Jan
18
Tougher Bankruptcy Restrictions for Middlesbrough Man’s Credit Card Spending Spree
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Colin Robert John Cliff, from Middlesbrough, has become the first person in the North East region to be subjected to tougher bankruptcy restrictions as he was found him guilty of “unreasonable extravagance”, the Insolvency Service reported today. He will now be subject to bankruptcy restrictions for the next three years.
Soon after losing his job last year, Mr. Cliff ran up debts of £4,284 on his new credit card. Over twenty days he used the card to pay for a holiday, clothes, accessories and to make cash withdrawals, even though he had no prospect of being able to repay what he spent. Less than six weeks later he filed his own petition for bankruptcy with his debts now standing at an estimated £13,740.
Changes to the laws under the Enterprise Act 2002,which effect personal bankruptcy, came into force on the 1st April 2004. Under the new rules bankrupts are now automatically discharged after one year. However, if an Official Receiver considers the bankrupt to be dishonest or blameworthy a Bankruptcy Restriction Order (BRO) may be sought, or a Bankruptcy Restriction Undertaking (BRU) may be accepted.
Under both a BRO and a BRU, the same restrictions that apply during bankruptcy can be imposed for a period of between 2 and 15 years on a bankrupt or former bankrupt, as well as some additional ones. Breaching the obligations imposed by a BRO or BRU may lead to criminal prosecution and even imprisonment.
In November last year, a Birkenhead woman became the first person to be subject to a Bankruptcy Restriction Undertaking as she agreed she was guilty of “unfit conduct” in the period leading up to her bankruptcy. In accepting the BRU she became subject to bankruptcy restrictions for six years.
Desmond Flynn, Insolvency Service, Inspector General and Agency Chief Executive said, “The Official Receiver will always seek to establish the reasons for any bankruptcy. During the course of those investigations, dishonest or blameworthy individuals will be identified and restrictions sought to protect potential creditors from losses and act as a deterrent to others”.
The number of BROs and BRUs are expected to escalate as ever-growing numbers of wantonly indebted consumers seek bankruptcy as a way of abdicating responsibility for their debts.
Jan
14
Record Numbers Seeking Help With Debts
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The number of people seeking advice for debt problems is at all-time highs as Christmas spending is expected to exacerbate financial problems.
All areas of the debt advice sector are reporting a surge in the number of people seeking help and advice with their debt repayment problems.
On Tuesday 4th January, the first working day after the holidays, the Consumer Credit Counselling Service reported a record number of calls as it received 1,000 calls in a single day. In December it received over 12,000 calls, a 77% increase on the same period the year before.
At the not-for-profit Debt Advice Bureau, the only national debt advice service staffed completely by unpaid volunteers, the number of people seeking advice has doubled.
The organisation, which helps set-up free debt management plans, as well as Individual Voluntary Arrangements and Trust Deeds, for those unable to repay their debts, has been receiving enquiries in record numbers. The last three months of 2004 saw the number of formal and informal arrangements initiated up over 120% in each month, with December up 168% on the previous year.
“In the first twelve days of January we have already initiated as many arrangements for clients as we did in the whole of January 2004″, said Debt Advice Bureau director, Stephen Rose.
There have been large year-on-year increases across the board. PayPlan, the debt management company, reported that calls throughout November, December and January were up around 50% on the previous year.
Likewise, Citizens Advice Bureaux across the country have seen sharp increases in the numbers in debt-related enquiries. According to a spokeswoman, the organisation as a whole is currently receiving 1.1 million calls a year, but that is expected to rise.
It is not just the number of people with debt problems that is rising, the level of debt has also increased. In July 2004, the level of total borrowing of British consumers surpassed the £1 trillion mark, with about 80% of that secured against homes and 20% unsecured in the form of loans, credit cards, store cards and catalogue credit.
Figures form the Debt Advice Bureau show that whilst the average unsecured debt of people initiating arrangements with them in January 2004 was £27,738, so far this year it is £30,432, an increase of nearly 10%.
“Many people could avoid a lot of the problems with creditors if they address their debt problems soon enough”, says Mr. Rose. “Too often people contact us when things have deteriorated to th point that court action is being threatened”.
A recent study highlighted that those with debt problems wait more than a year before they begin dealing with them.
It is important that if you are having problems that you seek help early, advise debt counsellors. Prepare a budget to see what you can afford, prioritise your debts and do not borrow more money in order to meet existing repayments or pay off existing debts.
