Universities Exchange Review and Tips

Exchanges between universities allow students to take a course abroad because universities around the world have opened their doors to students from all nationalities so that they improve their academic careers.

The world famous universities such as Harvard, Princeton, Boston University, University of Dublin, London School of Economics, Yale, University of Edinburgh, University of Victoria, University of Sydney, the Sorbonne, Grenoble, University of Provence.

Read the rest of this entry »

One bank admits defeat on PPI: The rest hold out for now

June 19th, 2011

In the latest news from the ongoing battle between consumers and large financial institutions, Barclays has said it will pay out compensation to everyone to whom it sold payment protection insurance and who made a complaint before 20 April.

Customers will be reimbursed the total value of all premiums plus 8% interest. The bank said the move would affect tens of thousands of customers, particularly those put on hold during a recent judicial review.

Barclays said it was the first bank to pay out PPI compensation on a “no-quibble” basis. It said its customers had waited long enough because of the long-running judicial review, and this would allow it to clear the backlog quickly and assess new cases more quickly.

Separately, the FSA has given three banks – Barclays, Lloyds, and RBS – more time to deal with their huge backlogs of complaints and a flood of new complaints.

As an indication of the scale of the problem, the Financial Ombudsman Service (FOS) revealed that since the start of April this year, it had received 40,000 new PPI complaints from people unhappy that their original complaint had been turned down by their bank.

In April, the banking industry lost its High Court challenge to new rules on the sale of PPI.
These were imposed last year by the Financial Services Authority (FSA) and the FOS. Among other things, the rules require sellers of PPI polices to review all their past sales to see if their customers have a claim for mis-selling, whether or not they have actually complained.

While the legal case was going on the banks put on hold tens of thousands of fresh PPI complaints that came in.

After losing their case, Lloyds Banking Group set aside £3.2bn to cover the cost of this compensation, followed by Barclays (£1bn), RBS (£850m) and HSBC (£269m). Barclays now says complaints lodged before 20 April will be eligible for automatic reimbursement, while those received since then will be assessed on merit.

Although it was hoped that the Barclays announcement would lead directly to the other banks adopting the same policy, Lloyds later said it would not be paying out on a “no quibble” basis.

Normally, complaints would have to be dealt with in eight weeks. However, some firms are facing a huge backlog and now a surge of new complaints which has created a bottleneck”

Now the FSA has decided that as a temporary measure, complaints put on hold during the judicial review must be settled by the end of August. Fresh complaints since the end of the judicial review but received before 31 August must be dealt with in 16 weeks. And PPI complaints received after the end of August but before the end of 2011 can be dealt with in 12 weeks.

After that, the normal eight-week timetable will apply.

There is no doubt that this is good news for consumers, especially after the bank charges fiasco. Whether is marks a sea change in the attitudes towards their customers taken by large financial institutions remains to be seen and I, for one, am sceptical. However, this does show that consumers have the means of redress and can, eventually, get their money back with interest.

This entry was posted on Sunday, June 19th, 2011 at 1:06 pm and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Debt written off after bank ‘imprisons’ customer

July 9th, 2011

In one of the more bizarre financial stories of recent weeks, HSBC bank has been forced to write off a customer’s overdraft after a judge decided it had harassed her with hundreds of phone calls and then unlawfully imprisoned.

The lady won her civil case against the bank at Swindon County Court when the judge ruled that the overdraft of £2,070 should be cancelled as HSBC had failed to meet its contractual obligations to her. The disputed clause was that the bank should run customer accounts with “reasonable care and skill”.

The customer had gone to her local branch of HSBC in October 2008 to complain about the overdraft fees it had been levying on her account. When she became upset and wanted to leave the interview room, which had been locked from the inside for privacy, the branch manager stood up and blocked her way.

According to the judge, that behaviour crossed the threshold to the level of unlawful imprisonment. However, leading up to that incident there had also been sustained telephone harassment.

Between 2008 and 2009 HSBC called the customer hundreds of times many calls were generated by automatic dialling equipment and were silent while on other occasions members of staff threatened the lady and said that the phone calls would continue until she paid off the overdraft.

The telephone calls continued for a year even after HSBC promised they would stop as a result of a first complaint against the company. The calls eventually only stopped when the customer began legal proceedings against the bank.

