Money Advice Update - September 2018

 

Wonga collapses into administration

Wonga, the payday lender that became notorious for its extortionate interest rates and was a toxic symbol of Britain’s household debt crisis, has collapsed into administration after it was brought down by a welter of compensation claims. Wonga’s loan book is valued at £400m. Its collapsed leaving an estimated 200,000 customers still owing more than £400m in short-term loans. But borrowers were told to continue making payments and administrators are expected to sell Wonga’s loan book to another lending firm. After emergency talks the finance industry watchdog, the Financial Conduct Authority, said it would continue to supervise Wonga and seek fair treatment for customers.

To read the full article click here.

 

Credit Connect reports that Experian secures Financial Conduct Authority (FCA) mortgage eligibility permission

Experian has announced that it can now offer mortgage eligibility services to consumers after securing permission from the FCA.  The permission means Experian will now roll out its eligibility tool to all its customers, giving potential homeowners the opportunity to find out which mortgages they are likely to be accepted for, and how much they could borrow, based on lenders’ criteria. It aims to revolutionise the mortgage journey for consumers, giving them more confidence about their options when they speak to a mortgage broker for professional advice.

 

MAS launches Student Financial Capability Research

To understand the financial pressures facing students we collaborated with the National Association of Student Money Advisers (NASMA) to commission a unique survey of the UK student population. This research, conducted with 5,118 full-time undergraduate students, examines the student experience of money at university or college. Most Higher-education students feel confident managing their money and pay attention to their finances. For example, three-quarters check their bank balance at least once a week. Students are not afraid to ask for help or seek guidance when needed. However, there is still significant cause for concern, over 431,000 students are finding keeping up with their study costs, including course materials, travel costs and accommodation, a ‘heavy burden’. One in five find themselves frequently overdrawn and of those, 40% have gone over their overdraft limit or used an unauthorised overdraft.

To read more about the research click here.

 

Vulnerability Academy: Improving outcomes for customers in vulnerable circumstances

The FCA has settled on its definition of consumer vulnerability and the need for firms to ensure indicators of vulnerability are spotted and responded to in a considered manner remains an important focus. Whilst firms are making progress to address the expectations of the regulator, many firms recognise the need to improve their internal knowledge and understanding of key issues staff face to ensure customers are treated fairly and appropriately. In response to this need, UK Finance and the Money Advice Trust have launched the Vulnerability Academy.

To read more about the vulnerability academy click here.

 

Arrow Global predicts by 2022 personal insolvencies to hit 105,000 per annum

Personal insolvencies are on track to hit 105,000 per annum by 2022 breaking highs last seen six years ago, according to their latest econometric forecast – Debt Britain 2018. Analysis shows that personal insolvencies have been on the increase since 2015 and rising interest rates on the back of the Bank of England base rate rise is fuelling the acceleration. This is despite a slight dip in 2019 due to the lagged effect of the post-Brexit referendum bank base rate cut and subdued unemployment rate. From analysis of the Office for Budget Responsibility projections for interest rates, unemployment and consumer debt, Arrow Global also identified that the performance of insolvencies has been worse than that of debt defaults and repossessions in recent years. This development could be to the result of an increased willingness of people to address excessive debt through a formal arrangement with creditors.

To read the full report click here.

 

Credit Connect highlight LiveLend research on hidden loan fees

New research from LiveLend has revealed that more than one in four (26%) people who took out a loan in the last five years were stung by extra costs they had not noticed. The research showed that most consumers are most likely to be caught out by fees for ‘same day money’ followed by missed or late payments. Other borrowers are tripped up by early repayment charges, which often apply to people who are trying to be sensible by paying their loan off early. However, four in five (79%) say the charges were not made clear at the point of sale. Additional market analysis shows that 91 per cent of major banks and loan providers charge these additional fees, which are often not made clear to consumers and the amounts can vary dramatically between providers. For example, early repayment fees, which are charged by two-thirds (66%) of providers, range between 28 days interest and 58 days interest. On a loan of £10,000 with an APR of 25 per cent, this could be anywhere between £172 and £358 depending on the provider. In total, loan companies and banks have made £164 million from these unsuspecting customers over the last five years, but even those who aren’t ‘caught out’ by these extra fees think it’s unfair that they’re so often buried in the small print.

To read the full article click here.

 

Monetary Policy Committee voted unanimously to raise bank rate to 0.75%

In August, the Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 1 August 2018, the MPC voted unanimously to increase Bank Rate by 0.25 percentage points, to 0.75%. Since the May Inflation Report, the near-term outlook has evolved broadly in line with the MPC’s expectations. Recent data appear to confirm that the dip in output in the first quarter was temporary, with momentum recovering in the second quarter. The labour market has continued to tighten and unit labour cost growth has firmed.

To read the full account click here.

 

The Office of National Statistics (ONS) publish research making ends meet: are households living beyond their means?