Jan
12
More Borrowers Plan to Reduce their Debts
Filed Under Debt Advice, News | Leave a Comment
49% of people with debts say they plan to cut their borrowing over the next six months, according to the latest Consumer Sentiment Report from the Nationwide building society, a 7 percentage point jump from last month and a massive increase from the mere 16% who were planning to cut borrowing six months ago.
Whilst people don’t expect to save more, the report reveals, they do intend to spend less and use the increased disposable income to reduce their debt.
“It is encouraging that consumers appear to be taking a responsible view of borrowing and more people appear to be planning to reduce their level of household debt.”, said Stuart Bernau, Nationwide’s executive director, commenting on the figures.
The five interest rate rises between November 2003 and August 2004 seem to have had the desired effect in encouraging those with debts to focus more money on repaying what they owe. The rising rates have not dampened views on how the economy or housing market will perform over the next six months as confidence remained positive.
There was a concerning negative in the figures. The number of those struggling with making debt repayments continues to rise. According to Nationwide, the number has been gradually increasing for the last six months with 7% of those surveyed this time reporting that they usually struggled to meet their debt repayments, a massive increase from the 2% figure for June 2004.
As for any Christmas debt hangover, people are generally confident about their ability to pay off what they borrowed for the festivities, the study of 1000 people revealed.
Half (51%) of consumers expect to have finished paying for Christmas within a month of the end of the celebrations. Another 29% expect to have paid everything off by the end of March, in time for Easter. This still leaves 19% who expect to have outstanding Christmas debt outstanding at the start of April, with 8% anticipating that they will still to be paying for Christmas at the end of June and 1% who do not expect to have repaid their 2004 Christmas debt before 2006.
Jan
10
Zero Rate Balance Transfers: Rest in Peace
Filed Under News, Tax, credit cards | Leave a Comment
It could be the end of 0% balance transfer deals on credit cards as card issuers are forced to introduce charges in order to stem the losses caused by “rate tarts” who continually switch from one zero rate deal to another.
Last week Mint, owned by Royal Bank of Scotland, joined the ranks of providers such as MBNA and Barclaycard when it became the latest card issuer to impose a one-off fee on balance transfers form other credit cards onto their 0% deals.
Until the summer last year transferring balances to a 0% or low rate credit card was free. Last August that all changed as Barclaycard heralded the impending demise of free balance transfers when it became the first card issuer to introduce fees for transfers, charging 2%, up to a maximum of £35, of the total amount transferred to its 0% rate.
MBNA, which issues hundreds of cards including many offering 0% on balance transfer for 9 months, followed as it added a 2% charge, minimum £3 and maximum £50, to total balance transfers across the majority of the cards.
“The imminent demise of completely free borrowing should not come as a shock”, says Charles Edwards, author of “Don’t Pay Interest”. “Any technique which enables borrowers to profit and ends up costing the credit card companies will eventually be killed off”.
“Interest holidays on balance transfers, fee-free credit card cheques and even cashback on balance transfers are all dead and buried. It is not surprising that something as expensive for the credit card companies as fees free 0% balance transfers should be facing a death sentence”.
Other card issuers are expected to follow suit and introduce fees for balance transfers as they try recoup some of the losses incurred as a result of borrowers who endlessly revolve their debts form one 0% deal to another.
The advice for now. “Make use of fee-free balance transfer deals while you can”.
Jan
7
Annual bonuses paid on with-profits policies by insurance companies are expected to be cut with long term policies, in particular the 25-year mortgage endowments, most likely to be hit, the Faculty and Institute of Actuaries have warned.
The warning has been made as the life assurers start declaring the annual bonuses their policyholders will receive in respect of 2004. Whilst those with shorter term policies may be over the worst, i.e. those with durations of 10 years or less, it is those with with-profit endowments intended to pay off their mortgage that are most likely to see reduced bonuses for some time yet.
“Policyholders are seeing the results of lower returns in terms of reduced bonuses now and, in all likelihood, for several years to come”, said Nigel Masters, Chairman of the Actuarial Profession’s Life Board. “This is a reflection of the lower returns available from stockmarkets and other investments around the world”.
Which means investors thinking that there will be a return to the high bonus payouts of the late 1990s will be disappointed. The combination of low yields on government bonds and declining stock market from 2000 to 2003 mean a reduced pay out for policyholders.
