds had credit card debts of more than £5,000.

There are increasingly worrying signs that many borrowers are struggling to stay on top of repayments. The average person has debts that total 150 per cent of their annual income, according to the Bank of England, half as much again as in 1997.

The Bank believes around one million households face problems coping with debt repayments - around 10 per cent of the four in 10 households that have unsecured borrowing.

A report from Citizens Advice earlier this month said 770,000 mortgage borrowers had missed at least one mortgage repayment over the past year, while two million homeowners said they were concerned their finances would not stretch to cover their debts.

The charity said younger people were particularly vulnerable, with mortgage-holders aged 21 to 24 the most likely to default.

The latest figures from the Government's Insolvency Service, published last month, have also unnerved debt campaigners. The numbers becoming insolvent in the second quarter of the year reached 26,000, a 66 per cent rise on the same period in 2005.

Borrowing difficulties have already begun to affect the housing market. Britain's housing boom has saddled newer homeowners with far larger mortgages. Figures from the Hay Group consultancy , published yesterday, showed the typical borrower now spends 51 per cent of monthly pay on mortgage repayments.

The Council of Mortgage Lenders said the number of homes repossessed in the first half of the year was 8,140, the most for more than five years.

At the same time, there is evidence that Britain's biggest banks, which have all reported a rise in bad debt in recent months, are cracking down on consumer credit. Two weeks ago, for example, HSBC said it would introduce annual reviews of all its customers' overdrafts, with cuts to many borrowers' overdraft limits likely to follow.

Alice Douglas, 42, writer: 'We were happy with a £60 TV. Now we spend £1,500'

"Seven years ago, I moved to Wales for a change of lifestyle," says Alice Douglas, 42, a writer from Snowdonia. "I bought a 4,000 sq ft church for £54,000, which was incredibly cheap, because it needed renovation work, but I had never done a big building project before. I thought I'd be able to do the structural work for £80,000 but I've had to spend £300,000. I didn't think of the cost, and even things like floor tiles for the kitchen ended up costing £5,000 because they were limestone, and I spent £25,000 on windows.

"I used every credit card I could get. At one point, I had 10 different credit cards with £8,000 on most of them, so that my debt was up to £60,000. It was all about to collapse until my mortgage company valued my property, which has massively increased in price.

"I still have about £30,000 on my credit cards, but I've just learned to juggle them. Once you've got them, there's too much temptation and you get used to a lifestyle where you want to have lots of things. We used to be happy with a £60 television set, but now we spend £1,500 on a 38-inch LCD.

"You get sucked into it, and get used to spending large amounts without thinking about it, because it's on a card. It does make a different because it doesn't feel like real money. If it did feel real, it would feel obscene. I went to London recently and spent £3,000 in Whistles, on clothes. I'm about to buy another property with an 85 per cent mortgage and I'll get the deposit on credit card.

"It's a gamble but it could pay off. If you're shrewd, you can use it to your advantage. My credit rating is very good because I borrow a lot but I'm able to make my payments. It used to stress me out but now I think, if I lose everything, it wouldn't be the end of the world."

Arifa Akbar

Britain's "buy now, pay later" consumer culture has led to unprecedented levels of personal debt. The average Briton now has more than twice as much unsecured borrowing - including overdrafts, personal loans and credit card debt - as the typical European, according to a report published by Datamonitor.

The market research analysts said yesterday that even before mortgage borrowing was considered, the average Briton owes £3,175, compared to the average debt in Europe of £1,588. Datamonitor said Britons had "an insatiable appetite for credit", taking on new unsecured loans of £215bn last year alone.

Borrowers from the UK now account for a third of all unsecured debt in western Europe, Datamonitor added. Paul Marsh, author of the report, said: "While the UK enjoys a buy-now pay-later culture ... many major European countries have a culture of saving and frugality. Countries such as France and Germany are particularly debt adverse."

The boom in unsecured lending has boosted total consumer debt, including mortgages, to almost £1.3trn, close to three times the level of borrowing in 1997, when Labour came to power.

The consumer borrowing crisis is set to become the most pressing concern for Gordon Brown's successor as Chancellor of the Exchequer. George Osborne, the shadow Chancellor, said: "Gordon Brown is presiding over an economy increasingly built on debt. This has left many families vulnerable to the triple blow of rising mortgage rates, taxes and energy bills."

The debt crisis is even hitting young borrowers, according to separate research published yesterday by One Advice, the debt advisers. The company said the average 18 to 24-year-old now owes £2,860 in unsecured borrowing. One Advice said the average figures obscured worrying individual cases. It said 108,000 18 to 24-year-olds had credit card debts of more than £5,000.

There are increasingly worrying signs that many borrowers are struggling to stay on top of repayments. The average person has debts that total 150 per cent of their annual income, according to the Bank of England, half as much again as in 1997.

The Bank believes around one million households face problems coping with debt repayments - around 10 per cent of the four in 10 households that have unsecured borrowing.

A report from Citizens Advice earlier this month said 770,000 mortgage borrowers had missed at least one mortgage repayment over the past year, while two million homeowners said they were concerned their finances would not stretch to cover their debts.

The charity said younger people were particularly vulnerable, with mortgage-holders aged 21 to 24 the most likely to default.

The latest figures from the Government's Insolvency Service, published last month, have also unnerved debt campaigners. The numbers becoming insolvent in the second quarter of the year reached 26,000, a 66 per cent rise on the same period in 2005.

UK Consumers Owe A Third Of All Western Europe Debt

stever@myvesta.org — 20060927

British people are responsible for a third of all unsecured debt in Western Europe, a report out today shows.

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The average Briton owes £3,175, twice as much as the £1,558 owed by their average European counterpart.

Unsecured UK lending - such as on credit cards, personal loans and overdrafts, but not including mortgages - reached £214 billion last year, making Britain the most indebted nation in continental Europe.

This is compared with a combined total for Western Europe of £600 billion.

France, which came second in terms of its unsecured debt, was still only half the size of the UK market. Total personal debt in the UK including mortgage debt is estimated to be £1.2 trillion.

The research from analysts at Datamonitor attributes the high level of British debt down to the UK’s buy-now-pay-later culture and it "insatiable appetite for credit", compared to major countries on mainland Europe which have a culture of savings and frugality. People in France and Germany are particularly averse to debt, according to analysts.

However, this situation is likely to change, with the UK consumer credit market reaching a "saturation point" at which banks will eventually be unable to loan Britons much more than they are doing at present.

By contrast, consumer credit growth in Western Europe is growing fast, at a rate of 8.3 per cent per year over the last five years compared to 2.7 per cent for the UK, providing new opportunities for lenders, the report says.

Paul Marsh, financial services analyst at Datamonitor and author of the report, said: "UK lenders looking for business opportunities should look overseas to realise their expansion plans.

"The UK is an increasingly difficult place to do business, due to the highly indebted nature of the population. Yet in other European countries consumers are not as indebted and the markets are not as sophisticated."

While the UK market is expected to continue growing at a slower pace than major European countries such as France, Ireland and Spain, the fastest growing markets are Turkey and Greece, according to Mr Marsh.

"These markets are where the real opportunities exist, but only for players brave enough to enter," he said.

After recovering from an economic crisis in 2001, unsecured borrowing in Turkey rose by 52.3 per cent per year on average over the past five years, while in Greece it grew by 28.8 per cent.

One of the reasons highlighted for Turkey’s consumer credit growth, is that it has a very undeveloped mortgage market, and hence, unsecured borrowing accounts for the vast majority of outstanding debt.

After the Office of Fair Trading’s decision to force credit card firms to cut penalty fees for defaulters, providers have turned to other ways to boost profits. Research released on Monday by Moneyfacts, a personal finance information company, found that 19 card providers had increased interest rates in the last three months, some by as much as 12.1 per cent.

Lisa Taylor, an analyst at moneyfacts.co.uk, said: "Rising bad debts and the lost fee revenue has left many providers with no choice but to look for alternative avenues for income. And it seems raising interest rates is a popular option.

"For many consumers this rise may go unnoticed but, should they take the time to look at the long-term consequences, they could be in for a nasty surprise."

Times Online
September 27th, 2006

CAB Advisor Has Been Convicted Of Fraud

stever@myvesta.org — 20060924

A crooked solicitor jailed for swindling more than £750,000 from clients is being allowed to give advice at a Citizens Advice Bureau, the Telegraph can today reveal.

Despite being jailed for five years in August 2004 after admitting 36 counts of theft and asking for another 11 to be taken into consideration, former Darwen solicitor Philip Pressler is in a position where he could advise on wills, powers of attorney and other legal issues to clients who know nothing of his background. Shamed Pressler, 53, formerly of Higher Whittlestone Farm, Darwen, leaves Kirkham Prison, near Preston, every Monday and Wednesday on day release to work as an adviser at Manchester District Citizens Advice Bureau (CAB), in Swan Street.

He catches the train from Kirkham to Manchester and works from 9.30am until 4pm before returning to prison in the early evening.
continued...

Although he swindled £759,000 from clients, wills and charities while a senior partner at Darwen solicitors Hindle, Son and Cooper, prison chiefs denied claims allowing him to work as an advisor during his rehabilitation was "inappropriate".

CAB bosses also denied that having a convicted fraudster giving advice on their behalf was a cause for concern.

But Darwen and Rossendale MP Janet Anderson said she was outraged Pressler was working at the CAB and would write to the minister for prisons to ask for him to be removed.

She said: "People in Darwen will quite rightly be very annoyed and upset about this.

"The very notion that a convicted swindler has been placed in a position where he has access to vulnerable people seeking advice is an absolute nonsense.

"I will be taking this up with the prisons minister Tony McNulty as a matter of urgency and ask him to make sure that he is removed from having contact with the public as soon as possible."

Det Sgt Graham Norris, from Lancashire Police's major crime unit, who led the investigation which led to Pressler's conviction said he was "highly concerned" Pressler could now be advising people on the same legal processes he used to defraud families across East Lancashire.

However, a spokesperson for the CAB said employing Pressler as an adviser did not undermine the work that they did or the quality of advice they provided.

A CAB spokesperson said: "The prime concern of any CAB is always to safeguard the welfare and interests of CAB clients. Philip Pressler has had to go through stringent vetting and risk assessment by the Prison Service as well as the bureau's own rigorous selection procedures before being considered for training as a volunteer adviser by Manchester District Citizens Advice Bureau.

"He has been subject to close supervision and monitoring throughout his time as an adviser and would have faced severe sanctions had he breached CAB rules or broken prison authority rules governing his conduct.

"There has never been any question of his handling bureau funds or having access to clients' money."

CAB advisers are trained volunteers whose expenses are paid for by the organisation. Their literature says advisers can: interview clients; help clients negotiate with people such as creditors; draft letters; make phone calls for clients; and represent them in court and at tribunals.

A Prison Service spokesperson said Pressler was released on temporary licence as a way "to provide increased opportunities to undertake training and educational programmes that cannot be provided within the prison."

She said: "Unpaid community work and reparative projects help prisoners give something back to the community. All prisoners are rigorously risk assessed before release on temporary licence and no prisoners are released if there are concerns for public safety or it is felt it is inappropriate to do so."

The Law Society, which regulates the industry, has paid more than half a million pounds to Pressler's victims from a compensation fund.

He was ordered to sell £690,000 of his assets to repay the Law Society or face a further three years in prison and was struck off as a solicitor by them in May, 2003.

A Law Society spokesperson said: "Unless another solicitor had applied to the Law Society for Mr Pressler to work under his supervision we would not be involved as the CAB can employ him without making us aware."

Det Sgt Graham Norris said: "Pressler committed some diabolical crimes and affected people and families in a big way.

"He systematically gained and then abused their trust and ripped lots and lots of people off.

"He has been proven to be a dishonest man. How can anyone prove he is not being dishonest now and does not have ulterior motives?

"Pressler is a conman and it did shock me when I was told that as part of his rehabilitation he is working at the CAB.

"I have raised my concerns with prison liaison officers at Kirkham about the suitability of him as a CAB adviser. But I have been assured that he is monitored closely and is supervised at all times.

"How would you feel if you had received advice from him and then found out who he was, what he had done and the fact he is still serving a prison sentence for fraud?

"Would members of the public want any advice, legal or otherwise, from a convicted conman?"

Former Darwen Grammar School pupil Dr Sandi Hoyland prompted the investigation into Pressler.

Pressler administered the estate of her father, John Hacking, and had right of attorney over it as his mental health had begun to fail.

Dr Hoyland told the Telegraph at the time: "Probate and power of attorney are probably the only two areas where solicitors can work in total isolation and Pressler exploited that, stealing all that money for his own lavish lifestyle.

"There needs to be tougher penalties for solicitors who abuse their position and a better way for people to make complaints to stop them from doing it to others."

Lancashire Telegraph
September 12th, 2006

Credit Card Firms Start Credit Crackdown

stever@myvesta.org — 20060919

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Until very recently credit card providers in the UK loved British credit card users who failed to make repayment of their entire outstanding balance at the end of each statement period. And why not, these customers were the source of huge profits for UK credit card issuers. However, with recently announced bad debt provisions by UK credit card providers being among the largest ever, and having recently been subjected to a fine-comb review from the Office of Fair Trading (OFT), a number of leading UK credit card providers are starting to fight back.

The first casualty in this new battle? UK credit card customers who are finding it increasingly difficult to make repayments on their credit cards.

Yesterday Britain’s largest bank, HSBC, announced that it would be writing to all of its customers informing them that the bank had now engaged a new credit policy with regard to its overdrafts and that period reviews of these would take place to see if a personal loan might not be more appropriate.

This follows the recent announcement by Europe’s leading credit card issuer, MBNA, that it could now be possible for you to have a credit card transaction declined even if you have available credit on your credit card to meet the transaction value. MBNA’s reason for doing this? Because they say they should have the right to decline a transaction if they believe you do not have the means to cover the repayment of your credit card bill! That might be so, but surely this would need to be done as part of a review of your credit card limit, not an instant decision when you are trying to conduct a transaction at a time when you genuinely believe you have the credit limit to cover the transaction value. Potentially very embarrassing indeed.

Likewise, around the same time, Barclays announced that its credit card customers would now be subject to periodic reviews of their credit card limit and that Barclays now reserves the right to lower a customer’s credit card limit at any time. A little harsh perhaps, but far better than the embarrassment of having a transaction declined in a shop!

Collectively then it appears that the leading UK credit card companies are fighting back against recent attacks on them. None less so than that by the OFT, which looks like it will involve UK credit card companies having to lower their fees and interest rates in the very near future. This may also involve some for of rebate to some UK credit card customers who have been excessively charged fees and interest. And herein lies the crux of the issue for many watchers of the UK credit card industry, who do not see these moves by the leading UK credit card companies as a helpful crack-down on delinquent UK credit card companies, by offering cheaper sources of borrowing, such as a personal loan, but more like a chance to cross-sell other products in their stable which are not the subject of such a careful, watchful eye at the moment.

Richard Smith
19th September 2006

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Visiting Price Comparison websites Can Hurt Your Credit Score

stever@myvesta.org

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People who repeatedly use financial comparison websites can inadvertently damage their credit rating, a report has said.

Comparison websites have sold 13.6 million products in the past year.

But the report, by Professor Merlin Stone of Bristol business school, says the sites do not offer credit checks to people shopping for financial policies.

If consumers are then rejected by a bank or another lender, the failed application damages their credit score.

"Many people apply for products they will not be approved for and are left with failed applications on their credit scores," said Professor Stone.

His report was commissioned by the Moneyexpert comparison site.

If you have too many of these applications on your file in a short period of time, a lot of the ratings systems... will probably downgrade your credit rating
Neil Munro, Equifax

Professor Stone argues that the problem lies with the fact that the comparison websites assume all potential customers are the same and have good credit histories.

If someone eventually applies for a product such as a mortgage or credit card, the lender checks their credit history.

This enquiry is logged and thus leaves a "footprint" on the files kept by credit scoring companies such as Experian and Equifax.

Equifax's spokesman Neil Munro said: "These footprints are used by future lenders as an indication of your credit-worthiness.

"So if you have too many of these applications on your file in a short period of time, a lot of the ratings systems the lenders will use will probably downgrade your credit rating.

"A large number of applications over a short period of time is statistically quite predictive of somebody's credit worthiness."

According to Moneyexpert, about 3.5 million people had applications for financial products rejected in the past year after being channelled through comparison sites.

This process can develop into a spiral, with failed applicants trying again and again to buy polices or products they have no hope of getting, but simply leaving themselves with a worse credit score each time.

Credit histories

What many people fail to realise is that it is not just events such as failed mortgage or credit card repayments, or county court judgements for debt, that can damage a credit score.

People with healthy finances can have a poor score if, for instance, they have been in a job for a short time, are not on the electoral roll, or do not have a fixed phone line.

You can have a poor score even if you have never borrowed money before simply because you have no identifiable borrowing history.

The use of comparison web sites has grown rapidly over the last few years and is still continuing to grow.

The most popular products bought were car insurance, travel insurance and home insurance.

Credit cards, personal loans and mortgages were the next most popular items.

BBC Online
September 19th, 2006

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Claiming Back Bank Charges - Why Wait For OFT Ruling?

stever@myvesta.org — 20060917

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The consumer watchdog’s decision to investigate whether bank overdraft charges are legal has sparked outrage among current account providers. But as the wrangling continues there is no better time to stand up to your bank and demand the return of cash it has taken from your account when you slipped into the red.

The banks reap an estimated £4.7 billion a year from charges on unauthorised borrowing. But the Office of Fair Trading (OFT) has announced that it will investigate whether charges of up to £39 a time are legal. The OFT is expected to introduce a limit on overdraft charges, similar to the £12 cap on credit card default charges implemented this year.

*
If you have been penalised for repeatedly going over your limit and believe that the charges are unfair, you should write to your bank to request a refund. Although it is unlikely that you will receive the full amount, the bank may offer part of the total. If you think that the bank’s reply is unsatisfactory, you can take the case to the Financial Ombudsman Service (FOS), which can force the bank to offer a refund if it agrees that you have been treated unfairly.

Emma Bandey, of Which?, the consumer organisation, says: “People should not be put off challenging their banks while the OFT investigation is carried out. But be prepared for some bully-boy tactics that banks have used to intimidate customers, such as closing accounts. Customers should open a new account elsewhere before making a challenge.”

For advice on how to complain, go to the FOS website at www.financial-ombudsman.org.uk or call 0845 0801800.

In future, try to minimise any charges by keeping regular checks on your bank balance and pending direct debits or standing orders. If there is no way to avoid going over the limit, contact the bank first because it may agree to waive the charge. Similarly, if you accidentally go over your limit and contact the bank as soon as possible, it may agree to refund the charge.

Trying to stay in the black will be crucial in the coming months because some banks have increased their overdraft interest rates.

Credit Suisse estimates that capping unauthorised overdraft charges at £10 would reduce banks’ profits by £1.2 billion. With this source of revenue in danger, the banks are turning to those customers who have authorised overdrafts.

On September 1 Lloyds TSB, NatWest and smile all put up rates on their main current accounts. Lloyds TSB’s Classic Plus account now charges 18 per cent, up from

15 per cent, on overdraft borrowing. NatWest customers with Current Plus, Advantage Blue or Advantage Gold accounts are paying between 1.14 and 1.16 percentage points more. Customers with smile, the internet arm of the Co-operative Bank, suffered a dual blow: it added two points to its overdraft rate and increased the monthly service charge from £7.50 to £10.

HSBC has gone one step farther, announcing a clampdown on those who depend too heavily on their overdrafts. From December it will impose stricter rules on overdraft allowances and conduct annual checks on customers who request overdrafts regularly.

Banking could become even more expensive if the OFT caps charges. Defaqto, the research group, responded to the OFT announcement by suggesting that such a move could lead to the end of free banking in the UK.

Ed Wells, of Troika, the financial services consultancy, says: “The jury is still out, but charging for services is something that banks would like to introduce. They say it would allow them to offer more transparent and fairer pricing.”

Case study

STEFAN ZUBAC, 24, won back £750 of £1,495 in overdraft charges incurred on his Barclays current account after requesting a refund. The bank agreed to halve the total sum as “a gesture of goodwill” and to avoid “the cost and inconvenience inherent in a further dispute”.

The original total was a result of Stefan, left, intermittently exceeding his authorised overdraft limit by £10, for which he was charged a £30 penalty on each occasion. He repeatedly asked the bank for leeway of £20 before going over his limit to tide him over before his pay went in the account, but his requests were denied.

Stefan says: “It was a vicious circle. The bank would stick me in a situation where I could never get out of my overdraft because it never gave me any grace period to pay off the unauthorised amount before it started charging me again.”

Know the Banking Code
# The Banking Code, set up by the Banking Code Standards Board (BCSB) in 1999, aims to ensure fair dealing and standards of good practice in the UK.

# Principles of the code include a commitment to clear information on interest rates and charges and how accounts work. Banks should also “deal quickly and sympathetically when things go wrong”. At present, the BCSB believes that banks “could do more” to fulfil their obligations on transparency.

# The code applies to current accounts, personal loans, savings and credit cards but excludes mortgages, investments, general insurance, pensions and life assurance.

# Signing up is voluntary, but most banks and building societies in the UK have agreed to abide by the code. The Post Office has not signed up but is in talks with the BCSB. A few small building societies and private banks have yet to sign up.

# The BCSB is lobbying to change the code so that banks are required to give 14 days’ notice before charging for an unauthorised overdraft. Seymour Fortescue, of the BCSB,

says: “This would ensure that customers have time to query the charges if necessary. It would also help to avoid charges on top of existing charges.”

The Times
September 17th, 2006

HSBC Getting Tough With Customers Who Break Overdraft Limits

stever@myvesta.org

High-street banking giant HSBC is to clamp down on customers who go heavily and repeatedly into the red.

Concerned about people who regard their overdraft as "an extension of their salary" rather than as a safety net, it is to introduce an annual review from 1 December.

The bank will contact all customers who have an overdraft, to check if they are having difficulty with the repayments and to gauge whether an overdraft is still the most suitable form of borrowing. Those who regularly breach their overdraft could see their limits cut.

The changes are designed to bring "greater clarity on what an overdraft service is, how customers apply for one and how fees are charged", said Joe Garner, HSBC's head of personal financial services.

In August, HSBC revealed a rise of more than a third in bad-debt write-offs, seriously hitting profits.

Its move comes just days after the Office of Fair Trading announced an inquiry into the size of bank charges imposed on customers who exceed their overdraft limits.

This probe was launched as the watchdog wound up a separate investigation into penalties for late payment of credit card bills. Providers have now cut these charges to £12.

Stuart Glendinning from price-comparison service Moneysupermarket.com said there could be a "pre-emptive element" in HSBC's move, since overdraft charges are expected to be cut. But it was more likely, he said, that HSBC was acting to reduce its exposure to customer bad debts.

NatWest, Lloyds TSB and Smile have all raised their overdraft rates recently.