Additional complaints against the bank noted that they did not freeze the account when asked to do so, allowing further payments to make it even more indebted. Aditionally, HSBC failed to tell the customer when she opened the account what the overdraft fees would be, which was a direct breach of contract.

HSBC said it was sorry for the stress it had caused the customer and expressed regret for the way it had treated her and her difficult financial situation. While not all the complaints against the bank were upheld, the judge noted that the bank had control of the phone calls and could have made them stop at any time, in particular after it indicated that it would do exactly that.

The judge ordered that the customer’s overdraft be cancelled and indicated that, had the customer applied for damages, she would have been awarded an extra £1,500.

The campaign website penaltycharges.co.uk, which helped the customer in this case, said: “We need legislation to stop unlawful bank charges, as all parties promised before the last election. Harassment of customers in difficulty seems to be routine for many financial institutions and regulators seem to take very little notice.”

This entry was posted on Saturday, July 9th, 2011 at 6:04 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

The cost of bankruptcy rises again

June 5th, 2011

The cost of going bankrupt increased by £75 to £525 at the beginning of June leading debt experts and other analysts to suggest that the cost could discourage people with debt or other financial problems from seeking help.

If you include the court fee necessary to complete the process, going bankrupt now incurs an upfront cost of £700. The Insolvency Service said the increase was needed to cover the cost of administration and the charges, including court fees, have gone up by 37% since March last year.

However, insolvency practitioners have warned that the increase will put extra pressure on individuals who were likely to be under stress or depressed.

The £525 charge is a deposit to cover the cost of managing a bankruptcy, which allows the bankrupt person to throw off the burden of debt and make a fresh start. The Insolvency Service recovers a full administration fee of £1,715, less the deposit, from the bankrupt’s assets or surplus income at a later stage. This sum is not being increased.

The overall fee is staying the same but they are increasing the proportion of it paid upfront when the bankruptcy process is begun. The Insolvency Service has seen its income squeezed because of the falling value of homes and other assets which are recovered from bankrupts.

Currently, the £1,715 fee is never fully paid in half of bankruptcies.

There has been some criticism of the rising cost, with National Debtline that there are some people for whom bankruptcy would be the best solution to their debt problem, but for the fact they cannot afford the associated fees.

There is now a cheaper and easier alternative, the Debt Relief Order (DRO), which costs £90.
An increasing number of people who are in financial trouble and looking to escape their debts have been avoiding bankruptcy and taking this lower cost route.

In the first quarter of this year there were 6,788 DROs, a 20% rise on the previous year.
However, people can only ask for a DRO if their debts are less than £15,000 and savings and assets are less than £300.

This leaves the glaring question of what to do if you have £16,000 of debt or more. You are faced with a barrier of hundreds of pounds before you can opt for bankruptcy to resolve your difficulties.

Responding to the criticism, the Insolvency Service pointed out that it is obliged by Parliament to break even, a task which has become increasingly difficult but will be made more realistic if they can recover more of their costs at the beginning of an often long and expensive process.

It is right that bankrupts pay something towards their debts and the Insolvency Service exists to strike a balance between giving bankrupts debt relief and a fresh start, and the need to provide some return to creditors.

This entry was posted on Sunday, June 5th, 2011 at 9:47 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Interest rates on hold for now, but a rise is on the way

June 12th, 2011

This week, UK interest rates were kept at the record low of 0.5% again by the Bank of England’s Monetary Policy Committee. Economists had widely expected the decision, as recent data has underlined worries about the strength of the UK’s recovery.

The decision comes despite the annual rate of inflation rising to 4.5% in April, up from 4% in March, and well above the Bank’s 2% target and is the 27th straight month that the bank has left rates unchanged.

Meanwhile, the European Central Bank’s president, Jean-Claude Trichet, has signalled that its interest rate could rise next month. The ECB on Thursday held rates at 1.25%, but Mr Trichet said the bank would maintain “strong vigilance” on inflation – widely interpreted as a signal to the markets that rates will be raised at the next meeting.

Analysts believe that continuing high UK inflation also made a rate rise by the MPC likely this year, some analysts believe this could come as soon as next month although that view is not widely held.

In fact, poor UK economic data has led some economists to push back expectations for the timing of the first UK rate hike as far as March next year.

However, with inflation likely to move above 5% in the next three to four months on the back of rising utility bills and food prices and with employment and employment intentions surveys remaining firm, the balance of probabilities favours an earlier move.