In addition, the sale of equities forced on insurers during 2002 and 2003 so that they could comply with the FSA’s strict solvency requirements meant that when stockmarkets did rise they did not reap the full benefit of that rise.
The smoothing process of with profits policies designed to protect investors form volatility, and which enabled them to receive bonuses during the stockmarket’s persistent decline, means that even if stockmarkets continue to improve, bonuses will maintain their very low levels for some time yet.
Jan
5
Don’t be Conned: OFT Warns of Loan Fee Scam
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The Office of Fair Trading today warned UK consumers against being caught by a loan advance fee scam originating from Canada and targeting British borrowers.
Advertisements have been appearing in local newspapers across the country offering fast loans regardless of credit history. The adverts, which have a freephone number to call, are usually placed in the classified sections of free or local newspapers.
Consumers responding to the ads are told that their loan has been agreed but before they can have the money they have to pay a fee to cover insurance of the loan. The applicant is told they must pay this fee by money order via Western Union or Money Gram. Once the fee is paid the applicant doesn’t hear from the company again and never receives the promised loan. Some victims have lost up £4,000 says the OFT.
One such victim is Mrs. Lockwood who applied for a loan after seeing an advert in her local paper. She was told that her application for a £3,000 loan had been approved but that she would need to pay £300 insurance. She paid the money but never received her loan. When she tried to call back the freephone number to complain the number had been disconnected. Mrs. Lockwood then received another call from someone purporting to be from the company who said she would need to pay more money to cover taxes in Canada. Luckily this time she refused and alerted the OFT.
The OFT has called on newspapers to be vigilant against this scam. OFT Chairman, John Vickers, said: “Any newspapers who are approached to put adverts of this sort in their papers should immediately contact the OFT and give details of who contacted them and the advert they attempted to place”.
Mr. Vickers also counsels, “Consumers should be wary of any business which requires an advance fee to be paid via Western Union or MoneyGram”.
The scam is being run by professional criminals and the OFT is also concerned that organised criminal gangs may be using the personal details collected from victims of this scam to commit further fraud. It is currently working closely with the Canadian authorities to take action against these fraudsters.
The OFT It is urging consumers who have been contacted in this scam to report it to them by calling 08457 22 44 99 or by emailing enquiries[at]oft[dot]gov[dot]uk.
Jan
4
The number of mortgages approved across the UK has fallen sharply to its lowest level for nearly a decade, adding further evidence that house prices may not just cool but could turn decidedly cold.
The Bank of England (BoE) today said that mortgage approvals fell to just 77,000 in November, down dramatically from a revised 85,000 in October and the lowest number since September 1995 when 74,000 loans were approved.
Mortgage lending rose by £6.46bn in November, from £6.93bn, the lowest growth since June 2002 and a near 7 percent decline. Growth in unsecured lending, which includes personal loans and credit cards, has also fallen back. Unsecured lending rose by £1.38bn in November, compared to £1.51bn in the previous month, more than 8 percent reduction in lending growth.
Grim Reading
These numbers make grim reading for the BoE, the housing industry, retailers, the general public as a whole and homeowners in particular.
The BoE’s figures echo the recent reports from various mortgage lenders that the housing market slowed in December and could stall completely in the New Year.
“It looks like demand in the housing market has weakened and it’s going to continue weakening,” said George Buckley, an economist at Deutsche Bank.
In fact, house prices have declined for three of the past four months, according to HBoS PLC, the UK’s biggest mortgage lender. 2005 could actually be a negative year for house prices, something which has not happened for a decade.
James Knightly, an economist at ING Financial Markets, was more direct saying that house prices could fall by as much as 10% during 2005.
The Only Way Is Down
The news of lower mortgage lending had an immediate impact as the pound weakened against other the US dollar and other currencies, a sign that the markets expect that the next move by the BoE will be to lower interest rates and will be sooner than everyone thought.
The BoE has raised interest rates five times since November 2003, taking the base rate from a 48-year low of 3.5 percent to the current 4.75 percent in an attempt to curtail the British desire for debt.
“The latest MPC minutes suggest that the committee is starting to react to the weaker data, which could see a 0.25 percent cut as early as the spring”, said Knightly. Though Buckley does not see rates being cut until the second half of the year.
For now the BoE is expected to stay their hand and wait for more data. With December’s mortgage lending figures expected to be weak too, attention will no doubt be turned to house prices, retail sales and consumer spending in general. Whenever the BoE does act it is clear that, for interest rates and house prices, the only way is down.