Mortgages and loans: Repayment woe begins at home

An estimated 770,000 UK homeowners have missed at least one mortgage payment in the past 12 months, according to Citizens Advice.

In a survey of 2,000 home loan borrowers, the debt charity found that 4 per cent had missed one or more repayments. This figure was extrapolated to provide the national calculation.

For young borrowers saddled with student loans and credit card debt, the figure rose to 13 per cent, said Citizens Advice.

Last year, the charity helped to deal with 1.25 million debt problems and received 51,000 enquiries about arrears on mortgages and secured loans.

"Missing payments on mortgages or loans could possibly lead to repossessions," said David Harker, chief executive of Citizens Advice.

Meanwhile, figures from the Council of Mortgage Lenders (CML) show that spiralling house prices have forced first-time buyers to borrow a record 3.24 times average income to get on the property ladder.

This figure for July was up from 3.21 times the average income in June, and 3.06 times in the same month last year.

The Independent
September 17th, 2006

Student Debt Levels Blamed For Half Of Drop Outs

stever@myvesta.org — 20060915

Large levels of debt is the reason why half of students that leave university decide to drop out.

New figures suggest that debts are having a real impact on the lives of students.

And while the average graduate can now expect to owe £15,000 by the time they receive their degree, half the people that do not make it that far blame their borrowing.

And the £15,000 debt exists despite the best efforts of students and their families.

Close to half (45 per cent) of undergraduates work more than 16 hours a week during term time, with more than four in five (81 per cent) working over the summer holiday to lessen their debts.

Additionally, some 58 per cent of students receive £5,000 from their parents to help them during their time at university.

But despite all this, not to mention student loans, more than three students in five (62 per cent) struggle financially during their time at university.

The majority of students do budget, but if they are to emerge from university financially stable, it is increasingly vital that they are well educated about how to manage their money.

Some 58 per cent of students draw up budgets to help them manage their money.

Myvesta UK IVA Advice

Pensioners Getting Further Into Debt

stever@myvesta.org

Increasing numbers of pensioners are borrowing money without any plans to pay it back, a recent survey from financial advisers Sesame reports.

Additionally, one in seven of the 2,000 pensioners that were surveyed said they would consider equity release to clear off credit card and loan debt.

The findings fly in the face of the long-held view that UK pensioners try to avoid debt at all costs.

The group said that today's pensioners had used credit in the 1960s and 1970s and were more comfortable with it.

But Alastair Conway, a spokesman for Sesame Financial Advisers, warned that debt held dangers for pensioners, particularly as many have a fixed income or an income that only rose in line with prices.

"People have to take control of their finances in the lead-up to retirement and beyond, if we are to avoid adding to the UK's mounting debt crisis," he said.

"This is because the ability of retired people to recover from bad financial decisions is more limited."

It may become more common for people to die with debts, Mr Conway added.

BBC News, September 14th, 2006

Myvesta UK IVA Advice

Protected Trust Deed Video Series

stever@myvesta.org — 20060913

Myvesta UK has today launched its Trust Deed Educational Video Series. The online video clips have been generated to assist Scottish individuals experiencind debt problems to assess the suitability of a Protected Trust Deed.

The Trust Deed Video Series can be accessed below:

Protected Trust Deed Video Series - Click Here

Bank Account Charges And Fees Under Scrutiny By OFT

stever@myvesta.org

Highstreet banks face the loss of billions of pounds after the OFT launched an inquiry into the fees charged to consumers on current accounts.

The Office of Fair Trading (OFT) is to examine the banks’ £4.7 billion annual income from the default charges that are applied when customers slip into the red or miss direct-debit payments. The move comes after the OFT forced banks to lower charges applied to borrowers who default on credit card payments by introducing a £12 limit last April.

The OFT believes that, as with credit card charges, fees applied to current accounts should reflect the administrative cost borne by the bank. Holders of current accounts can be hit by charges as high as £30 a day for exceeding their overdrafts. Charges for unpaid direct debits or standing orders are higher, at up to £39 for each item.

The banking industry defended its system. Ian Mullen, chief executive of the British Bankers’ Association (BBA), said: “Our members remain of the view that the current-account charging system is fair and legal. The majority of customers do not pay fees and enjoy free in-credit banking, unlike the vast majority of developed economies.”

Yet there are signs that the resolve of banks is beginning to crack. After several high-profile public awareness campaigns from organisations such as Which?, the consumer group, many banks have offered settlements, in some cases for thousands of pounds, to disgruntled account holders.

Emma Bandey, of Which?, said: “We have long since asked banks to open their books to public scrutiny, as we feel that default charges should be proportionate and reflect the administration costs involved. They should not be, as they are now, arbitrary figures picked to make the most money out of unsuspecting customers.” Overdraft charges and interest rates have long been an important source of revenue for banks and building societies, netting them about £10 billion a year, according to the BBA.

If the OFT sets a limit of £10 on charges, the industry stands to lose an estimated £1.2 billion a year, according to Credit Suisse, the investment bank. If they are scrapped altogether, the lost revenue could approach £5 billion, Which? estimates.

Some banks are attempting to stem their losses. Lloyds TSB, NatWest and Smile all increased their overdraft interest rates by up to 2 per cent on September 1.

Nick White, of uSwitch.com, the price comparison website, said: “The new overdraft rates are a signal that the industry is looking to stay one step ahead of the game.”

The banks expected an investigation into current accounts after the OFT’s ruling on credit card charges. The OFT will report its initial findings in three to six months.

The Times
September 8th, 2006

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

Industry Says No To The “One Size Fits All” Strategy

stever@myvesta.org

Insurers, which are already under scrutiny from regulatory and competition watchdogs, are to better equip consumers to buy payment protection insurance (PPI) by launching a buying guide and providing clearer pre-sale information for the cover.

The move to raise customer understanding of payment protection, which is sold as an add-on to credit cards and loans and is meant to help consumers repay debt if they are unable to work, is at the heart of the industry?s offensive to stave off enforcement action by the Financial Services Authority (FSA).

The FSA has threatened to tighten its rules if the industry does not show how it will improve poor selling practices and weaknesses in product design, uncovered during a mystery shopping exercise last year.

The regulator was concerned that the product was being sold to people who could not claim, because they were self-employed, and that sales literature was often unclear or did not highlight significant exclusions.

In setting out its proposals to address the FSA?s concerns, Jane Milne, head of household and property insurance at the Association of British Insurers (ABI) says: ?One of the main things we want to achieve is to help customers think through what sort of insurance they actually need, to make sure that they are covered for their sorts of eventualities.?

The ABI is to work with its members to produce a guide which explains how payment protection works and how it differs from other protection products, including income protection and critical illness cover. The guide will also contain a checklist of key questions consumers should ask when buying PPI.

The industry will also introduce guidance on ways of communicating key features using standard headings in policy summaries, to make it easier for customers to compare products. ?We will be looking at ways of equipping customers so they can buy more effectively,? says Milne.

In its submission to the FSA, the ABI, which represents the biggest underwriters of insurance, said distributors of PPI products would also be encouraged to improve their sales staff training. ?Clearly this is one of those issues where we need to work very closely with the distributors so at the point of sale the conversation is happening properly,? says Milne.

The ABI is also to finalise work on its guidance on consistent interpretations, to improve the claims handling process. The aim of this is to ensure that key definitions such as ?self-employed and ?contract worker? do not differ from insurer to insurer.

The industry has clarified its stand on refunds on loans that are repaid early, saying: ?Where customers have repaid their loan early and have not made a claim, ABI members will make an appropriate premium refund.?

Despite these efforts to standardise promotional features of the product, Milne says the industry is not moving towards a ?baseline?, from which consumers could expect certain types of cover as standard. Consumer groups say a baseline model, would help consumers compare deals.

?There isn?t a one-size-fits- all on this, but we do want to make sure that people are able to make realistic comparisons and choices. What we are looking at is whether we can come up with some sort of guidance which says: This is typically what you might find in a PPI product,? says Milne.

The ABI also defended the practice of insurance being sold as single premiums, even though unlike regular premiums, the total cost of the insurance is added to the loan, resulting in the customer paying interest on the combined amount.

The important thing is that when people are buying they understand the pros and cons of each approach and they can make the choice which suits them best,? says Milne.

Consumer groups say the initiatives were a ?small step? towards addressing the FSA?s concerns but doubted they would do enough to stop misselling.

This is a useful step but there is a heavy reliance on consumers to understand what they are being told,? says Peter Tutton, of Citizens Advice, the charity which made a complaint to the Office of Fair Trading about the cost of PPI.

The FSA says it plans to meet insurers in April to discuss their proposals but plans to check on their improvements with a second round of mystery shopping.

Copyright The Financial Times Limited 2006

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

UK Debt Statistics - September 2006

stever@myvesta.org — 20060910

Debt Facts and Figures - Compiled 1st September 2006

Total UK personal debt

At the end of July 2006 the total UK personal debt was £1,237bn. The growth rate increased to 10.5% for the previous 12 months which equates to an increase of £105bn.
Total secured lending on homes has exceeded £1 trillion (£1,000 billion) and in July 2006 it stood at £1025.4bn. This has increased 11.2% in the last 12 months.

Total consumer credit lending to individuals in July 2006 was £211.9bn. This has increased 7.2% in the last 12 months.

Total lending in July 2006 grew by £10.9bn. Secured lending grew by £9.8bn in the month. Consumer credit lending grew by £1.1bn.

Average household debt in the UK is approximately £8,577 (excluding mortgages) and £50,091 including mortgages.

Average owed by every UK adult is approximately £26,313 (including mortgages). This grew by ~ £200 last month.

Average interest paid by each household on their total debt is approximately £3,086 each year.

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,506 per average UK adult at the end of July 2006.

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

Plastic card / Personal Loans: Research by uSwitch has found that 3.4 million credit cardholders in the UK regularly make only the minimum repayment on their credit card. 11% of those with a credit card only ever make the minimum repayment – increasing to 18% for the 25-34 age group.

Credit card arrears rose consistently throughout 2005. The proportion of balances more than three months in arrears increased to 8.5%.

The number of people refused credit by mainstream lenders is estimated to increase from 9.1m in 2005 to 9.4m in 2010.

Total credit card debt in July 2006 was £54.7bn.

According to the BBA the proportion of credit card balances bearing interest was 74.3% in June 2006.

The average interest rate on credit card lending is currently 15.72 %, around 11 percentage points above base rate.

282 plastic transactions took place every second in the UK in 2005.

Debit cards accounted for 37% of all retail spend in 2005, ahead of cash at 34%. Plastic cards were used for 63% of all UK retail spending last year

Plastic cards in issue were 190m in 2005. This works out at an average of 4.1 plastic cards for every adult in the UK.

There are more credit cards in the UK than people according to APACS. At the end of 2005 there were 74.6m credit and charge cards in the UK compared with around 60 million people in the country.

Servicing Debt: Approximately 9.8% of individuals consider unsecured debt to be a “heavy burden”. A further 31% saying they are keeping up, but struggle from time to time

One person is falling victim to insolvency every minute of the working day - 26,021 people became insolvent between April to June 2006 which is a 66% increase on the same quarter last year. The number of people becoming insolvent in 2006 is likely to exceed 100,000.

In the last four years the average age of a bankrupt has fallen from 43 to 41 and the proportion of younger bankrupts, aged between 18 and 29, has more than doubled.

According to recent research by a leading debt solutions consultancy, the number of consumers facing personal insolvency is growing fast. Of adults with a high level of unsecured debt (£10,000 or over), 20% of those interviewed said they were ‘quite likely’, ‘very likely’ or ‘certain’ to declare themselves bankrupt or take out an IVA (Individual Voluntary Arrangement). This equates to 1.1 million adults across Great Britain.

The Bank of England raised the base lending rate to 4.75% in August 2006. This was the first increase for 2 years.

Citizens Advice Bureau (CAB) dealt with 1,128,000 debt enquiries last year. In the last decade the number of consumer debt problems dealt with by CAB has increased 118%. CAB clients have an average of £13,000 of debt which is nearly 17.5 times their monthly income. On average it would take CAB clients 77 years to pay back their debts in full.

The average debt of a client coming to Consumer Credit Counselling Service (CCCS) for advice is now £32,000. The number of people earning more than £30,000 a year who are asking them for help has risen by 257% in the past three years.

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

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

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

Young people (under 30): Graduates leaving university this year had average debts of £13,252, a 5% increase on 2005, according to a survey by NatWest bank. 62% of graduates leave university with debts of over £10,000.

Sixth-formers heading for college this year expect to leave their courses with debts of nearly £15,000. For those starting university this summer, the biggest concern was money being tight. Students are now increasingly relying on part time jobs to finance their life at university. A massive 87% of this year’s intake believes that they will have to get a part time job and 46% of current students have to rely on their income from term time work to get by, working an average of 14 hours a week.

Recent research shows that budgeting is the last thing on many students’ minds as the vast majority (80%) of 16-24 year olds admit they don’t keep track of their finances. Also, despite the likelihood of being on a tight budget, 1 in 5 doesn’t know within £100 what their financial state might be.

The average UK weekly pocket money for 7 – 16 year olds is £8.20 (£9.76 for 12 to 16 year olds, compared to £6.30 for seven to 11 year olds).

Four out of every five women aged between 21 and 25 spend more than their wages every month.

Pensioners / Pensions: 1.4 million pensioners (14% of the UK’s pensioner population) live on an income of £5,000 or less each year. After council tax, water and electricity bills, this leaves only £3,092 per annum – which is equivalent to £59.46 each week or £8.49 a day. More than 38 per cent (3.6 million people) get by on £10,000 or less, and over half of the British pensioner population live on £15,000 or less each year.

A major report published by Scottish Widows, reveals a dramatic deterioration over the last 12 months in the number of people saving adequately for retirement. The percentage of the population saving adequately for retirement falls from 55% in 2005 to 46% in 2006. The percentage of people who do not know where their main income in retirement will come from has almost doubled, and is now nearly a quarter of the population (23%)

Research from Scottish Widows Bank reveals one in six (over 1 million), pensioner homeowners in the UK have an outstanding mortgage on their home – each with an average debt of £45,313 – making a nationwide debt of almost £47 billion. What is more, one in three owe more than £50,000 and one in ten more than £100,000 putting increased pressure on retirement income.

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

Housing: According to the Department for Communities and Local Government (DCLG) the average house price in the UK in June 2006 stood at £190,883 (£198,952 in England). UK annual house price inflation rose by 5.2%. Annual house price inflation in London was 5.8%.

Note: the weightings used by DCLG were changed for the February 2006 figures.

The average Mortgage Interest rate at the end of June 2006 was 5.29%.

28% of mortgages taken out in June 2006 were “interest only” mortgages compared with only 12% taken out in June 2003. 22% of these “interest only” mortgages were taken out without a repayment plan specified to repay the capital.

Approximately 280,000 mortgages are one month or more in arrears. This represents an increase of 4% from the same period one year ago.

During the second quarter of 2006, 33,180 mortgage possession actions were entered, and a total of 22,254 orders were made – 11,020 of which were suspended orders. This is a 17% increase from the second quarter of 2005.

Gross mortgage lending was £30.4 billion in July - the second highest figure on record and the strongest July figure ever - according to new data from the Council of Mortgage Lenders (CML). Home buyers borrowed 19% more in July 2006 than in July 2005.

According to the Nationwide the annual rate of house price inflation picked up for the third consecutive month in August. House prices are now 6.6% higher than at this time last year. This is the fastest annual rate of growth since April 2005 and almost three times faster than at this time last year.

According to The National Association of Estate Agents (NAEA) the average time between instruction and completion is 17.0 weeks.

The average loan approval for house purchases in April increase to £139,200, which is 5% higher than a year earlier.

The Council of Mortgage Lenders has revised up its forecasts for housing market activity for 2006 and 2007. The CML now expects house prices to end the year 7% higher than at the start, compared with a 2% forecast back in February. Next year, the forecast for house price inflation has been raised from 2% to 3%.

The amount of unmortgaged property wealth held by UK home-owners currently stands at £3.6 trillion. Housing equity is the largest component of total wealth held by people living in the UK. Mortgage lending has helped fund a dramatic expansion of home-ownership, from 60% to 70% of the population during the last 20 years. Roughly 40% of the housing stock is owned outright, mainly by retired and older middle-aged households,

Housing 1st Time Buyers: The average house price in the UK in June 2006 for first time buyers now stands at £149,215 which is an annual increase of 6.8%.

The average first-time buyer was paying 3.21 times their income to get a mortgage in June - the highest figure on record - according to data from the Council of Mortgage Lenders (CML). The average new mortgage for first time buyers has now reached £110,000. The average age of a first-time buyer was 29 and interest payments consumed 16.5% of the income of the average first-time buyer.

Half of parents feel responsible for helping their children on the property ladder. Parents intend to help their children onto the property ladder by giving them an average of £17,677. One in six are prepared to give or lend their offspring over £30,000.

The average couple needs to save at least £29,000 to pay for the deposit and stamp duty on their first home.

According to the National Association of Estate Agencies (NAEA) first time buyers accounted for 11.3% of properties purchased in August.

High Street Spending: Britons now spend more on eating out in restaurants, pubs and on takeaway meals than on buying fresh and processed food and drink products to have at home.

For the first time more than half of all adults made an online purchase during 2005 - 25 million or 52 per cent of all adults.

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

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

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

Money Education / Financial Literacy: Classes on personal finance and budgeting in schools could make children richer by up to £32,000 between the ages of 35-49 according to the Institute for Public Policy Research.

25 million Brits (56%) spend 60 minutes or less per week reviewing their finances, with the average amount of time we dedicate as a nation reaching only 1 hour 19 minutes – the least amount of time in Europe, according to a study from Scottish Widows. We spend nearly twice as long (2 hours 11 minutes) chatting on the phone or texting each week, and 6 times as long (8 hours 4 minutes) watching TV.

A quarter of Brits (25%) have no idea how much they spend in a week, and a similar number (26%) have no idea of their monthly cash flow. This lack of knowledge extends into other financial aspects of life. Only half (51%) the population know the balance on their credit cards and nearly half (46%) have no idea what interest rates they receive on their savings or are paying on their accounts and debts.

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

Savings: A massive 72% of UK consumers believe they aren’t saving enough, but out of the people who are in a position to increase the amount they currently save, almost 8 million (18%) claim they enjoy spending their money too much to do so.

Halifax research shows that the UK saving ratio hit a four year high of 6.0% in Q1 2006. The household saving ratio measures the proportion of gross disposable income that households save rather than spend. The savings ratio has varied from a high of 14.1% in 1979 to a low of 3.1% in mid 2004 with a 7.8% average for the last 43 years.

Half the population (52%) could survive financially for just 17 days, should they suffer an unexpected loss of income, according to research by Combined Insurance.

Compiled monthly by Richard Talbot. richardtalbot@creditaction.org.uk

Myvesta UK IVA Advice

OFT Report Criticises 'Greedy' PPI Sellers

stever@myvesta.org — 20060827

A damning report from the Office of Fair Trading earlier this month was deeply critical about the £5bn-a-year "payment protection insurance" industry, raising concerns over possible profiteering.

The full OFT investigation into the industry will not be complete for several more months. But this week Guardian Money (the first paper to reveal the staggering profits earned by PPI sellers) obtained exclusive access to a private "feedback day" organised by the OFT and the PPI industry. It reveals an industry determined to cling to its practices.

The interim OFT report found that the "claims ratio" - the amount paid out as a percentage of the premiums earned - was only 19% for PPI but 55% for household insurance and 74% for motor insurance. It also found that average commissions earned were 60% of the premium paid. Little wonder that every bank and credit card provider is so keen to sell consumers loan protection and "peace of mind".

In its analysis of PPI pricing, it said that the cost of a typical policy giving cover for a £5,000 loan over five years varied from £16 to £40 per month "with very little obvious difference in the cover provided".

The OFT also found some evidence that lenders are selling extra-cheap personal loans - and recouping the cost by pressurising borrowers into taking out PPI. "Our research suggests that, broadly, there may be some evidence of unsecured loans with very low APRs being loaded with expensive PPI policies," it said.

The advertised APR interest rate on a loan never includes the cost of PPI, the report found - but when the cost is included, the APR effectively doubles.

"It seems to be a fairly common practice for distributors to make use of a headline APR to draw people into a credit deal. The price of the PPI is not upfront, yet the inclusion of PPI within the loan may significantly alter the total cost of the overall credit deal.

"London Economics carried out an analysis of cost and found that 37 of 40 credit providers showed a greater than 100% increase in the advertised APR as a result of including the PPI premium in the repayment calculation."

Consumers fail to shop around for PPI, the report found, "and even if they wished to, the wide variety of products and prices makes comparisons difficult".

Jane Milne, representing the Association of British Insurers, told the meeting that crude comparisons were insufficient evidence to suggest margins were too high or excessive profits were being made. "We need to look at the whole process and look at the costs involved in dealing with claims. It needs further investigation," she said.

Charlie Hanson, representing Egg credit cards, said there were legitimate reasons why many claims were turned down, and that consumers had a better understanding of the products than they were being credited with. One of the main reasons claims were turned down, according to Mr Hanson, was that the policy had been bought so close to an individual being made redundant that it became null and void.

Representatives from high-street banks, including Abbey, HBOS and HSBC, were at the meeting but were conspicuous in their lack of comment.

The Finance and Leasing Association claimed that some of the OFT's criticism was "a mystery" and not consistent with the charges levelled at other financial providers recently.

"Usually the stick is because prices are the same," Martin Hall, of the FLA commented, pointing to outrage over the universally high charges made by store cards providers. These costs, he said, had been blamed on a lack of competition in the market.

The fact the OFT was claiming that huge differences in price between similar PPI products meant little competition existed in the protection market was therefore, "a mystery", he said.

But Simon Burgess of British Insurance (which markets a cheaper, standalone PPI policy) backed the OFT report, saying: "Nothing has been said here today to satisfactorily refute any of the criticisms made."

The OFT will now assess the comments and observations made by the industry, and decide whether the market for PPI should be formally referred to the Competition Commission for further investigation.

The PPI sellers have every reason to fear a crackdown. The OFT's recently appointed chief, John Fingleton, has already shown his appetite to take on financial institutions, slashing penalties for late credit card payments to £12.

The Guardian
August 26th, 2006

Claiming Back PPI Fees

HSBC Have Got It Completely Wrong Again.

stever@myvesta.org

HSBC recently hit out at the aggressive marketing of individual voluntary arrangements (IVAs), which it believes is allowing consumers to leave behind the bad debts from reckless spending on credit cards.

As a partner in a firm that helps debtors to negotiate IVAs with their creditors and advises on bankruptcies I am keen that we are not portrayed as unprofessional.

An IVA by its very nature is a mechanism that allows people in financial trouble to repay their debts — the complete opposite of allowing them to walk away from their debts.

The problem is not the insolvency industry, but the availability of very cheap credit and the willingness of consumers to be the Micawbers of the 21st century by spending much more than they earn.