Economists say policymakers face a difficult choice: keep rates on hold to help the economy, or raise them to cool inflation. But higher rates increase the cost of borrowing, and there are concerns this may hurt the economic recovery.

The record low Bank rate has led to relatively small returns for savers. The latest statistics from the Bank of England show that, at the end of May, the average rate of interest with an instant access bank or building society account was 0.3%. This has been unchanged since a slight rise at the start of the year.

For cash Individual Savings Accounts, the average interest rate was 0.55%. Three years earlier, this had been 4.56%. However, as long as the Bank rate is low, borrowers – especially those with variable rate mortgages – are seeing relatively low home loan repayments.

This entry was posted on Sunday, June 12th, 2011 at 1:47 pm and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

UK Credit card spending restrained

July 23rd, 2011

The British Retail Consortium (BRC), which represents 90% of the UK’s shops and shopkeepers, this week said that credit card use fell last year as people turned to cash and debit cards to avoid borrowing.

The figures show that the number of transactions involving credit cards dropped 12.9%. The number of transactions involving cash also fell, although the average amount spent rose by 13% to £12.93. Debit card use jumped by 15.8%.

The BRC criticised the level of bank charges associated with credit cards, pointing out they are the most expensive payments they have to process.

On average in 2010, each retailer paid 1.7p per cash transaction to have the money transported and banked. The BRC said that the average charge for processing a credit card payment was 37.1p, compared with a debit card average of 9.2p.

Credit cards were used in just 10% of all transaction, but accounted to more than 44% of processing costs.

The BRC added that cash was the quickest way to pay. Using physical money took an average of 27.2 seconds, it said, compared with an average 39.4 seconds for a card payment.

The BRC’s annual Cost of Payment Collection Survey includes results from nearly eight billion transactions in store and online, 60% of the UK’s annual retail sales.

Retailers reported fraud losses had fallen by 37% compared with 2009 after investment in technology, such as the latest secure card readers, new levels of internet security and note checkers at tills.

The general trend with consumer spending is that hard-pressed customers are switching to cash and debit cards for the reassurance that they can’t spend what they haven’t got. This is why the use of credit cards has dropped sharply and cash still remains king, used for more than half of all retail payments.

It remains to be seen if this trend continues as the economy continues, but for now it seems that people are taking a much more sensible approach to their spending and levels of debt. Let’s just hope that these habits stick this time.

This entry was posted on Saturday, July 23rd, 2011 at 4:54 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

A look at this month’s inflation figures

August 19th, 2011

Despite the weak growth figures and summer holiday season inflation continues apace. In fact, the UK government’s targeted rate of inflation rose in July, following higher prices for clothing and footwear and fees for financial services.

The rate of Consumer Prices Index (CPI) inflation rose to 4.4% from 4.2% in June, according to figures from the Office for National Statistics (ONS). The Retail Prices Index (RPI) measure was unchanged at 5%.

Clothing and footwear prices measured for CPI saw their biggest annual increase since records began in 1997.

Bank of England governor Mervyn King has written another letter to the chancellor to explain why CPI inflation remains well above the 2% target rate. The governor must write a letter every three months if CPI is more than one percentage point above or below the target.

He blamed the continuing high inflation rate on, “the increase in the standard rate of VAT to 20%, and past increases in global energy prices and import prices”. It is worth noting that he also stressed that “the big risks currently facing the UK economy come from the rest of the world”.

The Bank of England said last week that it remained confident that inflation would return to its target level in the next two years.

Chancellor George Osborne replied to Mr King’s letter saying that, “A crisis of confidence in the global economy demands a global response”. He called for credible cuts in countries with big deficits and a “rebalancing of global demand to support growth”.

The ONS said the main contributors to inflation came from financial services, clothing and footwear, furniture, household equipment and housing rent. It said one of the biggest contributions had come from fees for financial services, which rose in July but had fallen in the same month last year.

The main downward pressure on inflation came from food and non-alcoholic drinks.

The big picture is still that rises in energy prices and in particular the VAT hike at the start of the year are still keeping inflation high. At constant tax rates, CPI inflation was 2.8% in July.

July’s inflation figures are particularly important because they are used to determine how much regulated rail fares can increase. Under the government’s new formula, fares will be able to rise by RPI+3%, which means average fares will be able to go up by 8% next year.

