A report from the Institute for Public Policy Research (IPPR) said the UK’s credit unions should be expanded as a major source of affordable ethical lending; and the expansion should be financed by a levy on the consumer credit industry. The report received wide support from religious leaders. Continue reading
Tag Archives: FCA
END OF THE ROAD FOR PAYDAY LENDERS? WHO REPLACES THEM?
Payday lenders are the current target of regulators. The cap being introduced in January will force nearly all of these firms out of business, claims the FCA. Continue reading
“SHOCKING NEW LOW FOR THE PAYDAY LOAN INDUSTRY?”
Wonga, the UK’s largest payday loan company, has been ordered to pay £2.6m in compensation, after sending letters from non-existent law firms to customers in arrears.
The letters threatened legal action, but the law firms were false. In some cases Wonga added fees for the letters to customers’ accounts, according to the BBC.
The customers affected (45,000 of them) will each receive £50 for distress (a piddling amount, surely?) plus any legal fees they have encountered. The regulator in this case is the Financial Conduct Authority (FCA); they cannot however fine Wonga because the offences happened before they started regulating payday loans companies.
Richard Lloyd, executive director of consumer group Which?, said: “It is right the FCA is taking a tougher line on irresponsible lending and it does not get much more irresponsible than this.
“It is a shocking new low for the payday industry that is already dogged by bad practice and Wonga deserves to have the book thrown at it.”
Tougher line? £50 each? I imagine the people at Wonga are laughing.
Wonga is not the only lender to do this. Back in my debt-crisis days, I received a letter from a non-existent firm of solicitors. I was only alerted to the fact when I noticed that the initials of the firm were identical to those of the bank that was chasing me for the debt. It’s sharp practice and could cause considerable distress, because most people have a healthy respect for the law. And that’s how it should be. So to use that fact in this way is pretty despicable. £50 each, eh?
There is an existing Code of Practice from the Office of Fair Trading (OFT) regarding harassment of debtors, although it is often ignored. I’ve blogged about it more than once; for details click HERE.
WANT TO KNOW MORE?
For the BBC News item, click HERE.
For the OFT Code of Practice regarding harassment of debtors, click HERE.
PAYDAY LOANS SUMMIT: BUT NO ACTION YET
Payday loan providers have attracted column inches from many writers, including yours truly. Now these firms have been summoned to a “summit” hosted by Government ministers.
Will concrete action follow?
Here’s a précis of a story in the Independent today.
Payday lending: adverts to face ban?
Payday lending advertising could be banned, under hard-hitting new rules being considered by the new City Watchdog the FCA.
The high-cost credit industry (that’s a new term to me) also faces a crackdown on the number of times they can rollover loans; and they may be forced to introduce time-lags, so borrowers don’t end up choosing a lender on the basis of how quickly it can get the cash.
This emerged from a Westminster summit yesterday. Consumer Minister Jo Swinson, who hosted the summit, said there is a need to control the number of loans borrowers are allowed to take out. She intimated that lenders could be forced to set up a central register of borrowers to cut the practice of multiple loans. One borrower reportedly had 34 different loans at the same time.
Ministers were told of far-reaching proposals that could ban daytime adverts on television that target the unwaged and vulnerable people. However the FCA’s Martin Wheatley didn’t rule out a blanket ban on lenders. “That power will be available to us,” he said.
Delroy Corinaldi of debt charity Step Change called for all payday loan advertising to carry a health warning that includes information about the risks of using high-cost credit. “In particular, companies must be clear that loans need to be realistic and affordable and are not a way to deal with long-term financial problems,” he said.
Citizens Advice’s Gillian Guy was keen to see new action on advertising. “Payday lenders need to be clear about who they are targeting. We see daytime television adverts with glamorous celebrity endorsements, targeted at the unemployed and those on low incomes.”
The FCA also announced at the summit that a consultation will be launched in September to decide its approach to controlling payday lenders.
However Richard Lloyd of Which? said: “Positive noises about tough new rules have come out of the summit … but these must now be backed up with more concrete actions than we’ve seen today.”
DO YOU WANT TO KNOW MORE?
Here’s the full story from The Independent.
Here’s my last post on this issue.