Nick Hood
Senior London partner
Begbies Traynor Group
London EC3

Letter In The Times
August 27th, 2006

Baby Boom Debts Set To Increase In UK

stever@myvesta.org — 20060825

If you’ve been following the recent British media coverage expelling the virtues and hardships of Britain’s baby-boomers, you’ll no doubt have seen and read a number of very interesting stories.

What’s not at doubt is that the generation of Brits who grew up following the end of the Second World War have seen massive changes in British society during their lifetimes. Not least among these changes is how to handle and cope with credit card debt - something which did not even need to be considered until 40 years ago this year. What you may not have heard, however, is the problems that Britain’s baby-boomers are now facing trying to make sure that they’ve cleared all their credit card debt before they reach the golden age of retirement.

Only last week news broke of what is thought to be Britain’s biggest credit card debtor, owing a total of £416,000 to 57 different credit card issuers. As it happens the unnamed 56-year-old happens to fall squarely into the bracket of baby-boomers in the UK reaching the golden age of retirement.

While this may sound like an unfortunate one-off, “not so” would be the reply from the Consumer Credit Counselling Service (CCCS), a registered charity helping people in financial difficulty, who contend that unlike the rest of British society the over 50s have actually increased their credit card spending habits over the past 12 months. Moreover, 23% of debtors seeking free debt counselling from the CCCS are over the age of 53, up from 19% previously. The average credit card debt among the over 53s seeking debt counselling from the CCCS was also slightly higher than the national average at £12,422.

Known also as the Barclaycard generation, baby-boomers in the UK have grown with increasing credit available on tap. This is also the first generation of Britons who have had to learn how to repay the massive levels of debt that has been continuously advanced to them throughout their lives to-date. These latest figures from the CCCS, together with the recent news of the 56-year-old credit card debtor owing close to half a million pounds clearly indicate that this lesson has been a hard one for Britain’s baby-boomers to learn.

However, as with many of the changes and challenges that British society has had to face in the last 50 years, this is one that the baby-boomers are having to learn to blaze their way through. Very clearly, however, it’s also one that those who have followed have, sadly, yet to master.

Richard Smith
24th August 2006

Myvesta UK – Not For Profit IVA & Bankruptcy Help

Payment Protection Insurance (PPI) - 10 Things Wrong

stever@myvesta.org

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

The top ten problems with the Payment Protection Insurance(PPI) market have been identified by an independent personal finance website.

Research by comparison site moneyfacts.co.uk puts price issues with payment protection insurance (PPI) at the top of its list.

The price of PPI for a loan of £5,000 over three years can vary by up to £800 between providers, and confusion over the levels of cover offered by different deals was in the top ten list.

Lisa Taylor of moneyfacts.co.uk said: "The actual level of cover is not easily comparable. Many lenders now offer a range of cover, using different terminology and don’t all promote the same features."

Another important issue in the list was the sales process. The site said it was wrong for customers to be quoted figures that include the protection fee, forcing them to opt out rather than choose PPI, with many consumers not aware of the insurance as a stand alone product.

This is made worse by recent statistics that showed 27 per cent of consumers had thought buying PPI would help get the loan agreed.

Other key problems in the top ten included terms and conditions being too complicated, poor value for money due to the payment protection market's low claim rate, and policies that leave consumers at risk by covering just one party.

Ms Taylor concluded: "While the cover that PPI provides can prove invaluable in some instances, consumers should think about the consequences of income changes on their ability to repay borrowing.

Moneyfacts

Claiming Back PPI Fees

Whingeing Banks Should Reform Themselves First

stever@myvesta.org — 20060824

Like it or not, economic life runs on the supply of credit. UK consumers, like those in the US, are addicted to it. But you don't expect those providing advice and treatment for the addicts to be criticised by those supplying the drug.

So it's hard to know what to make of the recent comments from the new chief executive of HSBC to the effect that those firms offering debt consolidation and advising on Individual Voluntary Arrangements (IVAs) are somehow culpable.

It's true that IVAs were originally intended to stimulate enterprise and risk-taking by removing the stigma from old-style bankruptcy. They may have done that. But even if one unintended consequence was to allow debt-laden consumers a way out of crippling interest payments on personal loans and credit cards, opting for an IVA is not a soft option.

The banks are as responsible as anyone for the explosion in personal credit to the problem levels of today. The remarks from HSBC's Mr Geoghegan come hard on the heels of an announcement from Morgan Stanley. It is to launch a product aimed at allowing homeowners to borrow much more money than is currently feasible, in exchange for the bank taking a slice of the equity in their property. Then there's the usual 'silly season' story in a weekend newspaper of someone's wire haired fox terrier being given a credit card with a £15,000 limit.

The debt management industry is maturing. It is made up of several reputable public companies who offer a good service and whose activities are tacitly backed by government as a way of providing a way out for distressed and overextended borrowers. There may be a few rogue backstreet operators taking advantage of the vulnerable by offering unsuitable debt management packages - but that's also reflected in the lending community too.

The banks have expanded their lending and credit card activities beyond all recognition since deregulation - and there is also plenty of evidence that those offering 'sub-prime' lending to less affluent borrowers have been expanding their activities too. Not surprisingly, loans like this carry higher rates and, if they work, are more profitable for the lenders.

Pressure groups, and of course banks and mortgage lenders, have complained that the debt management industry as a whole appears to offer consumers a simplistic proposition: an easy way to consolidate their debts into a single monthly payment. It may do so by taking a charge over their home's equity and often manage the lower payment simply by spreading payments over a longer period. But that's only one option. Most bona fide debt management firms offer a range of solutions tailored to individual circumstances.

It's true, of course, that debt management companies are not subject to the same regulatory controls as credit card issuers, mortgage banks or other lenders. They pay only a modest fee to be licensed.

You could argue, however, that that is all that is needed. Insolvency practitioners, including those who have to be employed by debt management companies, are regulated and have to jump through a variety of compliance hoops to do their jobs.

Unsurprisingly, the banks and credit card companies are in the forefront of those calling for these companies to be regulated. In fact, some debt management and IVA companies claim to conduct their businesses according to the spirit of FSA regulation anyway, or else have ancillary activities that are formally regulated.

But for the banks to claim that the 'IVA factories' pose a threat to their recovery of debts is wide of the mark. Banks generally do markedly better in terms of debt recovery under an IVA than they do if they try and collect the debt themselves by more traditional means.

Debt management companies reckon that recovery rates for IVAs are 25-45% versus around a 10th of this level through traditional means. Not only that, but the banks save on costs. The debt management companies who promote IVAs represent an outsourcing of the recovery process for the banks.

Instead of calling for regulation of the debt management industry, many would argue that banks and credit card issuers need to reform themselves. They need to rein in the way they market their lending, to ensure that those they lend to understand fully what they are getting themselves into, the charges involved, and the alternatives and the risks involved.

The reasons for the explosion in credit provision are complex. In part it's the instant gratification aspect of modern life, in part the relentless promotion of high margin branded products as though they were essentials, and in part the Thatcher-era deregulation of the credit markets, not to mention surging property prices, which have themselves been brought about by freely available credit.

Lord Griffiths, the former Bank of England director who 25 years ago recommended in an official report that bank credit be made more freely available to the man in the street, is on record more recently as saying that he could never have envisaged the proliferation of debt being offered to consumers, and that if he had done, he would have urged greater caution.

So if the banks are really sincere about seeing some improvement in their bad debt experience, then rather than criticising those providing debt consolidation advice and IVAs as a worst-case option - why not fund educational initiatives and curriculum development in schools, to teach new consumers about the realities of life in debt.

In the meantime you have only to look at the long-term relative share price performance of HSBC versus the likes of Albemarle & Bond, a pawnbroker, and the likes of Compass Finance, Debt Free Direct and Debtmatters to see which way the wind is blowing. Managing the consequences of debt is a big industry, and set to get bigger still.

Interactive Investor
http://myvesta.org.uk

50 Good Things About Being Debt-Free

stever@myvesta.org — 20060823

I had a tune running through my head when I was thinking about debt and then had an epiphany: Not since Paul Simon advised couples on "50 Ways to Leave Your Lover" has there been such a need for a new list.

I'm always telling people that they should deal with debt, and not "slip out the back, Jack," but maybe I don't dwell often enough on the sugar that comes after you take your medicine by paying off those bills.

So I began listing all the good things that come from being out of debt, and before you know it, I had a Simonesque list of 50.

Perhaps the time has come to advise Bea to learn the key. It's truly never too late to get a new plan, Dan!

Here are 50 good things about being debt-free.

Avoid trouble with cards, Gerard

1. No longer having to decide how much you can afford to pay on credit cards.

2. No ghosts of Christmas debts past haunting you during holiday shopping season.

3. Never being refused for credit.

4. Never being required to spend money you have not yet earned.

5. Having the control that accompanies buying things with cash.

6. Never having to use one credit card to make a payment on another.

Stash a buck, Chuck

7. Having a savings cushion for emergency expenses.

8. Understanding the different kinds of savings needs.

9. Having enough money for both needs and many wants.

10. Watching your balances grow, and that's a good thing.

11. Having fewer fights about money with your sweetie.

12. Experiencing the advantages of a higher credit score.

Plan an attack, Mac

13. Knowing what to do before a marriage.

14. Knowing what to do to prepare for a divorce.

15. Being prepared for a job layoff.

16. Knowing how to create a realistic budget.

17. Understanding the advantages of planned spending.

18. Getting better interest rates when you borrow.

Save for school, O'Toole

19. Having back-to-school costs covered.

20. Setting a good example for your kids.

21. Having the flexibility to shop for the best deal.

22. Knowing you will be prepared to pay your children's college tuition.

Answer the phone, Jerome

23. Not screening for credit-collection calls or letters.

24. Looking forward to opening your mail.

25. Never having to meet Judge Judy.

26. Reading a statement that reads "paid in full."

You're never a schlemiel, Lucille

27. Recognizing money scams a mile away and avoiding them.

28. Knowing when and where to ask for financial assistance.

29. Never having to pay late fees.

30. Never robbing Peter to pay Paul.

31. Keeping your own identity.

Don't worry, Lorrie

32. Sleeping better at night.

33. Never having to worry about repossession.

34. Never worrying about being upside down in a car loan.

35. Finally having your entire financial life working together in harmony.

36. Not worrying about paying for the family vacation.

37. Not having to locate a good credit-counseling agency.

38. Not needing a reference for a good bankruptcy attorney.

Keep ahead, Fred

39. Never being behind on your mortgage.

40. Knowing your checks will never bounce.

41. Keeping financial records that work best for you.

42. Having all the resources to satisfy the IRS.

43. Experiencing the joy of living below your means.

44. Not spending your weekend having a garage sale to help pay bills.

Be in the know, Joe

45. Being able to prevent financial problems before they happen.

46. Knowing you can withstand anything financial life throws at you.

47. Knowing how to and when to revise your financial plan as your circumstances change.

48. Knowing the difference between wants and needs.

49. Knowing when you will have money enough to retire.

50. People ask you for financial advice so often you become the next Bankrate.com Debt Adviser.

Myvesta UK IVA Advice

Citizens Advice Bureaux Critisised By Own Regional Manager

stever@myvesta.org — 20060822

Citizens Advice Bureaux across the North West are being reorganised to cope with budget cuts at a time when a soaring debt crisis is placing greater demands on their services.

Services are under threat or are being scaled down amid calls by politicians and councillors for a more efficient and organised service.

In Manchester the city centre CAB came close to disintegrating after weak management left a gaping hole in its finances.

Its telephone counselling service now looks set to be suspended and the office shut down with services being relocated around the Manchester area.

In Lytham St Annes a bureau was closed down after failing an audit.

In Wirral two offices are under threat as managers review service provision across the district.

In Flintshire, North Wales, the CAB will have to renegotiate service agreements with the local authority as it grapples with a £49,000 budget deficit.

CABs in Bebington, New Ferry, Wythenshawe, and Withington – among the most impoverished areas in the region – are also threatened with closure.

Citizens Advice North West interim regional manager Nick Bussey said: “Where a bureau implodes, as almost happened in Manchester, it is always down to poor management and trustees, and an inability to adapt. Some of our North West managers are simply not up to the job.

Thrive

“We are now moving away from a situation where CAB are handed grants to one where they will tender aggressively for contracts from local authorities and primary care trusts. Bureaux which saw this coming and prepared themselves will thrive, while others will fail.”

Politicians are calling for a wide-ranging review of the way CAB services are funded. Wirral South MP Ben Chapman said: “The question is one of core funding and sustainability, and about the regional and national structures of Citizens Advice itself. It provides a crucial impartial service, particularly in deprived areas with high debt levels, and we need to protect it for the future. But we need to urgently examine how the service is funded and look at how it is structured to safeguard it for the future.”

The North West has 56 CABs which operate as separate charities and are members of the national umbrella group.

All depend on local authority funding, grants from the Legal Services Commission and cash from the Lottery and similar funds. Volunteers make up about 80 per cent of staff and advice is free and impartial. Forty-six have closed in the last decade under restructuring and now more services are under threat as reduced grants push some bureaux into a financial crisis of their own.

The problems have emerged against a background of spiralling debt, which is forcing thousands more clients to turn to CAB. Consumer borrowing has passed £1 trillion, while the average British resident owes more than £26,000, including mortgage debt.

In one case, advisors in Wigan supported a man whose £1,800 home improvement loan spiralled to £14,400 after he lost his job and struggled to meet repayments. Some clients are so desperate they threaten suicide in front of counsellors.

From next year, the Department for Trade and Industry will fund dozens of extra debt advisors, to be employed by CABs across the North West. But many bureaux only went for the contract after being assured full costs would be factored in and that they would not be left out of pocket and in even worse financial difficulties.

Salli Edwards, chief executive of Flintshire CAB, said: “The danger is that if core funding from local authorities and other sources continues to be reduced like this, there will be no one to deliver the services. If many bureaux are forced to close, what will be left?”

Cuts made last year in Preston were only reversed when councillors re-instated £22,000 of funding. South Lakes CAB has also found itself in difficulties as local authority funds were cut.

Critics claim the fragmented set-up of CABs is inefficient and unaccountable. Councillors in Fylde slashed funding when two bureaux refused to merge, and core funders are pushing offices across the region to reorganise as a condition of support. Cumbria County Council has promised to raise funding for financial advice by £15,000 to £329,000 in 2008 but expects a county-wide presence to be established.

CAB managers warn a system of one-year grants is creating instability and say a balance must be struck between efficiency and meeting community needs.

North-West Enquirer

Myvesta UK IVA Advice

Bankruptcy For Women Increases In The UK

stever@myvesta.org — 20060821

Many women are going bankrupt due to credit card debt and increasing household bills, figures showed this week.

The number of female bankruptcies has gone from 42% to 44% over the past year, according to accountants Wilkins Kennedy, which surveyed 1,200 bankrupts across England and Wales. Since 2002, the figure has risen from 32% to 42%.

Keith Stevens, insolvency partner at the firm, said if the trend continues at the current rate half of all people going through the bankruptcy process will be women by the end of the decade.

"It is difficult to see the situation getting any better because so many people are already teetering on the brink of the precipice," he said. "A modest rise in interest rates or a fall in income could be enough to tip them over the edge."

Mr Stevens said the problem stemmed from the fact that women's salaries have failed to keep up with their need to be financially independent. Research by Halifax shows the proportion of new mortgages taken out by single women has more than doubled in the last 20 years and now accounts for 23% of the total market.

"Women are taking on a much greater debt burden than they used to, but their income still lags behind," Mr Stevens said.

The Consumer Credit Counselling Service (CCCS), a charity that helps people unable to cope with their debts, said the proportion of women contacting the service for help had risen to 53.4% last year, up from 51.9% in 2003. The charity's founder, Malcolm Hurlston, said the organisation had also seen an increase in the size of women's debts, particularly among women between the ages of 25 and 30.

"Women have always made up a large proportion of our clients because they have traditionally been more prepared to seek help," Mr Hurlston said. He added that women have a greater capacity to borrow now than in the past, and so the likelihood of getting into trouble had also increased.

Last week, research showed that people in their 50s have the worst credit card debt problems, with one debtor owing a total of £412,000 on 57 credit cards.

The unnamed 56-year-old is the largest debtor on file with the CCCS, which said that although credit card spending has slowed since 2005, those over 53 were increasing their spending.

Meanwhile, recent government figures showed personal bankruptcy has risen year-on-year. The number of individual bankruptcy petitions filed in the High Court and county courts in England and Wales between April and June rose 10% to 15,796 compared with the same quarter last year, the Department for Constitutional Affairs said. The government Insolvency Service also said the number of people becoming insolvent in the spring had reached record levels.

The Guardian
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Claiming Back Payment Protection Insurance Fees (PPI)

stever@myvesta.org — 20060817

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

A large industry has developed to help borrowers offset the credit risk they face. A working party led by the Department of Trade and Industry concluded that PPI can “provide valuable protection against changes in a consumer’s financial circumstances”.

Industry estimates for the United Kingdom PPI market put the number of live policies at around 20 million, with between 6.5 and 7.5 million new policies being taken out each year. PPI premiums are said to total approximately £5.3 billion per year. In comparison, property insurance premiums total £8 billion and motor insurance £9.5 billion.

Anyone can lose their job, fall ill, or suffer bereavement or the breakdown of a relationship. A change in circumstances can lead to a dramatic and sometimes permanent, fall in income. For those people with outstanding credit agreements a cut in income raises the serious possibility of unmanageable debt.

The scale and extent of PPI does not necessarily mean that PPI products provide consumers with good value for money, or that the market is working well for consumers. Most borrowers purchase PPI linked to the credit product such as a loan, a hire purchase or consumer credit agreement. Borrowers enter into these secondary sales with little opportunity to shop around and no real choice. As the Financial Services Authority (FSA) has pointed out, there is a danger that secondary sales lead to customers buying products that are poor value.

Stories of the credit industry making large, even excessive, profits from PPI premiums and commission regularly appear in the financial press. For example, the Guardian reported that Barclays made £240 million from PPI sales in 2000/01, with a profit margin of 70 per cent on payments made by consumers. In 2004, the same newspaper revealed that Barclays made as much as 20% of all of its world wide pre-tax profits from PPI, with £7 in every £10 spent on PPI going straight on to the bank's bottom line. Lloyds TSB plc report income in 2004 from creditor insurance premiums of £114 million and commissions from brokering creditor insurance at £377 million.

Two different estimates suggest that PPI premiums are about four times the cost of providing cover. This implies that borrowers generally could be overcharged by as much as £4 billion per year for PPI cover.

Evidence suggests that both the sales process and design of PPI products fail to meet the needs of many customers and often just increases their indebtedness, particularly in relation to debt consolidation. Published figures suggest that the limitations of the policy have meant that customers could only make claims for just over a quarter of the debts which they believed were covered by the insurance policy.

A Citizens Advice Bureau in Greater Manchester reported that a woman with multiple debts had taken out a consolidation loan for £20,000 to deal with them. Later the client read the documentation and realised that she had actually paid £27,000, as the loan included payment protection insurance and that interest on the PPI ran at the same rate as the loan itself. When she investigated further she saw that her monthly repayments were £284pm over 300months, which meant that she would have to pay £85,200 over the course of the agreement. By this time, the period within which she could cancel the agreement had expired.

The above example is typical. Often the consumer is not even aware that they have bought PPI or they have been told that the loan is dependent on them taking out PPI, which the Financial Services Authority makes clear should never be the case.

In June 2005 Cardiff Pinnacle, part of the global banking group BNP Paribas, wrote to 2,600 policyholders telling them that their SalaryProtect cover would be terminated. The plan, designed to pay out if policyholders lost their jobs, was closed on 20th July. Customers were given only 30 days’ notice. Policyholders who tried to claim after July 20 were turned down automatically, no matter how long they had been paying their premiums. Pinnacle told customers it was no longer prepared to provide cover because it had been overwhelmed by claims.

Hire purchase, conditional sale and loan agreements are commonly sold with PPI, which is usually sold as a one-off premium added to the credit agreement. When consumers exercise their right to terminate the hire purchase or conditional sale agreement they are told that the PPI policy cannot be cancelled. The borrower usually pays a one off, up front PPI premium funded by additional borrowing charged at the main agreement rate. Lenders are refusing to terminate these ancillary loans or bring about the refund of premiums.

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Lenders Already Passing On Interest Rates Rise To Consumers

stever@myvesta.org — 20060813

Millions of homeowners are bracing themselves for higher mortgage repayments as lenders begin to pass on last week’s quarter point Bank of England base-rate rise.

Abbey, Halifax and Northern Rock and subsidiaries of Royal Bank of Scotland, including Tesco, the One Account and First Active, were among the first few lenders to announce that they would pass on the full 0.25 percentage points to borrowers with standard variable rate (SVR) mortgages or discounted deals.

A Halifax customer with £100,000 left to pay on a SVR will see his or her repayments go up from £675.21 a month to £690.91 — £188.40 a year.

For most SVR borrowers, the change will take effect from September 1. But new customers taking variable rates could start paying the extra as soon as next week. For the growing number of borrowers on tracker deals, the additional 0.25 percentage points will have already kicked in.

Borrowers with Norwich & Peterborough Building Society have been stung twice — the lender has levied the quarter point, despite already increasing its SVR by 0.19 percentage points on June 16.

But the impact will be felt most keenly by the legions of borrowers on interest-only loans. On a £200,000 loan, an interest-only borrower would see outgoings rise by £41.67 a month, or just over £500 a year. For a borrower with the same loan, making capital repayments, outgoings would rise by a more modest £28.57 a month, or £342.84 a year.

Melanie Bien, of Savills Private Finance, a mortgage broker, says: “This is especially tough on first-time buyers who have opted for variable interest-only deals to ‘save’ money.”

Even fixed-rate borrowers who thought they were immune from soaring mortgage costs could soon face higher repayments, as swap rates, the money markets that determine fixed-rate lending, have risen in response to the base-rate rise — and in anticipation of another one before the end of the year. Anyone coming to the end of their deal is being urged to snap up the last of the good value, short-term fixes.

Nick Gardner, of Chase de Vere Mortgage Management, another broker, says: “Anyone wanting to fix should do so as soon as possible.”

The lowest two-year fix still available is a 4.49 per cent deal from Alliance & Leicester, with a £999 fee. For remortgagers, Nationwide is offering a rate of 4.89 per cent, with free valuation and legal work and an arrangement fee of £798.

No lender has yet put rates up by more than 0.25 percentage points, but with some SVRs at 6.7 per cent, there is a danger that rates could cross the 7 per cent threshold.

But the overwhelming majority of lenders, including Barclays, which owns the Woolwich brand and HSBC, are yet to announce new rates. Darren Cook, of Moneyfacts, the price comparison service, says: “Lenders are being cautious. The smaller ones are waiting to see what the big players do, but we cannot rule out higher rises sneaking in later.”