In other research, Kantar Worldpanel found that while grocery price inflation had grown 5.2% in the 12 weeks to 7 August, compared with the same period the previous year, grocery sales had only risen by 3.8%.

This shows that shoppers are trying to manage their ‘personal’ inflation by trading down. It’s therefore unsurprising that the discount retailers have pushed further ahead this month. Aldi performed particularly strongly, taking its market share to 3.6% from 3% at the same time last year.

This entry was posted on Friday, August 19th, 2011 at 1:20 pm and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

OFT moves to tackle credit scams

July 17th, 2011

The Office of Fair Trading (OFT) this week announced plans to tackle dishonest credit brokers that demand upfront fees for loans they have no intention of arranging. Firms found engaging in the scam practice will be closed down for the protection of consumers.

The measure is part of a general crackdown by the regulator following a complaint from Citizens’ Advice that said some unscrupulous firms were cold-calling thousands of potential borrowers and offering loans in return for hefty fees.

Evidence suggests some businesses are deliberately taking people’s money upfront with no realistic expectation of finding them the type of loan they need. To combat this, the OFT is making it mandatory for fees to be refunded if a loan is not agreed.

The OFT is going to ask the government to consider changing the law to ban outright the practice of credit brokers demanding upfront fees in exchange for arranging loans.

Citizens’ Advice had complained, in a so-called “super complaint”, that many people had received a text message or telephone call from these firms offering to find them an unsecured loan. Those who accepted were then charged the fees for little or no service in return.

The OFT estimates that 270,000 people had paid upfront fees to credit brokers in the past year, with complaints about them doubling between 2008 and 2010, an upfront fee of £70 was not uncommon, but the organisation had come across charges of up to £300.

The firms in question typically specialised in arranging unsecured loans for people who found it hard to borrow money because of their low incomes or past problems repaying debts.

Some victims, Citizens’ Advice said, had been persuaded to hand over their bank details and later found that money had been taken from their account without their permission. Victims struggled to get somebody to deal with the issue, and were charged a premium rate when calling to complain.

In parallel, the OFT will bring in new rules later this month for debt management firms to stop them making misleading claims in adverts, charging expensive fees upfront, giving poor advice or posing as charities.

As well as threatening to close down rogue credit brokers, the OFT is consulting on changes to its own rules to make it clear that borrowers already have a right in law for their fees to be refunded if the credit broker fails to introduce them to a potential lender and, if an introduction is made but a loan is not granted within six months, the fee must still be repaid.

The consumer minister Edward Davey welcomed the OFT’s proposed changes and has promised legislative action if required to back up the consumer protection initiative. Analysts have welcomed the moves as important steps to protect vulnerable consumers but pointed out that it will require continued vigilance as new loop holes will always be found by criminals and unscrupulous brokers.

This entry was posted on Sunday, July 17th, 2011 at 3:42 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Use of credit cards fall on the British high street

June 28th, 2011

A new sense of fiscal responsibility has been seen on the UK high street as credit card use fell last year as people turned to cash and debit cards to avoid borrowing, according to the nation’s shopkeepers.

The British Retail Consortium (BRC) which represents 90% of the UK’s stores, say transactions involving credit cards dropped 12.9%.

The number of transactions involving cash also fell, although the average amount spent rose by 13% to £12.93. Debit card use jumped by 15.8%.

The BRC has criticised the level of bank charges associated with credit cards. It pointed out they are the most expensive payments they have to process.

On average in 2010, each retailer paid 1.7p per cash transaction to have the money transported and banked. However, the average charge for processing a credit card payment was 37.1p, compared with a debit card average of 9.2p. Thanks to the business incubation guys over at NewInternetIdeas.com for this information.

Credit cards were used in just 10% of all transaction, but accounted to more than 44% of processing costs.

The BRC added that cash was the quickest way to pay. Using physical money took an average of 27.2 seconds, it said, compared with an average 39.4 seconds for a card payment.

The BRC’s annual Cost of Payment Collection Survey includes results from nearly eight billion transactions in store and online, 60% of the UK’s annual retail sales.

Retailers reported fraud losses had fallen by 37% compared with 2009 after investment in technology, such as the latest secure card readers, new levels of internet security and note checkers at tills.