UK households have seen their outgoings surpass their income for the first time in nearly 30 years. Households’ outgoings last outstripped their income for a whole year in 1988. Even in the run-up to the financial crisis of 2008 and 2009 – when 100% (and more) mortgages were offered to homebuyers without a deposit – the country did not reach a point where the average household was a net borrower. To fund this shortfall, households either have to borrow – at which point they could be living beyond their means – or dip into their savings and our data show they are borrowing more and saving less. In total, households accumulated more debt (due mainly to loans) than assets (such as deposits, bonds, shares and pensions) in 2017 for the first time since records began in 1987. If this were to continue, households could risk lacking enough collateral to cover their debt. According to our recent expenditure poverty analysis based on Living Costs and Food Survey data, the poorest 10% of households spent two-and-a-half times their disposable income, on average, in the financial year ending 2017. In contrast, the richest 10% spent less than half of their available income during the same period.

To read the full article click here.

 

HM Treasury response to the Breathing space scheme call for evidence

The government is committed to implementing this scheme as soon as is practicable, and intends to lay regulations to establish the scheme during 2019. As the Economic Secretary to the Treasury confirmed during the passage of the Financial Guidance and Claims Act, the government will provide a suitable alternative access mechanism to the scheme for those receiving NHS treatment for a mental health crisis. 

To read the full response click here.

 

This is Money reports Provident Financial accused of helping customers to hide debts from spouses

Disgraced door-to-door lender Provident Financial offered customers 'silent accounts' that enabled them to keep their debts secret from their partners, according to a former executive. The firm also signed up customers to tiny loan deals they did not need and could easily repay, in order to flatter its accounts by making it look as though it had large numbers of reliable customers – a practice known as 'pot busting'. Andy Parkinson was dismissed a year ago following a catastrophic overhaul of the agents' network at Bradford-based Provident. He brought a tribunal claim which has heard in Leeds that in 2013 Provident was involved in 'canvassing of potential customers on their doorstep which was at best non-compliant and the outcome probably illegal'. Parkinson said Provident was 'systematically ignoring affordability considerations', paying no attention to whether customers could manage the loans. 

To read the full article click here.

 

CAP publishes powerless people briefing paper

Almost half (49%) of the people helped with debt by CAP have owed money to the DWP, HMRC or their local authority. In this briefing paper, we explore the experience of being indebted to the government and how debt collection processes create fear, leave clients powerless and render debts unmanageable. A more consistent and co-ordinated approach is needed to support those in hardship.

To read the full paper click here.

 

Which? Reports cuts to free cashpoints are on the way

Which? are concerned about the impact on communities’ and consumers’ ability to freely access cash. Despite the introduction of a host of measures to lessen the impact on cashpoint closures on rural communities, including a bolstered Financial Inclusion Programme, we remained unconvinced that Link would be able to minimise the closure of machines across the network. Cashpoint closures following Link’s announcement actually increased six-fold from 50 per month in 2015 to 300 a month during the six-month period we analysed. Our investigation found more machines were lost proportionally in rural communities (-2.1%) than urban areas (-2%) across the UK, despite Link’s pledge that these changes would target urban, not rural machines. Coupled with the rate of bank branch closures, such closures will hit rural communities especially hard.

To read the full article click here.

 

Mailonline reports millions of savers are being hit by rip off rates as banks STILL fail to pass on last month’s interest rates rise announced by the Bank of England

The Bank of England increased the base rate by 0.25 percentage points. Yet most easy access account holders only saw a paltry 0.06 points extra in interest. The worst offender listed by Moneyfacts is Lloyds, which has not increased its Easy Saver account for new customers at all since the rate rise in August. Millions of long-suffering savers have missed out on a rise in Bank of England interest rates as lenders pocket the profits instead. It leaves the big lenders open to the accusation that they are keeping the difference for themselves.

To read the full article click here.

 

Mailonline report the contactless revolution is taking over but we'll regret it if Britain becomes a cashless society

Not long ago, you'd walk into shops, especially independent ones, and many weren't all that keen to take a card payment. Cash was the preferred method. Now the tables have turned, facilitated largely by the relentless drive to contactless payments. The contactless revolution has been swift. Contactless vs cash: In a matter of years, contactless payments are roughly the same level as those made with physical money. Most banks now dish out contactless cards alongside current accounts without an option not to. Last week, the Bank of England said that the case to remove 1p and 2p coins was growing thanks to inflation. A decade ago, more than 60 per cent of transactions in Britain were cash. Now, it has fallen to a third. Contactless accounts for a third of all payments. We are seeing the number of cash machines fall and many more may go if they don't remain profitable – i.e., not enough people use them. Sweden is an example of a country in which cash has died even quicker than Britain. Only two per cent of all transactions are now with physical money in the Scandinavian country.

To read the full article click here.