There has been little consolation for savers. Only a handful of banks and building societies, including Halifax, Lloyds TSB and National Savings & Investments, have so far put rates up by the full 0.25 per cent, but most of these increases apply only to guaranteed accounts. Banks are yet to increase returns across the board.

Changes on most ISA rates are expected early next week, but most building society customers will have to wait until the end of the month to find out how, or if, returns will be affected. Janet Cane, of Moneyfacts, says: “The rise caught banks by surprise. Many have not decided how to respond.”

Over the past few months, savings rates have been slashed. Barclays, HSBC and Woolwich all cut ISA rates by as much as 0.45 per cent in June.

The Times
August 12th, 2006
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My Way Out Of A Debt Nightmare

stever@myvesta.org — 20060811

When the precipice loomed, she went over it at high speed. Already £80,000 in debt and having just set up in business, Deborah Taylor's bank bombarded her with loan offers.

She finally succumbed and applied for £24,000. Deborah, 43, vanished into the financial abyss, eventually running up debts of £134,000. 'It was a horrendous experience,' the web designer said. 'I felt as if I was in a bubble, screaming, and no one could hear me. I ended up on anti-depressants.'

Her way out was an individual voluntary arrangement - a type of insolvency in which borrowers pay part of their debts in return for having the rest written off and avoiding the stigma of bankruptcy. And thanks to Britain's credit binge, it is a booming business - 11,105 people went into an IVA in the past three months alone.

Deborah, from Portsmouth, says her IVA is a boon. She has repaid just under 20% of her debts to her bank and though she is having to sell her house, she is still relieved. 'I feel like a different person,' she said.

Going bust has long been seen as the preserve of entrepreneurs. Famous bankrupts include TV chef Keith Floyd. But massive debt is no longer just for wheeler-dealers and is becoming more and more common among ordinary shoppers who have overspent.

High Street banks last week wrote off billions in bad debts, with £2.6bn attributable directly to consumers. The banks claimed the rise was fuelled by easy bankruptcy laws and the boom in IVAs.

The number of IVAs could rise still faster under plans to introduce Simple IVAs - or SIVAs - within the next 18 months. At present, debtors must get agreement from 75% of their lenders to enter an IVA. An SIVA will reduce that to 50%, but only if debts total less than £75,000.

Patrick Boyden, personal insolvency partner at PricewaterhouseCoopers, said: 'SIVAs will mean more business for the 'IVA factories' - as I call them - and draw more people from the poorer end of the market into using IVAs.'

Many blame the rising number of bad debts on the banks for overlending. Paul Latham, finance director at insolvency advice group Debt Free Direct, said banks could not place the responsibility for growing bad debts on organisations such as the one he represents.

'The banks spend £300m advertising lending every year,' he said. 'Blaming us for bad debts is like cigarette companies blaming doctors for diagnosing lung cancer.'

Finbarr O'Connell, president of the Insolvency Practitioners Association, claimed the rise in the use of IVAs was actually good news for the banks.

'I think it is very much to be welcomed that consumer debtors are increasingly looking to use what has become a well-established route to reaching some sort of orderly settlement with their creditors, rather than simply throwing in their hand and going bankrupt,' he said.

Even so, there are fears of a looming scandal in insolvency advice. Financial Mail and This is Money reported in April on fears that people were being advised to enter into an IVA when in their own interests they would be better off going bankrupt.

An insolvency business earns no fees from recommending bankruptcy, but can earn up to £6,000 by arranging an IVA.

Perhaps surprisingly, Latham said: 'Like the pension business 20 years ago, there are people in our industry who are not giving the best advice, either for the debtor or the lender.

'Some advisers charge the debtor upfront to arrange an IVA, which is not refunded if no IVA is agreed. That should be banned.' At present, each insolvency practitioner is regulated individually by professional bodies such as the Law Society.

Daily Mail

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Borrowers Struck As Interest Rates Rise

stever@myvesta.org

The Halifax, Britain's largest mortgage lender, has already passed on last week's quarter-point hike in interest rates to its borrowers, lifting its standard variable rate (SVR) to 6.75 per cent from 6.5 per cent.

The increase means the monthly repayments on a £100,000 variable-rate repayment mortgage with the halifax have risen by £15 to £690. Repayments on a £250,000 mortgage are up by £39 to £1,727. For the growing number of borrowers on tracker deals, the additional 0.25 percentage points will have already kicked in.

Alliance and Leicester will also up its rates for existing borrowers by 0.25 per cent on September 1. The One Account, owned by Royal Bank of Scotland, was among the first to respond to the Bank’s quarter-point hike in interest rates last week.

The rate on its flexible mortgage went up 0.35 points to 6.3 per cent for loans accounting for more than 85 per cent of the property. The change was a tenth of a percent higher than the base-rate rise.

Borrowers with Norwich & Peterborough Building Society have been hit twice — the lender has levied the quarter point, despite already increasing its SVR by 0.19 percentage points on June 16.

Other lenders such as the NatWest are currently reviewing their rates but are expected to follow suit in the next few days. Nationwide is due to announce changes to its mortgage rates tomorrow.

The impact of the rate rise will be felt most keenly by borrowers with interest-only deals. On a £200,000 loan, an interest-only borrower would see outgoings rise by £41.67 a month.

Howard Archer, the Global Insight economist told Times Online: "A significant minority of people have borrowed to the hilt and small increases in interest rates can have a much more damaging effect than in the past.

"Interest rates are just one more thing weighing on borrowers who also have to deal with soaring utility bills, petrol prices close to £1 a litre and modest earnings growth."

Last week, figures showed that personal insolvencies rose almost 70 per cent to hit a new peak in the three months to June. Property repossessions also recorded a steep year-on-year rise, with the number of eviction orders increasing by 20 per cent in the second quarter from a year earlier.

Mark Sands, director of personal insolvency at accountants KPMG, now estimates a record 100,000 personal insolvencies in 2006.

James Cotton, of London & Country Mortgages, advised borrowers on high SVRs to move their mortgage to a cheaper provider. Ray Boulger, a spokesman for John Charcol, the mortgage broker, said those intent on locking in to the best fixed-rate deals had to move quickly. "If borrowers are adamant about locking into fixed-rate deals they should move quickly as lenders will put up their rates over the next few weeks," he said.

The Times, August 10th 2006

Growing UK Debt Affecting Divorce Rates

stever@myvesta.org — 20060810

According to a new report recently published by Debt Free Direct, debt that is acquired in the joint name of your partner now accounts for 28% of all personal bankruptcies in the UK.

Typically this debt is made during times when both parties to the relationship believe that the relationship will never end. More often than not, these debt has been made using joint credit cards, where the credit card has both a primary and secondary user. With divorce rates being three times higher among bankrupts, the message is clear: if you want your relationship to stand the test of time, then think very carefully before agreeing to have a joint credit card account.

Divorce increase due to credit card debtRecent evidence appears to show that uncontrolled credit card spending is now a major problem among younger women in the UK. It is not necessarily the case that women have less reason to control their credit card spending than men, but the daily situations that women in relationships face normally means they turn to their credit card to pay for household items more often than men.

Unchecked, however, and the end of the month credit card statement, which typically is in the man’s name, will likely cause a shock and possibly an ensuing argument over the amount being spent. Added to this is the fact women are far less likely to be in a position to financially get themselves out of the UK credit card debt trap without the help of the man. In some cases, concerned with the spiraling level of credit card debt means the man has to cut the woman’s access to the joint credit card off, with all the problems that follow such a move to follow.

However, even where men do not cut off access to the UK credit card, mounting credit card debt payments generally results in financial hardship of the male primary cardholder, which in turn can lead to credit card defaults and, finally, action being brought by the UK credit card issuer to reclaim the debt.

So far as the man is concerned, the woes he is experiencing here have primarily been brought about because of the UK credit card spending habits of his partner, not him. In turn, this puts intense pressure on the couple’s relationship and, unfortunately, more often than not this is now ending up in the divorce courts.

The obvious lesson to learn from this is if you are going to agree to have a joint credit card with your loved one, you need to be communicating with each other so that the other knows exactly how much is being spent on the card and so that you can mutually agree that you can afford the purchases being made on the credit card.

While mutual consent as to the amount of debt you are creating as a couple is no assurance that you won’t end up bankrupt or divorced, it should hopefully reduce both of these possible scenarios as each of you is clearly aware of what your financial position is and so there is less grounds on which to argue about how and who got you into the mess you are in.

Richard Smith
9th August 2006
http://myvesta.org.uk

Questions And Answers: Individual Voluntary Arrangements

stever@myvesta.org — 20060809

Consider the scenario – you're heavily in debt, struggling to meet repayments, don't want to lose your house and don't know where to turn.

If you were offered the chance to have the debt halved or even reduced by two thirds and be debt free within five years, would you say no?

Well that's what thousands of over-indebted consumers are doing by taking out an Individual Voluntary Arrangement

According to the Insolvency Service, over 11,000 people took out an IVA in the second quarter of the year – a record number. Lloyds TSB has blamed them for its rising level of bad debts, but what are they and how can people take advantage? This is Money's Michael Clarke answers your questions.

What Is An IVA?

IVAs were established in the mid-eighties as a vehicle for sole-trader businesses that had ran into financial trouble to cut their debts but wanted to avoid applying for bankruptcy. They are essentially a legal contract between lenders and a borrower to make an agreed monthly repayment. Over the past 20 years they have become increasingly used by consumers as a way of easing their debt burden. According to accountants PricewaterhouseCoopers, an IVA application is made every seven minutes.

How do they work?

For an IVA to come into force, 75% of the creditors have to agree to the proposal put forward by the individual's IVA practitioner. The IVA company will look at a person's income and outgoings and calculate how much they can realistically pay each month.

The IVA company will typically propose that the debtor pays back between 30p and 50p in the £1 and if the creditors agree, the IVA contract will last for five years. Interest will be frozen while the debt is being repaid and after the contract has ended, the individual will be debt free. During the contract the individual will not be able to apply for any credit.

Before the IVA proposal is put to the creditors, the individual needs to sign a 'statement of truth' about the financial circumstances, which needs to be read by a solicitor. A creditor meeting then considers the proposal.

Who are they suitable for?

In most instances, a good debt management plan will be sufficient to help a person tackle their financial problems. Most IVA companies claim that only around 3% of people that phone its call centres are recommended to proceed with an IVA.

However, if you have a regular source of income and are more than £20,000 in debt then they will consider your case. It's a misconception that only poor people apply for IVAs. In fact, a typical IVA client will be a young professional in a good job that has simply borrowed too much money. Clients will usually own their own home.

What if I miss a repayment?

It depends on the frequency of the missed payments. If you have one missed payment due to exceptional circumstances then the creditors may accept it as a one-off and proceed as usual. However, if the individual stops paying altogether, then they have broken their contract and the creditors can force them into bankruptcy. However, this can cost them up to £1,500, so often they will sell the debt on to a debt collection agency and the individual will be in a worse position than when they started.

What assets can I keep?

One of the key benefits of taking out an IVA over bankruptcy is that the individual's is safe from repossession. However, if you have a large amount of equity in your property, the creditor may still expect a certain amount to be remortgaged to help meet the debt. It is likely that they will only concentrate on your unsecured debts.

How does it differ from bankruptcy?

Bankruptcy means that a person is forced to sell assets and use the funds to pay off creditors immediately. You are also refused access to financial products for a period after bankruptcy. IVAs use ongoing income to pay off debts. As mentioned above, you also get to keep assets such as your house.

Unlike bankruptcy, an IVA is not advertised in the local press and does not exclude you from running a business or lead to many professions terminating your employment.

Dealing with debt

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What if my financial circumstances change during the period?

If your financial circumstances change, such as you inherit a large sum of money, then you will be expected to keep creditors updated and the may wish to make a change to the agreement to reflect the different circumstances. Likewise, if you lose your job, the agreement can be reviewed.

What companies offer IVAs and how much do they get paid?

By law, only Insolvency Practitioners are allowed to propose and manage an IVA and a number of firms have sprung up to service the market. The largest of which are Debt Free Direct and Accuma, both stock-market listed companies that have reported massive growth. IVA firms expect to make an average of £7,000 per client. They charge a 'nominee fee' of between £1,000 and £2,500 at the start of the contract and then a further £500 to £900 a year in supervisory fees. Although these fees are charged to the lender, the nominee fee will come out of the debtor's first-year payments.

People considering an IVA should research the practitioner thoroughly before proceeding as there have been cases of rogue operators in the industry recommending an IVA when a debt management plan or bankruptcy would have been more suitable.

What are Simple IVAs?

The number of IVAs could rise still faster under plans to introduce Simple IVAs - or SIVAs – by the end of 2007. At present, debtors must get agreement from 75% of their lenders to enter an IVA. An SIVA will reduce that to 50%, but only if debts total less than £75,000.

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

Michael Clarke, This is Money
8 August 2006

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Questions And Answers: Bankruptcy

stever@myvesta.org

Almost 15,000 people declared themselves bankrupt in the second quarter of 2006, a slight decrease on the first quarter but an increase of 32% on the same time last year. But is bankruptcy always the best option if you find you have borrowed more than you can afford to pay back?

What does bankruptcy involve, and should I consider it?

Bankruptcy is a serious step to take, and there are other ways of dealing with debt. If you are considering bankruptcy you should take advice from your local Citizens Advice Bureau (or similar organisation) or an insolvency practitioner.

The majority of your assets are handed over to a trustee, who controls them from that moment onwards. The trustee might be an official receiver (a civil servant and court official) or a licensed insolvency practitioner. In the initial stages of your bankruptcy you will deal with the official receiver

Their job is to find out as much as possible about what you own and what you owe, and then to make sure the people or companies to whom you owe money are repaid. You are then protected from your creditors, who can no longer pursue you for payment. You might have to make a monthly contribution to your debts, but that will be based on what you can afford.

It is not a cheap option, however. You will have to pay a deposit of £325 if you are making a debtor's petition and £390 for a creditors petition, plus a court fee of £150 (although the court will waive this in some circumstances, such as if you are on Income Support).

But after that you start with a clean slate?

Sort of. Your debts are effectively written off after bankruptcy, so for a lot of people it brings enormous relief. But it is not a decision to be taken lightly. Getting a mortgage or any other credit in future may be tough.

Does bankruptcy last forever?

No. Most bankrupts will be automatically discharged after a maximum of 12 months, rather than the two or three years it used to take. But a new regime of Bankruptcy Restrictions Orders (BRO) will impose tougher restrictions to protect the public and the commercial community from those whose conduct has been irresponsible or reckless.

In cases where conduct is found to be reckless, culpable or irresponsible, a BRO will last for between two and 15 years. For all bankrupts there are restrictions on obtaining credit of more than £500 without disclosing their status, trading in a name other than the one in which the bankruptcy order was made and acting as a director during the bankruptcy period. For those subject to a BRO these restrictions will apply for the duration of the order.

But after that period you're debt-free?

Yes, although discharge doesn't necessarily happen automatically. The courts can decide to postpone it if you do not co-operate with the official receiver or your trustee. Even after discharge, a record of your bankruptcy will be kept on your credit file by commercial credit reference agencies for the next six years, and during that time getting any sort of credit could be difficult.

Many of the irrelevant and outdated restrictions that currently apply to bankrupts and prevent them from holding certain offices are being removed. However, bankruptcy may affect a person's ability to work in certain professions and you cannot act as a company director without leave of the court.

I own more than I owe, so can I just hand over assets to the value of my debts and keep the rest?

Well, the new regulations do include a method of repaying debts from the bankrupt person's income which does not require a court order, but that will still last for three years.

And there is a fast-track voluntary arrangement system, which will mean a bankruptcy order can be annulled in return for greater or quicker payments to creditors.

But when it comes down to it, bankrupts still risk having most of their assets sold for the benefit of creditors. That means you may have to give up your car if you don't use it for work, any expensive jewellery...

Oh dear. Still, whatever happens, they can't take my home, can they?

I'm afraid they can. If you own your home, the official receiver can sell it off to go towards paying your debts. If you have a mortgage and can't meet the payments, the lender might be allowed to sell your home.

If you have a partner or a spouse, they will be encouraged to buy your half of the equity in the property from the receiver. But if they can't do that the trustee will have three years to deal with your home.

If you rent your home, the receiver clearly cannot repossess, since the property is not yours. However, they can tell your landlord that you are bankrupt.

I've been paying into a pension for a few years now. They can't touch that, can they?

A trustee cannot usually claim a pension as an asset if your bankruptcy petition was presented on or after 29 May 2000, as long as the pension scheme has been approved by the Inland Revenue.

What about IVAs? I've heard they allow you to just dump your debts and get away scot-free.

Well, the banks certainly aren't happy about the sharp rise in business which IVA (individual voluntary arrangement) companies have seen in recent years - drummed up, according to them, by "misleading" daytime TV adverts.

IVAs were designed for sole-trader businesses as a halfway house to avoid bankruptcy. They are essentially a way of making your "best offer" to creditors; if 75% of them accept the offer, it becomes legally binding on all of them.

So I'll end up losing less than I would if I filed for traditional bankruptcy?

Actually, some people are surprised at the amount they are expected to repay under an IVA, and opt for bankruptcy instead. On the other hand, your house can't be repossessed if you opt for an IVA.

So how should I decide whether an IVA is my best option?

Go to a debt counsellor first for advice

So there are no easy ways out of bankruptcy, then?

No. Bankruptcy is a very serious option and should not be taken lightly.

Sunday August 6, 2006
Guardian Unlimited

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Bank Hints At Further Interest Rate Rises

stever@myvesta.org

The Bank of England has hinted that UK rates may have to rise further in coming months in order to keep inflation on target at 2%.

In its quarterly inflation report, the Bank said inflation could rise as high as 2.7% without a rate rise.

But while the Bank said it had raised its expectations for economic growth, it warned that high energy bills still posed a risk.

The news comes a week after the Bank raised rates to 4.75% from 4.5%.

The Bank's governor, Mervyn King, said the Monetary Policy Committee had opted to raise rates "against a background of firm growth and limited spare capacity and with inflation likely to remain above target for some while".

"It [the MPC] remains ready to take whatever action might be necessary in the future," he added.

However, experts said that uncertainties raised by the report made it unlikely that the Bank would opt for more than one more rise in rates.

There remains great uncertainty about future energy prices
Mervyn King, Bank of England

"There is a warning that rates may have to rise, but it will depend on the domestic and worldwide economy over the next few months," said Investec economist Philip Shaw.

Latest figures from the Office for National Statistics (ONS) showed Consumer Price Index inflation rose to 2.5% - its highest level since similar records began in May 1997.

Higher fuel bills, as a result of rising oil and gas prices, were behind much of the rise.

Looking ahead, the Bank said it expected soaring energy prices, as well as rising university tuition fees to push inflation above its 2% target.

The Bank said the pick-up in inflation was "somewhat more marked" than in its May report.

"There remains great uncertainty about future energy prices, especially in the light of political tensions in the Middle East, and inflation is likely to be volatile over the coming months," Mr King added.

The bank has had to balance controlling inflationary pressures against a possible slowdown in consumer spending with its rate rise.

But the UK economy has put in a strong performance recently, recording its strongest growth in two years between April and June, while the housing market has picked up significantly over the past year.

The report forecast that the UK economy would continue to recover as consumer spending picked up, investment recovered and trade provided a boost.

The forecast came despite figures, released earlier on Wednesday, showing that the UK's trade gap with the rest of the world had narrowed less than expected as both imports and exports fell.

The Office for National Statistics said that the world trade gap narrowed to £6.46bn in June from an upwardly-revised deficit of £6.98bn in May - against forecasts of £6.2bn.

BBC News, August 9th 2006
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Response to Insolvency Figures Today - Advice From Citizens Advice

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Citizens Advice, the national charity, has responded to today’s figures on the number of people of became insolvent during the second quarter of 2006 with advice for people in debt. The figures show a 66% increase on the same period last year.

Teresa Perchard, Director of Policy for Citizens Advice commented:

“We are not surprised by today’s figures as we have seen an increase in the number of people coming to us with debt problems. We would say to anyone who is in debt – don’t panic, but don’t ignore the problem. Let creditors know that you are having problems – they should be sympathetic and helpful. Look at your income and expenditure – don’t just try and borrow your way out of debt. What must be clear is what it will cost you and if you can really afford it. You can get free advice at www.adviceguide.org.uk or by visiting your local Citizens Advice Bureaux.”

A report published by the charity recently called Deeper in Debt revealed that CAB debt clients owe an average of £13,153 - almost a third more than they did three years ago, and the equivalent of 17.5 times their total monthly household income. It will take them an average of 77 years to pay off the money they owe at a rate they can afford.

Consumer credit debt problems brought to Citizens Advice Bureaux have doubled over the last eight years, accounting for three-quarters of the 1.25 million new debt cases dealt with by the national network last year.

Earlier this year the Government awarded Citizens Advice £33 million to provide more face-to-face debt advice in England and Wales.

Ten top tips for dealing with debt, borrowing and budgeting:

1. If you are in debt, don’t ignore the problem. Tell your creditors if you are having problems paying them.
2. Work out how much you think you can realistically afford to pay back to creditors.
3. Pay the most important things first like mortgages, rent, council tax, and gas and electricity, not just the person who shouts the loudest.
4. Check your income and see if there is anything you are entitled to that you are not getting, such as benefits or tax credits.
5. Be wary of borrowing more money to pay off existing debts.
6. When looking at borrowing money, spend time shopping around, researching what is on offer and getting advice. Never borrow money on the spur of the moment. Always look at the total amount you will have to repay.
7. Always try and pay of at least 10% of your balance every month on your credit cards.
8. Try and save something every month and allow for planned spending in your budget, such as Christmas and holidays.
9. Look at your income every time there is a change in your income or any other change that affects your finances.
10. If you do get into difficulty, seek free advice.

* Explanation of debt remedies:

Bankruptcy - is one way of dealing with debts you cannot pay. Bankruptcy proceedings free you from overwhelming debts so you can make a fresh start, subject to some restrictions; and make sure your assets are shared out fairly among your creditors. In England and Wales it costs £475 to go bankrupt. In most cases you will be discharged from bankruptcy within a year and, with a few exceptions, any remaining debts will be written off.

County court administration order - If one or more of your creditors has obtained a court judgment against you, the county court may make an administration order. Administration is a court-based procedure whereby you make regular payments to the court to pay towards what you owe your creditors. Your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly repayments. You do not have to pay a fee for an administration order but the court will take a small percentage from the money you pay towards its costs. The government is considering changing the rules for administration orders to increase the debt limit to £15,000 and require debtors to have at least £50 per month available income after essential expenditure.

An Individual Voluntary Arrangement - is a legally binding procedure which allows you to pay off your debts over a number of years. Some of the debt may be written off and you may be able to keep assets like your home. An individual voluntary arrangement begins with a formal proposal to your creditors to pay part or all of your debts. You need to apply to the court and you must be helped by an insolvency practitioner. Any agreement reached with your creditors will be binding on them. Insolvency practitioners charge fees to set up proposals and monitor the voluntary arrangement.