The figures presented by the BRC show a clear pattern. Hard-pressed customers are switching to cash and debit cards for the reassurance that they can’t spend what they haven’t got. At the same time, use of credit cards has dropped sharply. Cash remains dominant and was used for more than half of all retail payments.

What remains to be seen, and cannot be demonstrated by this data, is whether or not this pattern represents a growing maturity among the British public with regards to their spending habits or rather their restraint by default because they cannot get credit. Thanks to the guys over at ideasforabusiness.co.uk for this.

This entry was posted on Tuesday, June 28th, 2011 at 1:58 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Complaints about loan scams still increasing

August 23rd, 2011

Concerning news this week has shown that complaints about businesses that demand upfront fees for loans they never arrange have risen yet again, according to the Office of Fair Trading (OFT).

There were 3,167 complaints made to advice service Consumer Direct in the 12 months to the end of June, compared with 2,059 the previous year.

The OFT, independent advisors and this blog have all warned consumers not to pay a fee before receiving a loan. This is not standard practice and is a strong, although not conclusive, sign that you are being ensnared in a scam.

In June the OFT said that it was planning to strengthen regulations to safeguard borrowers. At that time it was estimated that 270,000 people had paid upfront fees to credit brokers in the previous year.

Many of the complaints involved credit applications during which potential borrowers were told to send an upfront fee through a money transfer service. A more suspicious demand is difficult to imagine so consumers are advised to be aware of this tactic.

There has also been an increase in complaints about companies who are not interested in the applicant’s credit history, that ask for payment of fees upfront and then disappear with the money.

Consumers are advised to check out the company carefully before agreeing to anything, including asking for a landline number, a physical address and doing a search about the company online, as well as checking that they have a valid credit licence.

Earlier this year, the OFT said it would close down rogue credit brokers, as well as propose changes to regulations that would give more opportunity to have fees refunded if loans were not made.

It also said it would ask the government to consider changing the law to ban outright the practice of credit brokers demanding upfront fees in exchange for arranging loans.

The OFT runs a register which shows whether a company has a valid licence to offer credit.

The problem with this type of scam is that the victims are often so desperate for money that it blinds them to the screamingly obvious flashing neon signs that read ‘scam’ in ten foot high letters.

In such a situation advice to take calm, rational decisions that take all the relevant factors into account is usually useless. However, if you or anyone you know are considering taking out a loan then that is exactly what you should do. If in doubt, consult a debt charity for assistance.

This entry was posted on Tuesday, August 23rd, 2011 at 5:31 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Banking giant hit in the profits: Better customer service to follow

July 29th, 2011

The banking giant Santander has set aside 620m euros (£548m) to cover the costs of mis-selling payment protection insurance (PPI) in the UK. The Spanish bank is the latest to outline the one-off amount to cover the cost of compensation for mis-selling the loan insurance.

Lloyds Banking Group set aside £3.2bn to cover the cost of this compensation, followed by Barclays (£1bn), RBS (£850m) and HSBC (£269m).

The move hit Santander’s profits. The UK arm of the bank, which includes the Abbey, Alliance and Leicester and Bradford and Bingley brands, saw pre-tax profits dip 3% to £1.2bn in the six months to June.

The parent company Banco Santander reported a first-half net profit of 3.5 billion euros, down 21%.

PPI is supposed to cover loan repayments if someone becomes ill or loses their job, but it has emerged that many of the policies sold by the banks were mis-sold. This blog has been following the consumer campaign with great interest.

In April, the banking industry lost its High Court challenge to new rules on the sale of PPI. Among other things, the rules require sellers of PPI polices to review all their past sales to see if their customers have a claim for mis-selling, whether or not they have actually complained.

While the legal case was going on the banks put on hold tens of thousands of fresh PPI complaints that came in.

Santander was second, behind Barclays, in the list of most complained-about financial institutions during the second half of 2010. The data, compiled by the City watchdog – the Financial Services Authority, was driven, in part, by PPI complaints.

The Santander chief executive said the bank had taken ‘significant steps’ to improve customer service. Earlier in July, Santander said it had brought its call centres back to the UK from India following complaints.

Unless you happen to be a shareholder in the Santander banking group this is excellent news. Hitting banks in the profits is the best and possibly only way to influence their actions. If their dodgy practices and lack of concern for their own customers starts to cost them money then they will quickly change their ways.