NEW WATCHDOG URGED TO CHALLENGE UNFAIR MORTGAGE TERMS
Yesterday (01.04.13) saw the official launch of the new Financial Conduct Authority (FCA). Many people in the UK media have expressed the hope that it’ll be more effective than the FSA that it replaces.
It was unfortunate that the chosen launch date was (a) April Fool’s Day and (b) a Bank Holiday, when it was a good bet that nobody would be at work; neither in the new authority nor in most of the organisations over which it was supposed to be watchdogging.
As I flagged up recently, Sunday Times Money (31.03.13) published a list of ten demands for the new watchdog. I am featuring three of them on this blog.
Unfair mortgage terms
According to Holly Thomas, who wrote the Sunday Times Money feature, the small print in bank and building society contracts is a source of problems.
[It was ever thus! Which of us reads the small print? I know I don’t. Maybe that’s one of the reasons I got into my own financial troubles]
Thomas writes that in 2010 a well-known building society (I’m not going to name them, for fear of legal action; my legal budget is not as large as that of the Sunday Times) scrapped the ceiling on its SVR (standard variable rate). By doing that it reneged on its promise that customers would never pay more than 3% over Bank base rate.
And a bank sparked outrage (I’m not surprised) when it announced rate rises for some so-called “lifetime tracker” mortgages … although the aforementioned base rate had stayed unchanged at 0.5%. In some cases rates would double, adding thousands a year!
Happy ending … for some?
There might be a happy ending for the tracker mortgage story; at least for some customers. The impressive Andrew Tyrie, chairman of the Commons Treasury subcommittee, raised concerns with Martin Wheatley, head of the new FCA. As a result, the FCA says that “the bank … volunteered that they would exclude customers from the change where there is evidence … that the customer could have been led to believe that the differential was for the ‘life’ or ‘lifetime’ of the product.”
Back to the ‘small print’ issue. That bank claims that all the affected customers were issued with contracts “clearly stating that it could change the margin.” However, they have declined to show examples of the terms and conditions to the newspaper. I wonder why.
I don’t know as much of this case as I’d like but, if half of this story is true, I’m tempted to ask the bank a variant of the time-honoured question. For example: “Which part of the phrase ‘lifetime tracker’ did we misunderstand?”
What does this mean in practical terms? For example some customers will see their rate jump from base rate plus 1.75 points to base plus 2.49 in May and it will jump again to base plus 3.99 points in October. If that’s true then only one word fits: outrageous.
Of course commercial organisations can charge what they like … provided they didn’t promise something totally different; and that seems to be what happened here. A class action against the above bank is being pursued by Justin Selig, of law firm The Law Department. So far 170 complainants are being joined to the action.
All of them thought they were on a lifetime tracker and the lawyer says he’s “seen nothing to indicate otherwise.” Enough said.
WANT TO KNOW MORE?
For the Sunday Times Money article by Holly Thomas, “10 priorities for the new consumer watchdog”:
“PENSION LIBERATION PLANS”: FACING A BAN?
Last month I wrote about so-called “pension liberation plans”, which are a very tempting way to release funds below the age of 55 but in many cases turn out unwise. Today’s “Sunday Times” urges that they should be banned by a new financial watchdog that will launch tomorrow.
According to the paper, the new Financial Conduct Authority (FCA) replaces the much-criticised Financial Services Authority (FSA), “which failed to prevent scandals involving payment protection insurance (PPI), endowment policies and split-capital* investment trusts.” The new body promises to act fast and ban poor products overnight, which is to be applauded.
As for these pension liberation plans, which have grown rapidly; they promise to release funds from your pension before the age of 55, when it’s normally available, by transferring the funds into another scheme, often offshore. However the fees can be eye-watering and they can attract extra tax penalties of up to 70%.
[* I admit that when I read the article I was worried about the mention of split-cap investment trusts. Over the past year I have become a fan of investment trusts or “ITs”; I hadn’t heard of this particular scandal and I wondered if I had invested unwisely. Turns out I needn’t have worried; the scandal appears to have been unveiled, and cleared up, nearly ten years ago; and it concerned a specific type of fixed-term investment trust.]