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Will I Lose My Home In Bankruptcy ?

stever@myvesta.org — 20060808

Extracts From The Myvesta UK Forum:

Question: Will I Lose My House In Bankruptcy

Hi, I am considering bankruptcy, but have conflicting advice regarding my home. I notice on a lot of the advice sites on here, it says you will have to sell your home, and will be bankrupt for 2 years. As I couldn't find an answer, I phoned the official receivers office and he said, they are not in the business of making people homeless, and I would be bankrupt for a year as they understand some people have got into difficulties but should I go bankrupt again that would be a different story second time around.I also asked about my car which is a K reg cavalier and he said why would he take that when I needed to get to and from work.

Can you please advise me, did I get an exceptionally nice official receiver or has some of the information on these sites not been updated as he said it was new law from April 2004.

Thanks

Answer:

Hi there,
I think the advice given to you by the Official Receiver is sound basically. If there is very little or no equity in the house then there is no benefit in the OR looking to sell the property (legally there needs to be more than £1000 in equity value to obtain a repossession order anyhow)

Equally with your car, if it is of low value and you need it to get to and from work etc then it also makes no sense to force sale of the vehicle.

Can I Keep My Car If I Go Bankrupt?

Hope this helps!
_________________
Kind regards

Sean

For Online Bankruptcy Advice In Video Clip Format - Click Here

Myvesta UK - "We Can Help!"

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Personal Insolvency Problems

stever@myvesta.org — 20060807

Britain's debt crisis deepens as personal insolvencies rise almost 70 per cent to hit a new peak.

Figures for the three months to June rose 10 per cent on the previous three months and 66.3 per cent from the same period a year ago.

Mark Sands, director of personal insolvency at accountants KPMG, said: “Pressure could mount further as consumers face higher energy bills and rising interest rates.

"We predict a record number of personal insolvencies of 100,000 in 2006 and we
think the figures mean someone is entering formal insolvency every minute of the working day.”

Accountants Grant Thornton said insolvencies were "spiralling out of control" and predicted worse to come, with the level of house reposessions set to rise and banks tightening their lending criteria.

Mike Gerrard, head of personal insolvency at Grant Thornton, said: "Personal insolvencies have hit the roof and carried on rising, reaching an average of almost 9,000 per month when just five years ago they averaged 2,500."

According to official figures released today by the Government's Insolvency Service, 26,021 people became insolvent in England and Wales during the three months to the end of June.

News of the dramatic rise - for the second quarter in a row - comes after the Bank of England yesterday increased the cost of borrowing by 0.25 per cent to 4.75 per cent. The move was the first time the Bank had upped interest rates for two years.

While designed to head off inflation, the rate rise puts pressure on mortgage repayments for millions of households.

Today's figures also come as concern mounts that the nation's £1 trillion consumer debt bill is becoming increasingly unsustainable.

The Insolvency Service revealed that 11,105 individuals filed for Individual Voluntary Arrangements (IVAs) in the second three months of this year, up 153.2 per cent on the same period last year and 34.9 per cent compared with the January to March quarter.

Gaining an IVA means borrowers do not have to service their debt obligations in exchange for agreeing to pay off a set sum each month.

The lax new laws on bankruptcy have been blamed by leading high street banks this week for sparking a sharp increase in their provisions for bad and doubtful debts.

Leading high street banks HSBC, Barclays, HBOS and Lloyds TSB this week all reported double-digit percentage increases in impairment charges for consumer loans gone wrong.

Mr Gerrard, who also predicted that banks could further tighten their lending criteria, said: "What is of greater concern is that such [insolvency] rises have developed within a relatively benign economic context.

"Without wanting to be overly gloomy, it is undeniable that recent economic factors such as the rise in unemployment levels, ever increasing utility bills and, since yesterday, higher interest rates will all play a part in tipping yet more people over the edge and adding to the problem."

The number of companies going into liquidation fell 4.9 per cent from the first to the second quarter , to 3,265, the Insolvency Service said.

Howard Archer, chief UK and European economist at Global Insight, said today's figures "highlight the fact that many people have borrowed to their limits".

"With unemployment continuing to rise, utility bills soaring, many home owners stretched to the maximum and debt bills at record high levels, it seems highly likely that individual insolvencies and mortgage repossessions will climb markedly further over the coming months," Mr Archer said.

"This danger has been magnified by the Bank of England's raising interest rates this week."

The need for heavily indebted borrowers to improve their personal finances will be a "significant constraint" on consumer spending for some time to come, Global Insight said.

Property reposessions also recorded a steep year-on-year rise during the second quarter, according to separately released figures from the Government's Department of Constitutional Affairs today.

In the three months from May to July, the number of eviction orders was 22,254, according to the Government. This is up 21 per cent on the second quarter last year and slightly higher than the first half of this year. Half of those orders were suspended.

This followed the issue of 33,180 summons after borrowers failed to keep up with debt repayments. This figure was 17 per cent higher than the same period last year.

Figures for the number of houses actually repossessed are not yet available for this year but there has was a sharp rise last year, to 10,250, from 6,000 in 2004.

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Bad Debts Are A Result Of Poor Lending Not The Promotion Of Insolvency Services

stever@myvesta.org — 20060805

So the cost of borrowing is rising for the first time in two years. The Bank of England's Monetary Policy Committee announced on Thursday that it would raise base rates from 4.5 to 4.75 per cent. Leading mortgage lenders have already signalled that they will pass the increase on to customers. A borrower with a £150,000 mortgage, say, will now pay an extra £30 a month.

A rise in the number of people struggling to meet debt repayments is bound to follow. There are already signs that the hangover from Britain's borrowing boom is worsening: announcing half-year results this week, HSBC, Lloyds and Barclays all revealed sharp increases in their provisions for bad debt.

Naturally, the banks blame everyone but themselves for this problem. Lloyds, for example, is scathing about the firms that sell individual voluntary arrangements (IVAs), a type of insolvency that enables borrowers to agree repayment plans with lenders.

The growth of IVAs and the relaxation of some of the punitive measures imposed on full-blown bankrupts, Lloyds suggests, have encouraged borrowers to take on too much debt, in the knowledge that there will be an easy way out later.

The argument just does not stack up. Even leaving aside the question of whether bankruptcy and IVAs are an easy option - debt advisers and consumer groups say they absolutely are not - surely it's up to the banks to be a bit more careful with their money?

Faced with the realisation that it has lent too much money to customers who now can't pay it back - Lloyds's bad debt provision in the UK has risen to a whacking £632m - the bank says someone else is at fault, as if working out who you can safely lend money to is not a basic skill in banking.

Not that repayment defaults have sent Lloyds into crisis; it still made a first-half profit of £1.78bn. The figures at Barclays and HSBC were, respectively, £3.6bn and £6.7bn.

And that's the rub. As long as our banks go on making such huge profits, they don't have to worry too much about even large bad debts. They have no reason to be more responsible in their lending decisions, particularly when there are other people to blame when the victims come to light.

Meanwhile, if you're concerned about rising interest rates, take action. Most economists think this month's rise will be a one-off for this year at least. But there is a minority view that rates could increase further.

If higher rates would leave you struggling to repay your mortgage, it's worth fixing what you pay now. The cheapest fixed rates are currently slightly more expensive than the best variable deals, but that's a small price for the certainty your repayments will remain affordable.

The Independant
August 5th 2006

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When Your Credit Rate Is Poor You Will Pay More In Interest Rates

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Do the banks know something we don't? The multi billion pound profits announced by all the major banks this week follow a sustained price war in many of their key markets - particularly the unsecured loan business, where interest rates are at an all-time low.

The trick that squares this circle is that only a few borrowers pay the lowest rates. Does a loan costing 6 per cent sound too good to be true? Unless you have a perfect credit rating, it almost certainly is. Save & Spend research reveals that four out of five loans on offer today are priced according to borrowers' personal credit histories - consumers with a bad credit report could end up paying 13 per cent or more.

Take the current best three buys listed by market analyst Moneyfacts: Moneyback Bank (5.6 per cent on a £10,000 loan, over five years), GE Money (5.7 per cent) and Northern Rock (5.7 per cent). In each case the headline interest rate is subject to credit rating. Most of the big banks - including Barclays, HSBC, Halifax and Lloyds TSB - offer headline rates that vary according to personal history.

Banking has gone the same way as insurance - what you pay is related to the banks' view of the risk you represent. Two years ago, 56 per cent of lenders used personalised lending rates - today that figure is 81 per cent, according to calculations made for The Independent by the price comparison service uSwitch.

Not only does this illustrate the importance for borrowers of looking after their credit status (see right), it also produces a Catch-22. Personalised interest rates mean there are real benefits from comparing rates available. But the process of seeking out and comparing interest rates can damage your credit rating, reducing your chances of being offered the best deals. Lenders assume a history of loans applied for but not taken up is an indicator of bad risk - new applications are then more likely to be rejected.

"You go into the branches of certain banks that advertise loans and you sit down and provide all your details - and it is only then that you will be told what you would actually get," says Cristina Rebollo, a spokeswoman for uSwitch. "By that time you have a 'footprint' on your credit score which means you can't shop around."

Not only do borrowers face higher rates than advertised, but lenders are also becoming more likely to reject applications. "Lenders are getting tough with credit - our research shows 3.5 million applications rejected over the past 12 months," says Sean Gardner, chief executive of analyst MoneyExpert.com.

Some online intermediaries - including MoneyExpert.com and MoneySupermarket.com - have launched web-based calculators to assist consumers assess their likely credit status, and identify the most competitive products available.

But the calculated credit rating is based on information provided by the individual borrower, who may omit, or be unaware of, information held by an agency. An agency's credit report could be significantly different.

Alexander Cowen Wright, a spokesman for Moneysupermarket.com, acknowledges the weakness. "It's a complex field, that we are trying to simplify," he says. "But we do give guidance on what consumers are more likely to be accepted for, though this is not guaranteed."

As he says, this is not necessarily just about providing lenders with people with the best credit record - it may be those who fit in other ways lenders' market positioning and preferred customer profile: "There are certain drives from lenders from time to time to attract a different type of customer and even those with a good credit rating might not fit."

Using the online credit calculators is helpful, but it is safer to check the actual credit status with one of the agencies themselves. Then the shopping around can begin in earnest - but try to make sure you know what you will be offered before you formally apply for the loan.

How to get the best possible credit rating

* Make sure you are on the electoral register.

* Check your credit report with at least one of the three main agencies: Experian (0870 241 6212), Equifax (0845 600 1772) and Call Credit (0870 060 1414). Individuals can obtain copies of their personal credit records for £2. Credit reports can be obtained online from www.moneysupermarket.com and www.moneyexpert.com.

* Challenge any information held by an agency that you believe is wrong or misleading, requesting that it is deleted or that your short note of explanation is inserted.

* If you are shopping around for the best loan or mortgage, demand a quotation search from the lender - not a loan offer. A potential lender seeing a 'footprint' of a string of loan requests is likely to assume the worst.

* Protect yourself against identity theft by looking after, or carefully destroying, paperwork, including old letters with your address.

* Pay your bills on time.

* Set up a direct debit to ensure you meet the minimum repayment on your credit card each month - even if the statement gets lost in the post.

* Don't ignore debts - if you have problems, reach agreement on making staged repayments rather than going into default.

The Independant
August 5th, 2005
http://myvesta.org.uk

Massive Profits Meets Record Levels of UK Credit Card Debt Provisions

stever@myvesta.org

Who says that running a UK credit card company is not a profitable business? Who argues that the risks associated with right-off for bad credit credit card users makes the business of credit card a risky one?

Well, however they are should take a look at some of the profit figures being published by many of the UK leading lenders this month! Several billions of pounds profit and record levels of credit card debt provisions tells the story that running a credit card business is very profitable indeed thank you very much.

The simple fact is that UK credit card issuers charge some of the highest rates of interest and fees in Europe.

Given that 2 out of every 3 Britons will carry-over a credit card debt each month, and that a majority of those who do carry-over a credit card debt will only pay the minimum repayment amount, and it’s not hard to see how UK credit card issuers have a license to print money. Is it any wonder then that we now have the option of over 1,000 credit card issuers to chose from?

In reply to most UK card issuers claims that many of their cardholders are in default, the answer appears to be clear – yes, they are. However, they’re not sufficiently in default to warrant any significant note being made on their UK credit rating report and with so many of us acutely aware of what the effect of having a bad credit rating will have on us, nearly all of us will do anything we can to make sure this is avoided.

That means paying the minimum repayment to each credit card issuer and then using the available balance each month to survive. The robbing Peter to pay Paul syndrome. And guess what? UK card issuers love this type of credit card user because we fit the bill of what makes a nice fat profitable customer. No wonder then that this year has been such a profitable one for the UK credit card industry.

The only question remaining then is how the latest shock rise in interest rates is going to affect this already precariously balanced juggling act of paying bills and trying to survive. It could well be the case that many more of us in the UK become credit card defaults in the next 12 months – and therefore UK credit card issuers would do well to provision for this.

Richard Smith
5th August 2006
http://myvesta.org.uk

Credit Cards Are A Girl's Best Friend: The Motto Of A Generation In Debt

stever@myvesta.org — 20060731

Young women are running up record levels of debt, chasing a celebrity lifestyle they can't afford. It even has a name - Madame Bovary syndrome. Is the answer will-power or psychiatric help? Katy Guest reports

Hands up those who went out for a bit of retail therapy yesterday. Saved a fortune on a half-price top that looks just like the one Sienna Miller was wearing in last week's Grazia. Exercised the plastic. Splashed the cash.

Hands up those who felt a rush of adrenalin when the cashier logged up the total. And who kept their purchases a secret? Hands up those who are in the red.

Do you still have your hand up? Are you addicted to shopping? It sounds self-indulgent to put the word "shopping" next to the word "addiction". It is the kind of thing footballers' wives giggle in interviews about how they could not be seen in public without the latest Balenciaga bag. But when you consider that four out of five young women spend more than they earn, or that many are thousands of pounds in debt, it starts to sound as if binge spending is spiralling out of control.

These alarming statistics come from a survey last week by the women's magazine More. It showed that women between 21 and 25 have an average £3,830 in credit-card debts and most never save. More than half still live with their parents, and the magazine's editor, Donna Armstrong, says: "The idea of a mortgage is a distant dream." Instead, they aspire to the lifestyles of celebrities and keeping up with the Joneses, "shopping and partying with their friends". Sixty-five per cent of them dismiss the idea of a pension as a joke.

"So what?" they would say. They are young, carefree and have dozens of store cards burning holes in their pockets. What is more, it is important to keep up, and we do not all have the sort of daddy-funded resources enjoyed by Paris Hilton, style icon to many young women. "My friends and I graduated six years ago," says Gemma, 27. "Somehow, they have all ended up in much higher-paid jobs than me. I don't want to be the only one who can't go on weekends away or refuses to buy a round just because everyone has switched to champagne. So I put it on the Visa. Then I don't have to think about paying it off."

There is a dark side to the shop-lit, adrenalin-induced buzz of shopping till you drop, and it is highlighted in a disturbing new drama called Shiny Shiny Bright New Hole in My Heart on BBC2 this Wednesday. Nathalie is a personal shopper with a rich client. They become friends, drink together and shop together, but when Nathalie starts to think she is entitled to the same lifestyle, and gets in debt trying to keep up, her friends melt away.

The dangers of overspending in an effort to keep up with celebrities and mates in this way have become such a common problem that it has been dubbed Madame Bovary syndrome, after Flaubert's profligate and doomed heroine. But Dr Robert Lefever, founder of the Promis recovery centres, and a consultant for the drama, warns that before you start blaming your debts on a glossy new syndrome, it is important to distinguish between frivolous overspending that requires a bit of old-fashioned self-discipline, and a deep-rooted psychological problem.

"Addiction and depression are the same thing," he says. "People are born with a tendency to be depressed, with a sense of inner emptiness. And sometimes they discover the magical effects of various substances or of some processes - shopping, work, gambling - that make them feel temporarily better. And they don't want to give them up. If they use alcohol, for example, we call them alcoholics. But there is another category of problem drinkers, whom we call idiots. The same goes for overspending. Some people drink or shop to excess because they think it is fun. Addiction is a problem that needs help. If you are an idiot, we just have to say, 'Go ahead, but you will face the consequences.'"

Genuine shopping addiction is, he says, often found in people with eating disorders, because both are due to a problem with self-nurturing. There are as many women affected as there are men. "But men tend to buy books, computers, sports and gardening equipment, and women tend to go for food and clothes." At the Promis Centres, they try to help, using the 12-Step Programme.

At the National Debtline, a free, confidential and impartial advice line, they try to help in more practical ways. Their callers come from all backgrounds - people on benefits and very high earners, says a spokes-woman. Just over half are women, 40 per cent are 25 to 35 and 49 per cent are in full-time employment. What they all have in common is that they are out of their depth.

"Our calls are increasing every year, as are those of other advice agencies," the spokes- woman says, because debt has become more accessible and acceptable. It becomes a problem for three main reasons: when people on low incomes lack the financial flexibility to negotiate an unexpected outlay; when a borrower loses their job or becomes ill; and when people over-commit themselves, believing they can manage a debt that then snowballs out of control.

Dr Joan Harvey, a senior psychology lecturer at Newcastle University, is well aware of how these things happen. "People living at home have high levels of disposable income but no sense of saving for the future," she says. "People who are young now are going to be very poor in old age because they are not saving for pensions.

"Society has changed. If you go back 40 years, girls between 16 and 25 didn't have the money or the availability of debt. There wasn't the attitude and the experience of instant gratification. We are not looking to the future."

She too believes that a genuine addiction is something different. "People with a problem spend more because their self-esteem is low and they need a boost," she says. "We describe them as having a high external locus of control; they believe other people control what happens to them, and they are very susceptible to peer pressure. Add to that all of the tricks shops use to make people spend more money and this is going to start to collapse on people."

The hard part, Dr Lefever points out, is that, unlike addictive substances such as alcohol or drugs, shopping is almost impossible to avoid. "Unlike an alcoholic, who can never drink sensibly, compulsive shoppers have to shop, so they have to learn to do it in the same way that other people would."

As a reformed addict, he knows the temptations only too well. "I would go into Hamleys, start at the top and systematically clean the place out. Now I don't go into places where I know I would be at risk, exactly the same as if I were addicted to a drug."

Sally Hawkins, who plays Nathalie in the BBC drama, has changed since she researched the role. "I spent a few days trailing around the shops and getting into her head and it was overwhelming," she says.

"The colours, the music, the smells, the way they fold the clothes, the sales ... You're basically buying into that world, that sparkly, shiny existence. That escapism is exactly what it's about."

ANNA MILLER, 25, MEDIA WORKER: I work, I want nice things and I deserve them - now

I don't think I have a psychological "shopping problem", but maintaining the lifestyle you envisage for yourself is an addiction, and there will always be another credit card to pay for it. I was born into a generation that has never had to wait for anything. It's all about going out, having a good time, enjoying your youth, instant gratification and now, now, now. I'm bad with money because if creditors are happy to give it to me then, unfortunately, I am happy to spend it.

I owe £23,500, including four credit cards, a student loan, an overdraft and two personal loans taken out during university. I earn £1,600 a month, £900 of which goes straight into paying off my debts, leaving me with £700 a month to pay for train fares, phone bills, going out and clothes; and the figures just don't add up. I spend more than I earn every month.

I used to live in a lovely shared house in Brixton with three other friends, but when my credit card payments became too much for me to manage I had to move back with my parents in Reading. I had such a great London lifestyle and could do anything I wanted - bars, gigs, clubs, parties, shopping - which was probably the root of my problems.

About a year ago my debt got so bad I wouldn't check my bank statements, I couldn't sleep and it started to affect my health. I certainly didn't predict that at 25 I'd be back living at home, but that is the sacrifice I've had to make.

My justification for spending is that I work hard and therefore I deserve nice things. I want to be able to afford things that project the image of the woman I want to be - the great wardrobe, the car and the nice house - but at present, these thing are beyond my means.

I'm not deluded and I know buying those skinny jeans is not going to make me look like Kate Moss, but why shouldn't I have them? I'm just as capable of buying them as she is, because I am a successful woman and I work hard.

I shop at lunchtimes and after work, at least twice a week. I've got a real problem with shoes and sales. If there's a sale sign in the window I'm in there. It's a false economy because I know I don't need these shoes but they're only a tenner, then I'll buy a skirt because that's only £15, then a necklace to match. Before I know it, I've got a £90 outfit.

But my biggest problem is the amount I spend on drinking and seeing my friends. I hate the thought of missing out on what could potentially be an amazing night. I go out a couple of nights for drinks and to the cinema, something like that, and I'll spend £10 to £15. On a typical Friday night, I'll spend £10 in the pub with workmates then I'll meet friends in Revolution and spend £18 on cocktails. Entry to clubs and drinks usually cost about £20 with £21 on top for my taxi home, so a total of about £70. Saturday will be quieter but I easily spend £40 more.

My generation is caught up in a spending bender. When someone's saying, "Here you go, don't worry, have £20,000; you've been approved", it's a bit like smoking in the playground. They just push it on you until you say, "Oh all right. If everyone else is doing it." Our parents' generation have a much better attitude to money, but my generation is spending like mad because the economy's so good and we've never had to worry about feeding our families through a recession.

I'm just the same as everybody else my age. We're all trying to get ourselves out of debt but none of us is prepared to sacrifice our lifestyles for it. Now I've moved home I want to seriously start getting rid of my debts and saving for my own house. I know the value of being more careful with money now, but I'm not prepared to put my life on hold while I do it.

Anna's name has been changed. Interview by Sarah Harris
The Independant

http://myvesta.org.uk

Are The Cracks Starting To Show In The Adverse Home Loan Market ?

stever@myvesta.org — 20060727

There was a time when bankrupts and serial bad debtors had little chance of climbing on to the housing ladder, either in Britain or America. These days they can call up any number of "sub-prime" lenders eager to cobble together a mortgage - at a fee - which is then packaged with hundreds of other loans into a security for sale to willing funds or institutions.

It is a lucrative trade so long as the economy is humming along and house prices are pushing ever upwards, earning lenders an average 1.2pc margin over cost of capital compared with 0.2pc for normal mortgages. But, like canaries down a mine, these types of mortgages are the first to tell us when economic oxygen is running low.

The air is thinning a little at Rooftop Mortgages, a sub-prime lender owned by Bear Stearns that specialises in the "heavy adverse" end of the market where risk is highest. A third of its borrowers are in arrears on debt payments.

Rooftop has had to dip into funding reserves twice to maintain its safety cushion on a £125m mortgage security - known as Farringdon Mortgages No 1. It drew £216,187 from its £1.37m reserve fund in April, followed by a £97,000 withdrawal last week. An informed source said that, once other parts of Rooftop's £1bn business were taken into account, the arrears rate was similar to other sub-prime lenders.