This entry was posted on Friday, July 29th, 2011 at 2:12 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One bank admits defeat on PPI: The rest hold out for now

June 19th, 2011

In the latest news from the ongoing battle between consumers and large financial institutions, Barclays has said it will pay out compensation to everyone to whom it sold payment protection insurance and who made a complaint before 20 April.

Customers will be reimbursed the total value of all premiums plus 8% interest. The bank said the move would affect tens of thousands of customers, particularly those put on hold during a recent judicial review.

Barclays said it was the first bank to pay out PPI compensation on a “no-quibble” basis. It said its customers had waited long enough because of the long-running judicial review, and this would allow it to clear the backlog quickly and assess new cases more quickly.

Separately, the FSA has given three banks – Barclays, Lloyds, and RBS – more time to deal with their huge backlogs of complaints and a flood of new complaints.

As an indication of the scale of the problem, the Financial Ombudsman Service (FOS) revealed that since the start of April this year, it had received 40,000 new PPI complaints from people unhappy that their original complaint had been turned down by their bank.

In April, the banking industry lost its High Court challenge to new rules on the sale of PPI.
These were imposed last year by the Financial Services Authority (FSA) and the FOS. Among other things, the rules require sellers of PPI polices to review all their past sales to see if their customers have a claim for mis-selling, whether or not they have actually complained.

While the legal case was going on the banks put on hold tens of thousands of fresh PPI complaints that came in.

After losing their case, Lloyds Banking Group set aside £3.2bn to cover the cost of this compensation, followed by Barclays (£1bn), RBS (£850m) and HSBC (£269m). Barclays now says complaints lodged before 20 April will be eligible for automatic reimbursement, while those received since then will be assessed on merit.

Although it was hoped that the Barclays announcement would lead directly to the other banks adopting the same policy, Lloyds later said it would not be paying out on a “no quibble” basis.

Normally, complaints would have to be dealt with in eight weeks. However, some firms are facing a huge backlog and now a surge of new complaints which has created a bottleneck”

Now the FSA has decided that as a temporary measure, complaints put on hold during the judicial review must be settled by the end of August. Fresh complaints since the end of the judicial review but received before 31 August must be dealt with in 16 weeks. And PPI complaints received after the end of August but before the end of 2011 can be dealt with in 12 weeks.

After that, the normal eight-week timetable will apply.

There is no doubt that this is good news for consumers, especially after the bank charges fiasco. Whether is marks a sea change in the attitudes towards their customers taken by large financial institutions remains to be seen and I, for one, am sceptical. However, this does show that consumers have the means of redress and can, eventually, get their money back with interest.

This entry was posted on Sunday, June 19th, 2011 at 1:06 pm and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

OFT moves to tackle credit scams

July 17th, 2011

The Office of Fair Trading (OFT) this week announced plans to tackle dishonest credit brokers that demand upfront fees for loans they have no intention of arranging. Firms found engaging in the scam practice will be closed down for the protection of consumers.

The measure is part of a general crackdown by the regulator following a complaint from Citizens’ Advice that said some unscrupulous firms were cold-calling thousands of potential borrowers and offering loans in return for hefty fees.

Evidence suggests some businesses are deliberately taking people’s money upfront with no realistic expectation of finding them the type of loan they need. To combat this, the OFT is making it mandatory for fees to be refunded if a loan is not agreed.

The OFT is going to ask the government to consider changing the law to ban outright the practice of credit brokers demanding upfront fees in exchange for arranging loans.

Citizens’ Advice had complained, in a so-called “super complaint”, that many people had received a text message or telephone call from these firms offering to find them an unsecured loan. Those who accepted were then charged the fees for little or no service in return.

The OFT estimates that 270,000 people had paid upfront fees to credit brokers in the past year, with complaints about them doubling between 2008 and 2010, an upfront fee of £70 was not uncommon, but the organisation had come across charges of up to £300.

The firms in question typically specialised in arranging unsecured loans for people who found it hard to borrow money because of their low incomes or past problems repaying debts.

Some victims, Citizens’ Advice said, had been persuaded to hand over their bank details and later found that money had been taken from their account without their permission. Victims struggled to get somebody to deal with the issue, and were charged a premium rate when calling to complain.

In parallel, the OFT will bring in new rules later this month for debt management firms to stop them making misleading claims in adverts, charging expensive fees upfront, giving poor advice or posing as charities.