The rating agency Fitch has already downgraded three sets of Farringdon Mortgage notes, warning this week that it is on look-out for any signs of further rot.

Stuart Jennings, the agency's head of mortgage-backed securities, said borrowers were slowly sinking under the weight of debt. "Unemployment is creeping up along with council tax bills and higher fuel prices, while the interest rate rises in 2003 and 2004 are kicking in now with a lag, and it's all catching up with people who have been struggling to cope for months," he said.

Fitch is also keeping a close eye on Kensington Group which suffered a share-price crash this month after revealing that the number of borrowers in arrears of over 90 days had reached 9.6pc, and rising fast.

Not all sub-prime clients are bad debtors, or course. Many are self-employed, such as contractors and artists with roller-coaster incomes, all too often denied mortgages in the past.

But what is disturbing is that these arrears are rising at the peak of the global economic cycle, after four years of roaring growth driven by China and India.

Given the time-lags in monetary policy, interest rate rises by the big three central banks of America, Europe, and now Japan, are only just beginning to bite

Most analysts now expect the US economy to soften early next year, and a disturbing number predict a full-fledged recession.

The implications are grim for a British economy levered to the hilt with £1,158bn in household debt, an all-time high of 101pc of GDP. UK families are already showing signs of crumbling credit-worthiness even before the global trouble starts.

Insolvencies of all kinds in England and Wales rose 73pc in the first quarter year-on-year to the record level of 23,351, according to the Insolvency Service. Court orders for home repossessions jumped by 57pc in the first quarter to 21,997.

But the booming sub-prime sector has grown so fast - rising from nowhere a decade ago to 10pc of the UK's £290bn mortgage market - that it could become a major headache in its own right.

The Financial Services Authority said it was watching for signs of stress, concerned that the sub-prime segment had not yet been tested by a housing slump.

"There is a possibility that the current rates do not correctly price the risk of a downturn," it said. The FSA is preparing a report on the sub-prime risks in the second half of the year.

In the US, where new-fangled mortgages are all the rage, the Federal Deposit Insurance Corp warned in a fresh report this week that mortgage lending was primed for trouble. "The growing popularity of non-traditional products may have moved the mortgage credit cycle into uncharted territory. Rising loan volumes, loosened underwriting standards, and untested products raise concerns about future credit losses," it said. "Despite favourable delinquency and default trends thus far, the current rising interest rate environment, combined with cooling home price appreciation, will limit borrowers' options when they face large monthly payment increases." The US government is concerned about the rush towards floating-rate mortgages, a break with US tradition. Record numbers of borrowers were lured into these loans when interest rates were just 1pc in 2003 and 2004, usually with a honey-trap discount on early payments.

This year, some $400bn of these mortgages face the crunch, followed by $1,000bn next year. Payments will jump by a quarter on average, and almost half for those with interest-only mortgages.

As the current slow-motion slump engulfs the US housing market, over-stretched debtors can no longer count on a slab of rising home equity. In the boom-bust hotspots of California, Florida, and Arizona, many are sinking into negative equity. Sales of existing US homes fell 1.3pc in June and are now down 8.9pc over the last 12 months. Overall, house prices in America have fallen 0.7pc so far this year, a sharp reversal from the torrid 13pc growth of 2005.

Phil Adams, director of securities research at Barclays Capital, said the troubles in the British sub-prime market were a warning signal for the broader economy. "I think we need to be watching this very closely. There's a continual squeeze on household incomes," said Mr Adams. He said Rooftop Mortgages was being punished hard for offering sign-up discounts of 2pc to 2.5pc that were now coming home to roost.

"When these discount periods end, the borrowers will experience significant payment shock and are more likely to fall into arrears and potentially default," he said.

But other sub-prime lenders are deteriorating as well. "The proportion of mortgage loans three months or more in arrears has increased to 14.6pc, its highest level since late-1999 and has so far shown no sign of stabilizing," it said.

Rob Thomas, of the Council of Mortgage Lenders, said the picture was more benign than it looked.

"A lot of people bob in an out of arrears without ever being repossessed," he said.

Mr Thomas said this year's rise in court orders for repossession was misleading since the new caste of sub-prime lenders in the market are much quicker to take legal action than building societies. "They try to nip problems in the bud," he said.

In the end, the Bank of England can always cut rates sharply if the British property market turns ugly, preventing any repeat of the early 1990s.

The ERM housing bust scorched deep into our collective memory could occur only because Britain pegged sterling to the D-Mark, forcing it to raise rates into an accelerating downturn.

No British government is likely to repeat the error of delegating monetary policy to a foreign body, at least for a very long time. Inside the eurozone, Spain, Greece, Ireland, and Italy may not be so lucky when their housing booms come down to earth.

The Telegraph
27/07/2006

http://myvesta.org.uk

Avoiding Debt Can Be Impossible For Many

stever@myvesta.org — 20060726

Financial education not a solution for those who've fallen on hard times

RUNCORN, England — The rising debt load in the United Kingdom is often attributed to weekend spenders using their credit cards to purchase the latest and greatest clothing, DVDs and electronic gadgets. It's common to think the largest debtors are the ones who are living outside their means and using credit to finance their lifestyles. But problem debt isn't just an issue for those whose fingers are worn out from entering their PIN; the people with the worst debt of all are often taken by surprise.

"For most people in the UK debt is not a way of life, but it consumes the lives of individuals after they have suffered from an unexpected event such as job loss or the death of a spouse," said Steve Rhode, chairman of the not-for-profit financial crisis centre Myvesta UK. "People often prepare for financial emergencies and have the best laid out plans in front of them for when crisis strikes, but all too often those plans fall short and crippling debt becomes the norm."

According to Mr Rhode, concepts such as educating consumers on how to properly manage their finances or warning individuals about the dangers of overspending do nothing to help people who end up in debt due to an overwhelming life event. Mr Rhode said:

"Whenever debt levels rise or the number of bankruptcies increases, there is always a cry that we need more education to teach people how to manage their money, but how does financial education help the single mother with three children who was recently abandoned by her husband? We can put warning labels on credit cards and we can tell people to spend within their means, but without concentrating on solutions for those who are already facing problem debt, we're just spinning our tyres."

Mr Rhode said that giving people the skills and tools necessary to avoid problem debt should be a large priority, but that emphasis also needs to be placed on providing the right solutions when people get into trouble. He said:

"All the financial education in the world can't stop life events from causing people to get into debt. And while education is important to give people the tools and knowledge to manage their money responsibly, we need to concentrate on providing caring, compassionate solutions when people find themselves in over their heads."

http://myvesta.org.uk

Bankruptcy Or IVA - Which Is Best ?

stever@myvesta.org — 20060725

Should I Consider An IVA Or Petition For Personal Bankruptcy?

Ultimately the decision to opt for an IVA or to 'bite the bullet' and petition for your own bankruptcy is one of of personal choice.

Essentially, the IVA as a strategy should be considered as a formal alternative that will enable a person to avoid the stigma and, very often, the intrusiveness of the bankruptcy option. It is important however that a person examines all of the available options in some depth before deciding which strategy is best for them as an individual.

The Individual Voluntary Arrangement is for most people a much easier and less stressful process than a bankruptcy petition however this is not always the case.

For some people the formal nature of a bankruptcy petition along with the direct intervention brought about by the appointment of an Official Receiver or Trustee In Bankruptcy acting without the consultation of the debtor represents a psychological 'line in the sand' that can serve to deliver the resolution that that person may really be seeking at a basic level.

What Is The Difference Between An Official Receiver And A Trustee? - Click Here For a Video Answer

Equally though, many people find that the restrictions that a bankruptcy order can bring about can be much harder than they anticipated and can affect areas of their everyday lives that they had not considered when choosing this path. The ability to make repayments to creditors via an IVA proposal for many people is of moral importance as they believe that they have a moral responsibilty to repay at least some of what they owe to their creditors.

Some of the main advantages of the IVA option are listed below:

* Enables an individual to reach a binding agreement with their creditors over an agreed period of time unlike informal debt management plans that are not binding on creditors and can last for many years.

* Ensures that all interest and other costs are completely frozen throughout the duration of the IVA period. Again this is different to informal debt management plans where interest and charges are often not frozen.

* IVAs for the most part include an element of debt write off by creditors upon completion of the IVA period. Often times the debt write off within an IVA can be 50% or more of the total amount of debt owed to the creditors.

* IVAs are not openly advertised as is the case with bankruptcty. This allows for the individual to enter into an IVA agreement without having to disclose an often sensitive issue openly.

* For Sole Traders or Company Directors the IVA option allows them to continue trading and will not affect a persons directorship status at all.

Click Here For The Full IVA Educational Video Series

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Have Debt Management Plans Had Their Day With The Increased Versatility Of The IVA ?

stever@myvesta.org

What Are The Advantages Of An IVA Over A Debt Management Plan?

There are many advantages of the Individual Voluntary Arrangement over the informal debt management plan. Essentially, the IVA represents a binding agreement on creditors once the IVA proposal has been accepted.

The main benefits of this are the fact that creditors are not able to 'change their minds' regarding the terms of the IVA and they are also bound to freeze all interest and other costs associated with the credit facility.

Other benefits are the fact that creditors are not allowed to make contact with the debtor throughout the duration ot the IVA term and for many individuals this serves to remove a great deal of stress and pressure as they may well have been dealing with creditor collection calls and correpondence for a period of time before the IVA had been out in place.

These factors offer a real advantage to debtors when compared with the lack of control that informal debt management plans offer indebted individuals.

The terms offerd via a debt management plan fundamently are completely controlled by the creditors and they are under no obligation to offer debtors any interest reduction concessions or relief from debt collecting tactics. Indeed it is quite common for an individual to enter into a debt management plan administered by a debt management organisation only to see balances increase and offers of repayment refused.

In addition to this debt management plans do not offer any element of debt forgiveness or 'write off' by creditors and so the individual is expected to repay the entire amount of outstanding debt over a longer period of time than the original credit agreements due to the reduced payments that will be being made to the accounts.

This is one of the reasons why many individuals choose to opt for the IVA strategy if possible as it offers a definative debt resolution period along with firm boundaries within which the IVA terms are set.

IVA's are also administered by highly regulated and licensed Insolvency Practitioners. This is not the case with debt management plans that can be administered by unqualified individuals and organisations.

To View The Entire IVA Educational Video Series - Click Here

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Bankruptcy Videos Now In Flash Format

stever@myvesta.org — 20060721

Myvesta have now extended their Bankruptcy Educational Video Series so that they can be viewed in Flash format. The link to the bankruptcy video clip page is below:

Click Here To View The Myvesta Bankruptcy Video Series

IVA Option Has More Support Than Before

stever@myvesta.org — 20060715

Two million UK individuals are fighting to keep their financial situation afloat, a debt management organisation has asserted.

DFD which advises borrowers on how to regain control of their finances, said its share of the market is growing at a yearly rate of 140 per cent.

The company is one of many making large profits by providing Individual Voluntary Arrangements (IVA) , in which borrowers get breathing space to reorganise and repay their debts. Its warning coincided with figures from the British Bankers' Association (BBA) showing an unexpectedly large jump in mortgage lending in May.

Banks approved 81,298 mortgages for house purchases last month, 20pc more than last year. Debt Free Direct's chief executive, Andrew Redmond, said various studies put the number of over-indebted people between 1m and 3m.

People are considered over-indebted when they can only afford the interest on their loans but cannot pay off the principal amount. Extrapolating from the first quarter of 2006, there will be 30,588 IVA cases across the market this year compared to 20,292 in 2005.

The BBA said that, facing high repayments, consumers' appetite for fresh credit card debt appears to be waning.

The amount customers repaid to credit card companies was greater than the amount they spent on plastic in May, meaning that card debt levels dropped by £251m. But unsecured debt, which includes loans and overdrafts as well as credit cards, rose by £699m.

Net mortgage lending, which strips out redemptions and repayments, was £5.73bn, the highest level for two years

The Telegraph

Bankruptcy Restriction Order And Undertakings

stever@myvesta.org

Extracts from the Myvesta UK Forum:

Question...

Hi there,

I have just received a letter from the OR telling me that the Secretary of State has directed the OR to apply to the court for a BRO to be filed against me (this was expected) or I can enter into a BRU (this I will probably do). The restriction will be for about 4-5 years.

I know all about the restrictions with regard to applying for credit or been a director of a company.

The question I ask is what about any money I inherit during the years that the BRO/BRU is in effect, also what about my earnings, at the moment I do not have enough disposable income to pay back my creditors but what happens if I get a new job with higher earning potential will I have to tell the OR.

Thanks

Didds

Answer...

Hi Didds,

When an individual is made Bankrupt they are subject to certain restrictions e.g. not being able to act as a director of a limited company.

The purpose of a BRO / BRU is effectively to protect the public from the future actions of a Bankrupt by retaining a number of those restrictions upon him/her. The Bankruptcy Restriction Order or Undertaking will specify what these restrictions are. Any breach of the conditions of a BRO / BRU is a criminal offence. These restrictions can continue after a Bankrupt has been discharged from Bankruptcy.

With regards to regards to income payments orders Section 310 of the Insolvency Act 1986 (as ammended) states that such an order can only be made before discharge of the bankrupt.

Therefore it appears that any increase in surplus income after your disharge will be unavailable to the Bankruptcy estate. The Rules relating to Inheritances, i.e. After Acquired Assets similarly only apply during the period of Bankruptcy and not the for the period of the BRO/BRU that continues after discharge, so again should this occur it appears you will retain the benefit of the windfall.

Hope that helps!
_________________
Best wishes

Dean

http://myvesta.org.uk

Debt Related Funny Stuff To Make You Laugh

stever@myvesta.org

Myvesta have added a 'Funny' section to the Debt Help Forum. It is always healthy to see the humerous side of things - debt inluded!

The link is below:

Debt Relate Funny Stuff - Click Here

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Simple IVA - New Debt Solution Plans Draw Nearer

stever@myvesta.org

The Governments plans to make it easier for consumers to take out Individual Voluntary Arrangements - should be coming closer to realisation.

Under plans currently being rubber stamped, a 'Simple IVA' will be introduced later this year or early 2007 and this will help speed up the application process and allow more people to apply for the debt repayment plan as an alternative to bankruptcy or non binding Debt Management Plans offered by charities and commercial groups.

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

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

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

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

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

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

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Bankruptcy & IVA Video Series Added To Google Video

stever@myvesta.org — 20060710

Myvesta UK the Not for Profit Financial Crisis Centre have added their insolvency video series to Google Videos for the benefit of consumers wishing to learn more about bankruptcy and IVA strategies. The video clips can be accessed via the links below:

Bankruptcy Video Series (Google Video Format)

IVA To Z Video Series (Google Video Format)

Scottish Bankruptcy Video Series (Google Video Format)

Scottish Bankruptcy Educational Video Series

stever@myvesta.org — 20060703

Myvesta have now added a new educational video resource to the Myvesta UK website. The process of bankruptcy (or sequestration) is different in Scotland to England, Northern Ireland and Wales.

The link below will take you to an online video educational resource that explains the sequestration process in detail in new media format:

Bankruptcy In Scotland

Need Plastic Surgery ?

stever@myvesta.org — 20060617

The UK credit card market has been shaken up by enforced cuts to penalty charges. John Greenwood tracks down the best bargains

Barclaycard is urging its customers to repay more than the bare minimum on their credit cards and is offering them lower interest rates to encourage them to do so.
Credit cards

The credit card company, which has more than 11 million customers, is including a new message on statements for cash--strapped cardholders who have paid off only the contractual minimum of two per cent of their balance for six consecutive months.

Barclaycard customers repaying more than 10 per cent of their balance sees their interest rate fall from 16.9 to 9.9 per cent.

The move comes 10 days after Barclaycard said it would reduce its penalty charge for late payments on credit cards from £20 to £12 following a ruling from the Office of Fair Trading. HBOS, Royal Bank of Scotland and Lloyds TSB have followed suit, while last week Morgan Stanley and Co-op hinted that they too would slash penalty fees.

Experts say the strategy of urging customers to clear their debts reflects a change in tack for credit card issuers, which will have to find new ways to recoup money now that they can no longer profit from hefty default charges.

Barclaycard swiftly increased the interest rate it charges on cash advances by up to 5 percentage points to a massive 29.9 per cent - a clear message that intends to get the money it is losing on penalty charges back somehow. Experts predict that other banks will follow suit with higher interest rates across their product ranges, so it is more important than ever to shop around for the best deals.

"Now they can't make money out of defaulters we expect a surge in marketing initiatives to make you use your credit card more, such as cashback deals, so credit card companies make more in merchant fees," says Brian Brown of Defaqto, the financial analysts.

"We also predict that interest rates will go up and introductory offers will become less attractive, although the reintroduction of annual charges for credit cards is unlikely because as long as one company offers free cards, the rest will have to as well."

Despite fears that deals may become less attractive, there are still some fantastic offers available. Credit card deals come in all shapes and sizes. Making sure you get the right card will save you pounds and give you more spending power.

Here are the best deals for every kind of cardholder.

I have no debts and want a card that gives me as long as possible to pay without charging me interest.

GE Money's Transformation card tops the tables, charging no interest at all for the first 12 months that you hold the card, then switching to an annual percentage rate (APR) of 12.9 per cent. Sainsbury's Bank's Platinum card offers 12 months at 0 per cent interest on purchases, reverting to a slightly more expensive 15.9 per cent APR thereafter.

I don't want the hassle of changing credit card just to get the best introductory offer. I want a card with a reasonable rate of interest if I can't afford to pay my bill off at the end of the month.

The cheapest standard rate credit card is Halifax's Flat Rate card, which charges an APR as low as 5.9 per cent, which is cheaper than many personal loans, although only people with good credit ratings will be able to get this card. American Express's Blue is also competitive, charging just 6.9 per cent APR.

I have a large credit card debt and my current 0 per cent deal is coming to an end, so I need to find a new deal.

There are currently no cards on the market that allow you to transfer your balance to a 0 per cent deal without paying a fee.

The Halifax One card is the best value for balance transfers under £2,500, charging you 0 per cent interest for the first 12 months on debts you bring over from other credit cards, with a one-off balance transfer fee of 2 per cent. It then reverts to an APR of 15.9 per cent.

GE Money's Transformation card offers the same 12 month interest-free period for balance transfers, but beats the Halifax One card for transfers over £2,500 because although its transfer fee is 2.5 per cent of the sum brought over, it is capped at £50. It also beats the Halifax card on its standard APR of 12.9 per cent.

Watch out for introductory offers as most credit card companies choose to allocate payments first to outstanding balances at the lowest rate of interest, such as 0 per cent balance transfers, leaving transactions that attract higher interest rates, such as purchases and cash advances, to continue to accrue -interest.

I always pay off my credit card in full and want a deal that rewards me for spending on my credit card.

Morgan Stanley has the best cashback credit card on the market for low to moderate spenders. Its Platinum Credit card gives you 2 per cent cashback for the first £2,000 you spend, and 0.5 per cent thereafter.

American Express's Platinum Credit card gives you more cashback the more you spend - 0.5 per cent up to £3,000, 1 per cent up to £7,500 and 2 per cent for spending over £7,501.

The Telegraph
June 9th, 2006
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Debtors Warned That Filing Bankruptcy Is Not A Soft Option

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Many thousands of cash poor debtors who are preparing for bankruptcy have not understood the hardship they will face as a result, according to warnings from debt specialists. They claim more than 110,000 people are considering declaring themselves bankrupt this year, in many cases because - wrongly - they consider it to be a soft option.

Almost 15,400 people were declared bankrupt in the first quarter of the year , a 12 per cent rise on the last three months of 2005, and a 51 per cent increase on the same quarter of last year. The increases reflect a five-year trend - the number of personal bankruptcies has risen every year since 2001, but began to spike particularly sharply upwards in 2004.

Tony Supperstone, a consultant at accountants BDO Stoy Hayward and president of R3, the insolvency practitioners' trade body, says the Enterprise Act passed that year has lessened the stigma attached to bankruptcy. "It now looks very attractive - you can be discharged from bankruptcy after six to 12 months, with all your debts cleared."

Frances Walker, of the Consumer Credit Counseling Service, says someone going bankrupt can now expect to be discharged after an average of eight months, compared with at least three years before the law changed. "Many borrowers see bankruptcy as a new lease of life," she says. "For many, being free from the worry of the debt is such a relief that it is worth the consequences of the bankruptcy." The problem, debt experts warn, is that borrowers may not realise how serious those consequences are.

To start with, bankrupts lose all control of their assets, including possibly even their share of the family home. The official receiver, or an insolvency practitioner, divides up the assets and shares them out among the bankrupt's creditors.

"Bankrupts are not allowed to obtain credit of more than £250 and have to seek permission to use bank accounts and credit cards - only basic living expenses can be paid, with any surplus going to pay off creditors," adds Holmes. "Any income earned during the bankruptcy order can be claimed against for an income repayment order for up to three years." That's assuming the bankrupt is able to earn an income. In professions such as the law, bankruptcy could mean losing your licence.

All insolvencies stay on your credit file for at least six years. As a result, bankrupts are likely to find it particularly tough to get credit for an extended period after being discharged - the best case is they will have to pay substantially higher rates of interest. For these reasons, the CCCS says bankruptcy only makes sense for a small number of people with debt problems - of the cases it handled in the first quarter of the year, it recommended bankruptcy to just 12 per cent of borrowers. "If you're a young person without much in the way of assets, it can make sense," says Walker. "But bankruptcy does still have very serious implications."

A better bet, for many borrowers, may be to come to an agreement with creditors - either an informal pact to make fixed repayments over a longer period, or an individual voluntary arrangement (IVA), a legally-binding deal that is less serious than full-blown bankruptcy.

The downside to IVAs versus bankruptcy is that it is likely to take longer to be clear of your debt - five-year plans are most common. But borrowers retain much more control of their assets, and their professional status is less likely to be affected. And the impact on your credit rating will also be less disastrous.

Ways to deal with a debt crisis

* Debt management plans: This is the least formal way to get on top of your borrowing. The idea is to persuade your creditors to agree that you will repay what you owe over a longer time period with affordable fixed payments each month.

* You can try to negotiate with creditors yourself, by writing to them to propose a repayment schedule. Alternatively, groups such as Citizens Advice and the Consumer Credit Counselling Service will negotiate on your behalf with your unsecured creditors , usually for free. Bear in mind that you can't force lenders to agree to this sort of scheme. And the agreement is not legally binding however and creditors often will not agree to any proposals to stop interest and charges.

* Individual voluntary arrangement (IVA): An IVA is a more formal version of the first option, and requires an authorised insolvency practitioner to arrange and oversee the deal. All your lenders can be forced to accept the terms of the IVA if 75 per cent of creditors by value of the total debt agree.

* Insolvency practitioners charge a fee for their services, which will add to your debt however they will be able to negotiate a comnplete freeze in interest charges.

* Bankruptcy: This is the most extreme option. Your assets - including property - are divided up between your creditors, with the insolvency courts ruling on who gets what. You may be discharged after a year, leaving you debt free, but the bankruptcy remains on your credit file for six years, with serious implications for your finances.

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Does The UK Consumer Worry About Everything Other Than Debt?

stever@myvesta.org — 20060615

Research by Prudential's risk report asserts that UK consumers are more worried about terror threats, asian bird flu and super bugs rather than the everyday reality of household debt.

"An era of fear and panic has gripped the nation and it is entirely unfounded". You are far more likely to lose your job and struggle with debts than be a victim of international terror attacks or superbugs," said Paul Cowman, head of protection at Prudential.

"Many people are focusing on unlikely events but not worrying about how they would meet the payments on their mortgage if they were to become seriously ill or lose their job."

Almost two Britons in five (38 per cent) are concerned about possible terror attacks, with 18 per cent worried about superbugs and a similar number afraid of bird flu.

But while concerns about these things are running high, little attention is being paid to more mundane concerns.

Just one person in ten worries about personal debt or bankruptcy and just one Briton in eight is concerned about their job security.

And these are areas where UK residents can act effectively to protect themselves, by taking out relevant insurance policies.

Dr Peter Marsh, of the Social Issues Research Centre, commented on the findings.

"Today we have little to fear and our lives are rarely at serious risk yet we seem compelled to worry, perhaps even to invent things about which we can fret and express anxiety," he said.

"The result is that we lose a proper focus on risk and get diverted away from real threats.

Telegraph
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So Just How Joined Up Is Debt Advice In The UK?

stever@myvesta.org — 20060607

The Government has been vocal about the fact that is keen to promote a joined up approach to the provision of debt advice in the UK. However it would appear that the reality of the situation is that this ambition is a very long way from the actuality of debt advice in the UK today.

Indeed the various providers of debt advice and management are hardly best of pals. Providers of consumer funded debt management plans assert that creditor funded debt management companies are not impartial as they ultimately rely on creditors to survive. Creditor funded organisations proclaim that they are independant however and bicker about the fees that are charged to consumers by commercial debt management organisations.

Within the creditor funded sector the grumbling continues as charitable organisations assert that other debt management organisations should operate from a starting point of being 'not for profit' and should not be set up as commercial ventures designed to make shareholders money. Indeed there are notably distinct camps within which debt advice allegiances have been made and bed partners have been chosen.

It is interesting to note that the indebted consumer simply wants to work with organisations that can provide the best advice that will enable them to get out of debt as quickly and and painlessly as possible. The indebted consumer cares not one jot about the squabblings of various organisations seeking to protect and grow market share and voice. They simply care about getting good help in order to get out of debt.

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Time To Get Tough On Water Bill Dodgers

stever@myvesta.org — 20060606

Individuals who refuse to settle their water supply bills should have their supply drastically restricted, an influential Lords committee has said.

A report from the Science and Technology Committee says about 15% of people are currently not paying their bills, safe in the knowledge they will not have their supply cut off.

The peers' report also calls for water meters and more action to cut leaks.

They say UK water policy is generally "a muddle" with the failure to consider water supply implications of policies such as huge housebuilding programmes.

In particular they say John Prescott's old department failed to allow for water scarcity when planning new homes.

Committee chairman Lord Selborne said the committee, investigating water management, had been "shocked" at the numbers of people who do not pay their water bills, which lead to water firms writing off £960m a year.

He said many people "know they can't be cut off, so there's no reason to pay their bill... it means that every one of us pays an extra £10 to cover their bill".

The report calls for action against those people who can afford to pay their water bills, but refuse to do so.

Lord Selborne explained that a device was in use in Australia which allowed enough water to satisfy the basic health and safety requirements but nothing more.

Leaks

The peers' say they were concerned that the water watchdog Ofwat had not taken the problem of shortages seriously enough.

"Our key message is that the government must work much harder to integrate environmental, social and economic interests in the management of water," their report said.

HAVE YOUR SAY
We need more homes to help first time buyers and cut overcrowding but good planning means we can improve water efficiency at the same time
Yvette Cooper
Housing and planning minister

Send us your views

The committee wants a major cut in high leak levels from water company pipes.

Lord Selborne said his committee was given incorrect information by the government about what the increased water demand might be in areas of housing development such as the Thames Gateway.

He said former Environment Minister Elliot Morley wrongly told the committee increased water consumption would be just 0.1%.

That was a charge denied on Tuesday by Housing and Planning Minister Yvette Cooper who said there was a misunderstanding about what Mr Morley had told the peers.

Planning

Lord Selborne said there was a lot of consultation going on now about the issue, but he said the committee would have liked to see it happening earlier.

"It takes a long time to plan new infrastructure," he told the BBC.

"If you're going to put 200,000 houses into an area, you've got to start planning the reservoirs, the pipes, the cleaning plants for the water, everything like that at least 10, probably 15 years ahead, and of course in this country we're not good at long-term planning.

It is deeply irresponsible to build houses unless water efficiency comes as standard, it is as simple as that
Peter Ainsworth
Conservative environment spokesman

"I'm afraid the government doesn't think that far ahead."

He added that the issue of water shortages required everyone to pull together - and that included people not moaning when roads were dug up to repair leaking water pipes.

In their report, peers urged the government to make it easier for water companies to have universal metering of customers and at the same time provide help through the benefits system for people struggling to pay their bills.

Conservative environment spokesman Peter Ainsworth said: "Everyone, except Mr Prescott, is aware that the South East is suffering from water shortages.

"It is deeply irresponsible to build houses unless water efficiency comes as standard, it is as simple as that."

'More homes needed'

Ms Cooper said the growing and ageing population meant a rising demand for water and for new homes.

"We need more homes to help first time buyers and cut overcrowding but good planning means we can improve water efficiency at the same time," she said.

Meanwhile a spokesman for the Home Builders Federation said: "It is crucial to recognise that houses do not use water - people do - and it is the people who are living and working in the South East now who need homes."

He acknowledged that measures were needed to better manage water supply but insisted new homes were "part of the solution, not the problem".

Tom Le Quesne of environmental group WWF said public water supply was on a "knife-edge", particularly in the South East.

"We can resolve the problem; there's a whole range of measures we can take," he told BBC Five Live.

"First and most important is that any new-build housing should be built to the highest standard of water efficiency."

BBC News
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Britians Streets Of Debt

stever@myvesta.org — 20060604

A new BBC programme called Britains Streets Of Debt is starting this week on BBC1 at 9.15 am to 10.00am. The series is on from Monday to Friday and is a broadcasts a close look at various debt problems that are common in the UK today.

Show Titles:

Monday:
The Whistle Blower. For the first time on British television, a senior banking executive reveals how high street banks deliberately target their customers and push borrowing.

Tuesday:
Borrowers Beware. Repossessions have gone up 70% in the last year, as many of the people buying into the home owning dream have ended up borrowing more than they can afford.

Wednesday:
Easy Prey. Millions of Britain's elderly are up to their necks in debt and women over 60 are the fastest growing group of people seeking debt advice.

Thursday:
Losing It Online. Last year we gambled £53 billion and one million people bet regularly online.

Friday:
Going For Broke. Shiralee Doveston owes £9,000 and is desperate to go bankrupt but does not have the £310 administration fee.

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Going Bankrupt Is Not The Easy Way Out

stever@myvesta.org — 20060603

Today, personal bankruptcies in Britain have surged to a record high with increasing numbers of graduates and professional workers overwhelmed by massive personal debts. However, declaring bankruptcy often does more harm than good.

On Friday new figures from the Government showed that the number of people becoming insolvent during the first three months of 2006 soared to its highest level since records began. A total of 23,251 people in England and Wales became insolvent during the quarter, 73 per cent more than in the same period last year.

At the same time, the number of people taking out individual voluntary arrangements (IVAs), under which they agree to repay a set amount each month in exchange for interest on their debts being frozen, leapt to 7,961 - an increase of 141 per cent on the first quarter of 2005.

Although more people are buckling under financial pressure, experts also reckon that recent legal changes have made bankruptcy and other forms of insolvency more attractive. Under the 2002 Enterprise Act, which came into force two years ago, a bankrupt's debts can be discharged after just one year, compared with the previous three-year term.

But people who pile on debts thinking bankruptcy or an IVA could be an easy way out are in for a shock. Even when discharged after just a year, a bankruptcy record will stay on a credit file for a further five years, making it difficult if not impossible to obtain even a mobile phone contract, let alone a bank account or mortgage.

"Although bankrupts are now discharged within a year, information about bankruptcies stays on your credit report for at least six years - as does information about an IVA," says James Jones, the consumer affairs manager at Experian, the credit rating agency. "Even after your bankruptcy or IVA has ended, the fact that you became bankrupt or entered into an IVA in the past may still stop you getting credit. It may also stop you getting the best rates."

Mark Ward, the head of consumer services at Call Credit, another rating agency, says: "Bankruptcy seems an attractive option because you are discharged after just a year, but there are massive repercussions for years afterwards."

In the past most people were forced into bankruptcy because their business failed, they got divorced or they lost their jobs. Today, it is being caused by people's spending running out of control, with growing numbers of teachers, police officers, army personnel and young professional graduates among those left saddled with huge debts.

"Years ago people ran into debt problems via divorce or having a business that failed. Now it is lifestyle reasons such as accruing debts, having paid for holidays or home improvements. People having problems repaying a £20,000 debt accrued for landscape gardening is not unusual," says Greg Mullarkey of W3 Debt Solutions. "We are also seeing more people going bankrupt in their twenties than ever before."

Mullarkey tells the tale of a married teacher and a prison officer who had racked up £245,000 of unsecured debt between them and were facing monthly payments of £3,000 excluding their mortgage just to keep the creditors at bay.

"They were literally suicidal having swapped one credit card for another. Because they never missed a minimum payment they never had a problem getting more credit. Their monthly bill has been cut from £3,000 a month to around £680 under an individual voluntary arrangement."

Many graduates are using IVAs to get rid of outstanding student loans because the Government has closed a loophole in the bankruptcy laws that allowed student loans to be written off. Under an IVA the Student Loans Company may agree to write off some of the debt. "The Student Loans Company can decline an IVA, but they often take a pragmatic view," says James Dean of Debtmatters.

Again, experts warn graduates not to be hasty because of the repercussions of writing off a debt. Credit rating agencies say mortgage lenders often ask if you have ever been bankrupt, so even if the order is no longer shown on your credit report you will have to declare past bankruptcy to the lender. Many landlords and employers also check your credit report for court judgements, bankruptcies and IVAs - although they cannot see your credit account information.

So declaring yourself bankrupt or entering into an IVA might also make it difficult for you to rent a flat or get the job you want, particularly if it is a financially sensitive position. "It is essential for people considering bankruptcy or an IVA as a solution to their debt problems to speak to a professional debt adviser before reaching a decision and to consider the serious implications such a decision will have," adds Jones.

If your debts are threatening to get out of control you should, in any case, contact one of the reputable debt advice agencies. Among other things, debt advisers will help you prioritise repayments, thus maximising the chances of avoiding your home being repossessed.

Bankruptcy and IVAs are often the last resort and they may not be necessary. Debt Free Direct says one third of its customers enter debt repayment plans, which are informal arrangements with creditors.

The key is to get advice - you may be better off declaring yourself bankrupt than opting for an IVA, for example. Tony Supperstone, the president of R3, the trade body for insolvency specialists, agrees. "If you have no assets and no income then bankruptcy is probably the best option. But if you are in a professional career you may lose your livelihood by going bankrupt - solicitors and accountants, for instance, will be kicked out. So an IVA may be a better option."

The Telegraph
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Debt Statistics and Figures - Compiled 1st June 2006

stever@myvesta.org

Total UK personal debt

Total mortgage borrowing in the UK will have passed the £1 trillion (£1,000 billion) in May 2006, according to the Council of Mortgage Lenders.

At the end of April 2006 the total UK personal debt was £1,191bn. The growth rate remains strong at 10.2% for the previous 12 months which equates to an increase of £100bn.

Total secured lending on homes in April 2006 was £999.2bn. This has increased 10.8% in the last 12 months.

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

Plastic card / Personal Loans: 282 plastic transactions took place every second in the UK in 2005.

Debit cards accounted for 37% of all retail spend in 2005, ahead of cash at 34%. Plastic cards were used for 63% of all UK retail spending last year

Total credit card debt in April 2006 was £56.0bn.

According to the BBA the proportion of credit card balances bearing interest was 74.9% in March 2006.

The average interest rate on credit card lending is currently 15.5 %, around 11 percentage points above base rate.

39% Brits overspend on their debit cards on day-to-day purchases and the most common reason is because psychologically, they feel they are not spending any money, according to National Savings and Investments’ (NS&I) latest Quarterly Savings Survey.

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

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

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

Servicing Debt: Citizens Advice Bureau (CAB) dealt with 1,128,000 debt enquiries last year. In the last decade the number of consumer debt problems dealt with by CAB has increased 118%. CAB clients have an average of £13,000 of debt which is nearly 17.5 times their monthly income. On average it would take CAB clients 77 years to pay back their debts in full.

The average person has just £27 a week left to live on after meeting all their bills and essential outgoings, a survey has showed. Recent rises in council tax and utility bills, combined with high levels of debt, have left the average Briton with £954 worth of monthly commitments to pay from an average income of £1,070, according to Combined Insurance.

Government figures showed 23,351 people became insolvent between January and March - 73% more than in the first quarter of 2005 and 12% higher than in the final three months of last year. At the same time, the number of homes threatened with repossession was up 29% on the same period last year, with over 33,000 actions handled by the courts, according to figures from the Department of Constitutional Affairs.

According to a report by PricewaterhouseCoopers Individual Voluntary Arrangements (IVAs) have doubled in number in 2005, with someone entering an IVA every seven minutes of each working day.

The rate of increase is likely to continue throughout 2006. People are simply spending too much. 83% of those surveyed said expenditure in excess of income was the principal cause of failure, not loss of income or occupation, or marital breakdown. The young are increasingly turning to IVAs as a way out of debt, with 56% being under 40, and over a fifth under 30.

The average debt of a client coming to Consumer Credit Counselling Service (CCCS) for advice is now £32,000. The number of people earning more than £30,000 a year who are asking them for help has risen by 257% in the past three years.

More than 105,000 people telephoned the National Debt Line between January and April, a rise of more than 30 per cent on last year. The helpline had been so 'inundated' by desperate callers that it had been able to deal with just 32,000 cases.

According to the Council of Mortgage Lenders (CML) total household debt has grown sharply as a percentage of disposable income over the past decade and currently stands close to 150%. At the end of 2005, the secured debt to income ratio was 121%, compared to 80% in 1995. And the unsecured debt to income ratio was 24%, almost double that of 10 years ago.

According to a report commissioned by One Advice, nearly 2 million 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 50,000 individuals in that demographic owing more than £10,000.

Two million households are living on a financial knife-edge, susceptible to an economic downturn or changes in personal circumstances, according to a recent Financial Services Authority (FSA) report. A further half million households are already in serious financial difficulty paying bills and meeting debts, the report found.

Four million people say they always run out of money at the end of the week or month.

14 million adults (35%) are relying on their overdrafts to get by each month; 3.5m are permanently overdrawn, while two million workers start the month in their overdraft, even after they have been paid.

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

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

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

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

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

Young people (under 30): Young people have the highest level of unsecured debt in the UK, with the average person under 30 owing nearly £8,000, recent figures have revealed. People aged between 18 and 29 owe about £7,718 each through credit cards, overdrafts and loans, the equivalent of 36 per cent of their total household income, according to Alliance & Leicester. Student loans were found to make up 46% of this figure.

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The proportion of bankruptcies among the 18 to 29-age group has more than doubled in the last 4 years. It has jumped from 7.9% in 2001 to 18.7% last year.

A recent FSA report highlighted:

* 29% of 16-24 year olds said they would not know how to prepare and manage a weekly budget;
* 19% of 22-24 year olds have short-term debts over £5,000;
* 62% of young people said if they got into money trouble or debt they would not be able to name any advice or support services they could turn to for advice
* One in five students dropped out of courses; Of undergraduates who considered dropping out financial difficulty was a strong factor for 34.4%;
* 94% of 16 year olds believe it is important to know how to manage money; only 53% have been taught how to

More than half (59%) of 16-24s admit they go over budget when using a debit card and 41% of 25-34 admit to overspending on their debit cards.

Pensioners / Pensions: Research from Scottish Widows Bank reveals one in six (over 1 million), pensioner homeowners in the UK have an outstanding mortgage on their home – each with an average debt of £45,313 – making a nationwide debt of almost £47 billion. What is more, one in three owe more than £50,000 and one in ten more than £100,000 putting increased pressure on retirement income.

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

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

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

Housing: According to the Department for Communities and Local Government (DCLG) the average house price in the UK in March 2006 stood at £186,519 (£195,001 in England). UK annual house price inflation rose by 3.3%. Annual house price inflation in London was 4.0%.

Note: the weightings used by DCLG were changed for the February 2006 figures.

The number of homes sold in England and Wales has soared by 37% in the space of a year, according to the Land Registry.

Gross mortgage lending totalled £25.1 billion in April - the highest April lending figure on record according to the latest data from the Council of Mortgage Lenders (CML). Lending was 16% higher than in April 2005 and marks six months of record lending figures.

According to The National Association of Estate Agents (NAEA) the average time between instruction and completion is 17.1 weeks.

The average loan approval for house purchases in April increased to £ £140,400, some 9% higher than a year earlier.

Nationwide said that house price growth was sluggish for the second month in a row in May with prices rising just 0.2% in the month, marginally up on the 0.1% increase in April but down significantly on March’s strong 1.1% gain. The annual rate of house price growth slowed slightly in May to 4.7%. This supports the figures from the Land Registry for January – March 2006 which showed an annual growth of 5.05% over the same period in 2005.

The amount of unmortgaged property wealth held by UK home-owners currently stands at £3.6 trillion. Housing equity is the largest component of total wealth held by people living in the UK. Mortgage lending has helped fund a dramatic expansion of home-ownership, from 60% to 70% of the population during the last 20 years. Roughly 40% of the housing stock is owned outright, mainly by retired and older middle-aged households,

The cost of owning and running a house rose by 7% in the financial year 2004/05, more than three times the rate of CPI inflation, according to research by Halifax. Total annual housing costs increased to £6,366 in 2004/05. For the average UK homeowner, housing expenses take up 17.5% of their disposable income

Housing 1st Time Buyers: The average house price in the UK in March 2006 for first time buyers now stands at £145,214 which is an annual increase of 4.2%. (Note: the weightings used were changed for the February 2006 figures. This has had a large impact on the reported average house price for first time buyers)

According to the National Association of Estate Agencies (NAEA) the first time buyer share of the market decreased to 7.9% in April. This is considerably lower than the same period last year when first time buyers’ share of the market was at a high of 22.3%.

In the UK, the average deposit required by first time buyers in Q1 2006 was 17% of the purchase price. Based on repayment loans, in the UK, repayments as a % of household income for first time buyers were 21% in Q1 2006.

Bradford & Bingley research shows the number of parents giving, or lending, their children the deposit for their first home has doubled in the last year to 42%. One in ten first time buyers receiving assistance are buying jointly with their parents, or relatives.

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

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

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

Money Education / Financial Literacy: 25 million Brits (56%) spend 60 minutes or less per week reviewing their finances, with the average amount of time we dedicate as a nation reaching only 1 hour 19 minutes – the least amount of time in Europe, according to a study from Scottish Widows. We spend nearly twice as long (2 hours 11 minutes) chatting on the phone or texting each week, and 6 times as long (8 hours 4 minutes) watching TV.

A quarter of Brits (25%) have no idea how much they spend in a week, and a similar number (26%) have no idea of their monthly cash flow. This lack of knowledge extends into other financial aspects of life. Only half (51%) the population know the balance on their credit cards and nearly half (46%) have no idea what interest rates they receive on their savings or are paying on their accounts and debts.

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

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

Savings / Pension: Half the population (52%) could survive financially for just 17 days, should they suffer an unexpected loss of income, according to research by Combined Insurance.

FSA research shows that 81% of the pre-retired think that a state pension will not provide them with the standard of living they hope for in retirement. Nevertheless, 37% of these people have not made any additional pension provision.

The majority of people in the UK are not planning ahead sufficiently, and are likely to be storing up problems for the future. 39% of people say they tend to live for today and let tomorrow take care of itself. In the last three years, 28% of people have experienced a large unexpected drop in income, and 21% have faced a large unexpected expense. 70% have made no personal provision to face a drop in income, and 55% do not think they have sufficient provision to face an unexpected expense.

According to the latest quarterly National Savings and Investment survey almost half of Brits (45%) do not saving regularly.

Compiled by Richard Talbot of Credit Action

http://www.myvesta.org.uk

Major Banks Will Reduce Credit Card Penalty Charges

stever@myvesta.org — 20060601

At least three of the UK's largest banks will reduce their credit card penalty charges following OFT' demands.

But one of the banks, Barclays, is will increase the interest rates that it charges for some card holders.

Barclays, Lloyds TSB and HSBC will cut their penalty charges by nearly half from £20 to £12 in the next two months.

The changes were demanded by the Office of Fair Trading (OFT) in April, when it said standard penalty charges levied by card issuers were excessive and unfair.

The Office of Fair Trading said at the time that the UK's banks were illegally overcharging their customers by £300m a year through unnecessarily high charges.

These are levied for late payment of credit card bills, failed payments or spending more than a card's borrowing limit.

The demand for lower charges brought howls of protest from the banking industry, but the banks were told to respond by 31 May.

The OFT does not have the power to impose its order directly, but threatened to take legal action to do so if the banks ignored its instruction.

It also angered the banking industry by suggesting that basic bank charges, such as those for overdrafts, should be capped in a similar fashion.

Royal Bank of Scotland, which owns NatWest, has yet to announce a decision, but said it was still in discussion with the OFT.

Barclaycard

Barclaycard has more than 11 million UK customers in the UK, some of whom will now face paying higher interest rates.

We have to reflect in our pricing the costs we incur in our business
Barclaycard spokesman

From 1 August, when the new lower penalty charge comes in, the interest rate paid by about 10% of its customers will rise by between 2% and 5%, within a range of 14.9% to 29.9%.

Cash advances will now be charged at 27.9%, up from 21.9%.

The bank said that only its most creditworthy customers would pay the lowest rate of 14.9%.

A bank spokesman explained: "We have to reflect in our pricing the costs we incur in our business."

BBC News
http://myvesta.org.uk

Bad Debt At Barclaycard Rises To £1.6 Billion.

stever@myvesta.org — 20060531

Customers of Barclaycard, the nations largest credit card supplier, are steadily defaulting on £1.00 out of every £5.00 they have borrowed, fuelling fears over the extent of indebtedness across the country.

The blow-out in bad debts at Barclaycard, which has 11.2 million UK cardholders, was revealed in a financial statement yesterday from the parent bank, Barclays. It said that first-quarter growth in bad debts at Barclaycard continued to soar at the same pace as last year, when they grew by 44 per cent to £1.1 billion.