As well as threatening to close down rogue credit brokers, the OFT is consulting on changes to its own rules to make it clear that borrowers already have a right in law for their fees to be refunded if the credit broker fails to introduce them to a potential lender and, if an introduction is made but a loan is not granted within six months, the fee must still be repaid.

The consumer minister Edward Davey welcomed the OFT’s proposed changes and has promised legislative action if required to back up the consumer protection initiative. Analysts have welcomed the moves as important steps to protect vulnerable consumers but pointed out that it will require continued vigilance as new loop holes will always be found by criminals and unscrupulous brokers.

This entry was posted on Sunday, July 17th, 2011 at 3:42 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Complaints about loan scams still increasing

August 23rd, 2011

Concerning news this week has shown that complaints about businesses that demand upfront fees for loans they never arrange have risen yet again, according to the Office of Fair Trading (OFT).

There were 3,167 complaints made to advice service Consumer Direct in the 12 months to the end of June, compared with 2,059 the previous year.

The OFT, independent advisors and this blog have all warned consumers not to pay a fee before receiving a loan. This is not standard practice and is a strong, although not conclusive, sign that you are being ensnared in a scam.

In June the OFT said that it was planning to strengthen regulations to safeguard borrowers. At that time it was estimated that 270,000 people had paid upfront fees to credit brokers in the previous year.

Many of the complaints involved credit applications during which potential borrowers were told to send an upfront fee through a money transfer service. A more suspicious demand is difficult to imagine so consumers are advised to be aware of this tactic.

There has also been an increase in complaints about companies who are not interested in the applicant’s credit history, that ask for payment of fees upfront and then disappear with the money.

Consumers are advised to check out the company carefully before agreeing to anything, including asking for a landline number, a physical address and doing a search about the company online, as well as checking that they have a valid credit licence.

Earlier this year, the OFT said it would close down rogue credit brokers, as well as propose changes to regulations that would give more opportunity to have fees refunded if loans were not made.

It also said it would ask the government to consider changing the law to ban outright the practice of credit brokers demanding upfront fees in exchange for arranging loans.

The OFT runs a register which shows whether a company has a valid licence to offer credit.

The problem with this type of scam is that the victims are often so desperate for money that it blinds them to the screamingly obvious flashing neon signs that read ‘scam’ in ten foot high letters.

In such a situation advice to take calm, rational decisions that take all the relevant factors into account is usually useless. However, if you or anyone you know are considering taking out a loan then that is exactly what you should do. If in doubt, consult a debt charity for assistance.

This entry was posted on Tuesday, August 23rd, 2011 at 5:31 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

UK Credit card spending restrained

July 23rd, 2011

The British Retail Consortium (BRC), which represents 90% of the UK’s shops and shopkeepers, this week said that credit card use fell last year as people turned to cash and debit cards to avoid borrowing.

The figures show that the number of transactions involving credit cards dropped 12.9%. The number of transactions involving cash also fell, although the average amount spent rose by 13% to £12.93. Debit card use jumped by 15.8%.

The BRC criticised the level of bank charges associated with credit cards, pointing out they are the most expensive payments they have to process.

On average in 2010, each retailer paid 1.7p per cash transaction to have the money transported and banked. The BRC said that the average charge for processing a credit card payment was 37.1p, compared with a debit card average of 9.2p.

Credit cards were used in just 10% of all transaction, but accounted to more than 44% of processing costs.

The BRC added that cash was the quickest way to pay. Using physical money took an average of 27.2 seconds, it said, compared with an average 39.4 seconds for a card payment.

The BRC’s annual Cost of Payment Collection Survey includes results from nearly eight billion transactions in store and online, 60% of the UK’s annual retail sales.

Retailers reported fraud losses had fallen by 37% compared with 2009 after investment in technology, such as the latest secure card readers, new levels of internet security and note checkers at tills.

The general trend with consumer spending is that hard-pressed customers are switching to cash and debit cards for the reassurance that they can’t spend what they haven’t got. This is why the use of credit cards has dropped sharply and cash still remains king, used for more than half of all retail payments.

It remains to be seen if this trend continues as the economy continues, but for now it seems that people are taking a much more sensible approach to their spending and levels of debt. Let’s just hope that these habits stick this time.

This entry was posted on Saturday, July 23rd, 2011 at 4:54 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.