*
Extrapolating to all of 2006 produces a possible bad debt charge at Barclaycard of £1.6 billion — almost one fifth of the £8.6 billion lent to all Barclaycard’s extended credit customers. These customers are the minority who fail to pay back their balances in full each month.

Including the majority who pay back in full, Barclaycard has £24 billion outstanding.

Naguib Kheraj, Barclays finance director, said that while the number of people in difficulty was stable, the average balances of defaulters was rising and the recovery rate — the amount of debt got back by the bank — was falling.

He also suggested that welching was becoming less of a taboo. “Clearly, it’s more acceptable for people socially to default on their debts.”

Personal bankruptcies are soaring, partly because of a change to the rules that allows people to walk away from their liabilities after just 12 months.

The Times
http://www.myvesta.org.uk

Barclays otherwise reported strong trading in the quarter.

Mortgage Debt Approaches £1 trillion In UK

stever@myvesta.org

The level of mortgage debt is just short of £1 trillion, it is reported by the Bank of England today.

An additional £8.5bn was borrowed by consumers to buy homes in last month, bringing the level of outstanding amount of mortgage debt to £999.2bn.

However, the value of unmortgaged property is much higher, at £3.6bn.

With individuals owing another £192bn on credit cards, loans and hire purchase agreements, total personal debt now stands at £1.191 trillion.

Outstanding mortgage debt is now forecast to go through the £1 trillion level next month.

But while the figure stands as a landmark, Council of of Mortgage Lenders (CML) chief Michael Coogan believes it does not have any particular significance in terms of policy-making.

"Although it is a milestone, it will perhaps soon be forgotten as home-ownership and mortgage lending continue to grow further," he said recently.

The CML regards the rising figure as an indicator of growing home ownership: up from 60% of the population to 70% in the past two decades.

The CML also argues that there are few signs that home ownership has reached a natural limit. It says it expects continuing growth of both home ownership and mortgage lending in the foreseeable future.

BBC News
http://www.myvesta.org.uk

Credit Unions To Offer Banking Services

stever@myvesta.org — 20060526

Over 70,000 credit union members in Scotland, Yorkshire and London will be able to use ATM machines and direct debits later this year. Their credit unions have been named as the first credit unions to offer banking services by the Association of British Credit Unions Limited (ABCUL) and The Co-operative Bank.

In what is seen as a major step change in the development of credit unions in the UK, the credit unions will be able to offer their members a bank account with a debit card which can be used in shops and to withdraw money from cash machines.

Although there will be no chequebooks or overdrafts, accountholders will be able to set up standing orders and direct debits.

The accounts will be run and promoted by the individual credit unions but the behind the scenes administration is being carried out by The Co-operative Bank. Following the successful completion of this first phase, the service will be rolled out to other credit unions throughout the UK in 2007.

The credit unions concerned are: Capital Credit Union (Edinburgh, Lothian and the Borders), Glasgow Council Credit Union, Hull and East Yorkshire Credit Union, Leeds City Credit Union, Scottish Postal Workers Credit Union, Scotwest Credit Union, Southwark Credit Union and White Rose Credit Union (Wakefield, West Yorkshire).

23 May 2006

http://www.myvesta.org.uk

A lifetime of debt?

stever@myvesta.org

Recent research by Citizens Advice states that many people turning to them for help are getting deeper into debt from which it will take them a lifetime to escape.

A report published by the charity reveals that CAB debt clients owe an average of £13,153 - almost a third more than they did three years ago, and the equivalent of 17.5 times their total monthly household income. It will take them an average of 77 years to pay off the money they owe at a rate they can afford.

Consumer credit debt problems brought to Citizens Advice Bureaux have doubled over the last eight years, accounting for three-quarters of the 1.25 million new debt cases dealt with by the national network last year.

Survey data involving 567 debt clients from 61 bureaux across England and Wales confirms that CAB debt clients tend to be considerably worse off than the population at large, with household incomes less than half the national average. And more than two-thirds of those surveyed were entirely or partly dependent on benefit income.

The charity is urging the Government to press ahead with plans for a new low cost, out of court insolvency remedy, the Debt Relief Order, targeted at debtors with low incomes and assets. It says this would offer hope to those too poor to take advantage of other debt remedies such as county court administration orders, bankruptcy and Individual Voluntary Arrangements (IVAs).

It says getting the new remedy onto the statute books quickly is especially important if major new Government funding being pumped into providing much more free, independent debt advice for those on the lowest incomes is to be effective.

'Deeper in debt' is published at the same time as a separate report, 'Out of the red', highlighting the range and extent of debt advice already being delivered by Citizens Advice Bureaux up and down the country. The two reports will be launched today at an event at the Department of Trade and Industry.

24 May 2006

UK Debtors Owe 17 Times Their Monthly Income

stever@myvesta.org — 20060524

People seeking debt help from Citizens Advice owe so much money it would take more than 75 years to clear their borrowings at an affordable rate, the charity said today.

Citizens Advice said the number of people seeking help with credit card and loans debts had doubled during the past eight years and accounted for three-quarters of the 1.25m new debt cases its bureaux dealt with last year.

In a report based on 567 of its debt clients in England and Wales, it said the average debt was £13,153, nearly one-third higher than three years ago.

Most of the clients had incomes that were less than half the national average, with two-thirds dependent on benefits.

As a result they owed 17.5 times their total monthly household income. The charity estimated it would take them almost eight decades to repay at an affordable rate.

With the cost of going bankrupt in England and Wales set at £475, the charity said these clients were unable to afford what is increasingly becoming a favoured option for people struggling with debts.

Neither could many of them pay the costs associated with taking out an individual voluntary arrangement, under which interest on debt is frozen in exchange for a set amount being repaid each month.

Citizens Advice is calling on the government to introduce the debt relief order - a new low-cost, out-of-court insolvency remedy.

The order would be aimed at people on low incomes who owed up to £15,000, had less than £300 of assets and less than £50 a month spare after meeting all their essential outgoings. Like bankruptcy, people would be discharged within a year.

The group said it would offer hope to people who were too poor to take advantage of other debt solutions.

David Harker, chief executive of Citizens Advice, said: "Low income combined with badly informed and poorly understood financial decisions are at the root of many of our clients' debt problems.

"For many there is little prospect of their income increasing or their circumstances changing. The reality is that they are condemned to a lifetime of poverty overshadowed by an inescapable burden of unpayable debt.

"They need to be given some hope that they can turn things around, with a solution that offers them a fresh start, lifts them out of the poverty trap, and gives them a chance to build better financial skills for the future."

Plans for the debt relief order are before Parliament.

A report published earlier this week suggested 1.7 million Britons often struggled to make repayments and that 1 million could be on the verge of bankruptcy.

The research showed that one in five adults had unsecured debt of more than £10,000 and that 44% of people on low incomes were facing debt problems.

The Guardian
http://www.myvesta.org.uk

One Million On Brink Of Insolvency

stever@myvesta.org — 20060523

A million people in the UK are on the brink of insolvency as the credit boom of the last decade has left borrowers struggling to repay their debts.

Research by YouGov has found that one in five of the adult population -- around 8 million people -- has unsecured debt of more than £10,000. Almost 10 per cent of these borrowers -- or three-quarters of a million people -- have problems repaying their debt every month while a further ten per cent struggle "most months" or "quite frequently".

Thirteen per cent said their debt problems had become so bad that they were "quite likely", "very likely" or "certain" to declare themselves bankrupt or take out an Individual Voluntary Arrangement (IVA). One in ten had already approached an insolvency practitioner.

The survey, which questioned 1,366 borrowers, found that people living in rented or council accommodation were most likely to become insolvent, followed by those earning less than £20,000 and divorcees. Borrowers in Scotland were more likely than the English or Welsh to seek insolvency.

Earlier this month the Department of Trade and Industry (DTI) reported that 23,251 people in England and Wales become insolvent in the first quarter of 2006, a 73 per cent increase from the same period a year earlier. The majority of debtors declared themselves bankrupt but almost 8,000 took out IVAs, an increasingly popular alternative to full bankruptcy.

IVAs allow debtors to stave off bankruptcy by coming to an agreement with creditors to pay off a percentage of their debts over a given period.

Collectively British consumers owe more than £1 trillion on mortgages, credit cards, loans and overdrafts. Earlier this month, Mervyn King, the governor of the Bank of England, said Britons’ spiralling levels of debt could create difficulties for the economy.

"The proportion of unsecured debtors reporting their debt as a serious problem has gone up, the number of calls to the National Debt Helpline has risen quite sharply, so I think the signs are that a potentially large social problem, with many households getting into difficulty with their debts, is materialising."

"The rise of the ‘credit junkie’ phenomenon and the ‘spend, spend, spend’ culture is a long term issue," she said. It needs addressing at grass roots level and that means via the educational system," she added.

Frances Walker, a spokeswoman for the Consumer Credit Counselling Service (CCCS), said it was a concern that so many people were considering bankruptcy.

"Sometimes bankruptcy is the best route to take but there are serious repercussions. We would recommend anyone with debt problems to take expert advice from a free debt service like us or Citizen’s Advice before they take such a serious step."

Ms Walker added that the average borrower calling the CCCS for help had debt of more than £30,000 to more than 11 creditors, a 5 per cent increase on the year before. "We live in a society where credit is here to stay so we have to teach people how to use it properly," she said.

Times Online
http://www.myvesta.org.uk

OFT Lets Banks Off the Hook - What A Surprise!

stever@myvesta.org — 20060521

Talk is cheap as this article by Alisdair Milton illustrates......

The Office of Fair Trading has said it has no immediate plans to limit overdraft charges despite its earlier report, which said that high credit card charges were unlawful.

In April, the OFT released a report on UK credit card default charges that ruled that charges in excess of £12 were unlawful and unnecessary. The report also held wider implications for the rest of the lending market in the UK, saying that the principles of fee limits on credit cards could be applied to other areas in the lending market such as store cards, mortgages and overdrafts.

However, the OFT appears to have let other lenders off the hook as it stated that credit card charges are its immediate priority. A spokesperson for the OFT said: “ Our priority is the issue that we’ve been looking at, and that’s credit card charges. We’ve made no commitment to do anything other than that.”

While the spokesperson admitted to having no immediate plans to enforce fee limits on banks she did add that they expected them to apply the principle ‘across the board’.

Financial analysts believe that the OFT’s ruling on credit card charges could cost the banking industry an estimated £1.5bn in lost revenue. They also added that similar limits applied to overdraft fees could result in the end of free banking.

In its April report, the OFT stated that banks could only justify charges that covered the costs incurred through a default. Banks were given to the May 31 to respond to the ruling.

The OFT’s investigation into credit card fees was brought on by UK credit card companies continually raising their default fees during the last several years. Credit card companies maintain these rises were necessary in order to offset the lost revenue incurred by offering 0% interest deals on their cards.

Excessive banking and credit card fees has seen a sharp rise consumer complaints to the Banking Code Standards board, who say that complaints were up 50% last year.

Consumer groups have urged consumers who have been victims of unfair and excessive charges to take court action if necessary as the law specifies the difference between charges that can be levied for breach of contract and penalty fees. This gives any consumer who has suffered through unfair charges every chance of being successful with any court action.

Consumer groups such as Which?, have been campaigning for more transparency from banks on how they can justify charges in excess of £30 per day for been overdrawn by a small amount.

http://myvesta.org.uk

IVA's and Voluntary Bankruptcies Soar

stever@myvesta.org — 20060514

The level of individuals petitioning to be made bankrupt has nearly doubled during the past year, new government figures have shown.

13,897 people in England and Wales applied for personal bankruptcy themselves, as opposed to being forced into bankruptcy by their creditors, during the first three months of 2006.

This was an 85% increase on the 7,528 people who petitioned for bankruptcy during the first quarter of 2005.

However the number of people forced into bankruptcy by their creditors rose only slightly during the year, increasing by 16% to 5,615.

The figures come a week after the Insolvency Service said a record 23,351 people in England and Wales were declared insolvent during the first three months of the year.

It said the number of people declared bankrupt rose by 51% compared with the same period the previous year, while those taking out Individual Voluntary Arrangements (IVAs), under which interest on debt is frozen in exchange for an agreed amount being repaid each month, soared by 142%.

The DCA's figures are different to those from the Insolvency Service, because they represent the number of bankruptcy petitions as opposed to the number of people who are actually declared insolvent.

Steve Treharne, head of personal insolvency at KPMG, said: "Earlier this year we saw a dramatic increase in the number of people calling help lines and asking the Citizens Advice Bureau and other organisations for guidance.

"The volume of callers seeking advice on debt is likely to be a major factor in this latest leap in people accepting personal insolvency as the solution to their problems.

"There is also a rise in the number and size of commercial firms proactively looking to advise those in financial difficulty - which should be taken into account."

He added that the 85% rise in the number of people choosing to go bankrupt suggested that bankruptcy had lost much of its stigma.

The DCA figures also showed that there were 3,150 company winding-up petitions during the first three months of the year - 9% more than during the first quarter of 2005.

Sarah Nancollas, a licensed insolvency practitioner from Nancollas Greer, warned that the problem would only worsen.

"The figures point to longer-term issues that have to be addressed. We are now living in a culture of debt where large amounts of credit are readily available.

"Unless action is taken we can expect these numbers to continue to grow this year and probably into 2007 as well," she said.

The Guardian
May 12th, 2006

http://www.myvesta.org.uk

New Bankruptcy Warnings from Experian

stever@myvesta.org — 20060511

UK consumers were yesterday informed of the "serious" implications of bankruptcy by the credit agency Experian.

Jill Stevens, director of consumer affairs at the company, warned that becoming bankrupt "is not an easy way out of debt".

She added that finding yourself insolvent would "probably mean you have to give up any valuable possessions you own".

Experian has launched a new credit report basics guide called Your Credit Report and Bankruptcy, offering advice for those who have found themselves in financial difficulty and are looking for alternatives to bankruptcy.

It explains the impact that bankruptcy can have on an individual and provides financial information to those with money problems.

Ms Stevens said: "[Bankruptcy] may be the best option for some people, but it should only ever be considered as a last resort and after receiving professional advice.

"It is rarely a positive solution to money problems," she added.

A recent report from the Insolvency Service showed that there were a total of 15,389 bankruptcies in England and Wales during the first four months of 2006.

More people in the UK are taking out individual voluntary arrangements, which allow debtors to make a deal with their creditors, instead of going into bankruptcy.

BBC Radio 4's Money Box programme states that a total of 28,000 people a year in the UK are now choosing this option.

http://www.myvesta.org.uk

Bankruptcy Is Not Always Best Option As IVA's Increase

stever@myvesta.org

New insolvency laws mean that your debts can be wiped out after just a year - but your credit rating will be at rock bottom for a lot longer, warns Paul Farrow.

Personal bankruptcies in Britain have surged to a record high with increasing numbers of graduates and professional workers overwhelmed by massive personal debts.

On Friday new figures from the Government showed that the number of people becoming insolvent during the first three months of 2006 soared to its highest level since records began. A total of 23,251 people in England and Wales became insolvent during the quarter, 73 per cent more than in the same period last year.

At the same time, the number of people taking out individual voluntary arrangements (IVAs), under which they agree to repay a set amount each month in exchange for interest on their debts being frozen, leapt to 7,961 - an increase of 141 per cent on the first quarter of 2005.

Although more people are buckling under financial pressure, experts also reckon that recent legal changes have made bankruptcy and other forms of insolvency more attractive. Under the 2002 Enterprise Act, which came into force two years ago, a bankrupt's debts can be discharged after just one year, compared with the previous three-year term.

But people who pile on debts thinking bankruptcy or an IVA could be an easy way out are in for a shock. Even when discharged after just a year, a bankruptcy record will stay on a credit file for a further five years, making it difficult if not impossible to obtain even a mobile phone contract, let alone a bank account or mortgage.

"Although bankrupts are now discharged within a year, information about bankruptcies stays on your credit report for at least six years - as does information about an IVA," says James Jones, the consumer affairs manager at Experian, the credit rating agency. "Even after your bankruptcy or IVA has ended, the fact that you became bankrupt or entered into an IVA in the past may still stop you getting credit. It may also stop you getting the best rates."

Mark Ward, the head of consumer services at Call Credit, another rating agency, says: "Bankruptcy seems an attractive option because you are discharged after just a year, but there are massive repercussions for years afterwards."

In the past most people were forced into bankruptcy because their business failed, they got divorced or they lost their jobs. Today, it is being caused by people's spending running out of control, with growing numbers of teachers, police officers, army personnel and young professional graduates among those left saddled with huge debts.

"Years ago people ran into debt problems via divorce or having a business that failed. Now it is lifestyle reasons such as accruing debts, having paid for holidays or home improvements. People having problems repaying a Â£20,000 debt accrued for landscape gardening is not unusual," says Greg Mullarkey of W3 Debt Solutions. "We are also seeing more people going bankrupt in their twenties than ever before."

Mullarkey tells the tale of a married teacher and a prison officer who had racked up Â£245,000 of unsecured debt between them and were facing monthly payments of Â£3,000 excluding their mortgage just to keep the creditors at bay.

"They were literally suicidal having swapped one credit card for another. Because they never missed a minimum payment they never had a problem getting more credit. Their monthly bill has been cut from Â£3,000 a month to around Â£680 under an individual voluntary arrangement."

Many graduates are using IVAs to get rid of outstanding student loans because the Government has closed a loophole in the bankruptcy laws that allowed student loans to be written off. Under an IVA the Student Loans Company may agree to write off some of the debt. "The Student Loans Company can decline an IVA, but they often take a pragmatic view," says James Dean of Debtmatters.

Again, experts warn graduates not to be hasty because of the repercussions of writing off a debt. Credit rating agencies say mortgage lenders often ask if you have ever been bankrupt, so even if the order is no longer shown on your credit report you will have to declare past bankruptcy to the lender. Many landlords and employers also check your credit report for court judgements, bankruptcies and IVAs - although they cannot see your credit account information.

So declaring yourself bankrupt or entering into an IVA might also make it difficult for you to rent a flat or get the job you want, particularly if it is a financially sensitive position. "It is essential for people considering bankruptcy or an IVA as a solution to their debt problems to speak to a professional debt adviser before reaching a decision and to consider the serious implications such a decision will have," adds Jones.

If your debts are threatening to get out of control you should, in any case, contact one of the reputable debt advice agencies. Among other things, debt advisers will help you prioritise repayments, thus maximising the chances of avoiding your home being repossessed.

Bankruptcy and IVAs are often the last resort and they may not be necessary. Debt Free Direct says one third of its customers enter debt repayment plans , which are informal arrangements with creditors.

The key is to get advice - you may be better off declaring yourself bankrupt than opting for an IVA, for example. Tony Supperstone, the president of R3, the trade body for insolvency specialists, agrees. "If you have no assets and no income then bankruptcy is probably the best option. But if you are in a professional career you may lose your livelihood by going bankrupt - solicitors and accountants, for instance, will be kicked out. So an IVA may be a better option."

Another IVA Firm To Float On AIM

stever@myvesta.org — 20060509

The rise in consumer debt, and the consequent increase in people who risk being swamped by their borrowings, has generated investor interest in debt advisers, with debts.co.uk announcing today that it plans to float on the junior market, Aim.

The Chesterfield-based company, owner of Debtcare and The Debt Counsellors, has carved itself a niche in the rise of individual voluntary arrangements (IVAs), a less-severe alternative to bankruptcy, in which people come to an agreement with creditors on how to pay debts.

Last year, about 16,000 people opted for an IVA, but the figure is expected to swell in the coming years as a result of rising indebtedness and slowing house-price and wage inflation. Last week, official figures showed a record number of personal bankruptcies in the first three months of the year - up 13% at 23,351. Mortgage repossessions were at a 13-year high, with 22,997 in the first quarter, more than twice the number in the same period last year.

Debts.co.uk is looking to raise about £4m of new money to fund expansion of its business to meet growing demand for debt advice. Seymour Pierce brokers will start marketing the firm this week with an eye to a flotation next month.

The move will sort out any money worries for three of the company's directors, including the founder Paul Carter, who will pocket about £4m between them from the deal and retain majority control.

Guardian Newspapers Limited

http://www.myvesta.owg.uk

Bankruptcy UK: Bankruptcies soar to new peak

stever@myvesta.org — 20060505

Bankruptcy UK: Bankruptcies soar to new peak

Bankruptcies Show Dramatic Rise In The UK

stever@myvesta.org

More than 23,000 people became insolvent in England and Wales during the first three months of 2006 - 73% more than in the same period last year.

The figures from the government's Insolvency Service will add weight to the view that 2006 could see record levels of personal insolvency.

Experts have blamed the rise in insolvencies on greater personal debt and higher unemployment.

About two-thirds of people declared themselves bankrupt.

The remaining people took out Individual Voluntary Arrangements (IVAs) - an alternative to bankruptcy that allows debtors to come to an agreement with their creditors.

Meanwhile, seperate figures from the Department for Constitutional Affairs showed that the number of housholds in the early stages of having their home repossessed was at its highest level since 1992.

Culture problem

The number of companies going into liquidation also rose during the first quarter of 2006. In total, 3,439 firms went to the wall, representing an increase of 17% on the same period last year.

The level of personal and company insolvencies has been rising over the past two years.

According to Pat Boyden, a partner at accountancy firm PriceWaterhouseCoopers, said that consumers were paying for "spend now, worry later culture."

Mr Boyden added that personal insolvencies could "easily" surpass the 100,000 mark in 2006.

BBC News - May 5th 2006
http://myvesta.org.uk/programmes/myvesta_iva.html

Two million people in the UK have more than £10,000 in unsecured debts.

stever@myvesta.org — 20060425

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

New Bankruptcy Petition Fees Take Effect

stever@myvesta.org

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

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

Tax credits still being overpaid

stever@myvesta.org

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

New IVA Information Centre Gives Consumers the Latest IVA News

stever@myvesta.org

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 keeps March IVA market share at under 20 pct

stever@myvesta.org — 20060423

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

IVA Companies Cashing In On Rising Debts

stever@myvesta.org

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

Parents Still Supporting Adult Children

stever@myvesta.org — 20060419

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

Claim Your Money Back From The Bank

stever@myvesta.org

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

Comfortable With Our Debt?

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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

Borrowers Undaunted By Debt

stever@myvesta.org

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

Court Orders Hit 10% Of Adults

stever@myvesta.org

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

Large Insolvency Practitioners Misselling IVAs To Benefit Claimants

stever@myvesta.org

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

Free Banking Under Threat

stever@myvesta.org — 20060407

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 welcomes OFT action on bank charges

stever@myvesta.org — 20060406

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

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OFT Says Credit Card Charges Are 'Unfair'

stever@myvesta.org — 20060405

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.

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By Andrew Ellson
The Times

OFT Cracks Down On Credit Card Charges

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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