Payday loan borrowing’s quadruple increase

The number of individuals turning to payday loans to keep them afloat until their next pay-cheque has quadrupled over two years, according to the Citizens Advice Bureau.

Payday loans are attractive to some because they are a quick way of gaining short-term credit, however the charity is concerned that is has become too easy to obtain such credit and is calling for tighter regulation.

Peter Tutton, of the Citizens Advice Bureau, told the BBC: “The sort of regulatory regime isn’t working to protect people, so there’s work for the government to do.

“The government needs to look at consumer credit and get really serious about making it more effective. We need better sorts of messages to firms that it’s not acceptable to treat people badly.”

The Consumer Minister Ed Davey said, "In the last government - the Labour government looked at capping interest rate costs of credit three times.

"And the last Labour government rejected it three times because they were concerned that they would push vulnerable consumers into the hands of these illegal money lenders who are really the nasty of the nasty."

He reportedly raised concerns that tougher payday loan measures could result in people turning to illegal loan sharks.

There are fears that it is too easy to get caught in a payday loan spiral, as Steve Perry, who took out 64 loans from 12 different companies over 18 months, leaving him with a debt of £22,000, told the BBC it was the "roll over loan process" that needed to be tackled.

Some companies are charging as much as 4,000 per cent interest rates, which means that, if debts are rolled over, the interest owed can, quite quickly, get out of control.

Mr Perry added: "The repeat loans where people are going back month after month, either paying off in full and borrowing again or paying the interest only on a loan.

"People can do this for up to twelve months, every single month, this is what's really trapping people."

Stephen Skarloff, head of the Finance and Leasing Association, Stephen Sklaroff, spoke to the BBC. He said, "There's a responsibility on the borrower, as well as on the lender, to make sure that all the information is on the table."

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Posted in: borrowings,increase,payday,quadruple

Inflation increase pushes consumers deeper into debt

Inflation increase pushes consumers deeper into debt

The inflation rate rose to 4.5% in August, according to the latest figures from the Office for National Statistics.
The main contributing factors included rising utility bills, higher food and clothing prices.

The rate increased from 4.4% in July and the Bank of England expects the Consumer Price Index to rise to 5% before the end of the year.

This is grave news for consumers as the cost of living soars, plummeting UK households further into debt.

Wages are not rising in line with inflation though, which leaves consumers with less to spend and more debts to cover.

The price of clothing and footwear increased at the fastest rate on record (3.7%) for the July to August period.

The end of the summer sales and introduction to autumn prices saw female clothing increase more than male or children’s wear.

Furniture and home goods also experienced a price rise, from 2% between July and August compared with a 1 % rise a year ago.

The biggest annual rise in the water and energy bills in more than two years has also pushed up the rate of inflation.

Gas and electricity prices from 5 of the “big 6 “energy suppliers have risen by around 20%, adding between £150 and £200 to the average annual fuel bill.

The inflation rate is now double the Bank of England’s target rate of 2%, with little sign of returning to the target rate soon.

The increased rate of inflation will have a detrimental effect on the pockets of cash-strapped Brits.

New research from Alliance Trust Savings found that 65-74 year olds are the age group which will suffer the highest inflation rate at 5.4%, which is the fastest rate of price change since October 2008.

Those under 30 face an inflation rate of 4.9%, which is the highest rate to face people in this age bracket since September 2008.

Mounting debt prevents Brits from saving

Kevin Mountford, head of banking at moneysupermarket.com, commented on the increased cost of living, “Basic rate tax payers now need an account paying at least 5.63 per cent just to preserve the value of their savings, rising to 7.51 per cent for higher rate tax payers and a staggering 9.01 per cent for savers paying the top rate of tax. Currently no savings accounts pay enough to offset the damage done by inflation.

“While most savers won’t be able to secure an inflation beating product, it is still vitally important they check their rates and be prepared to switch if they are not on the most competitive deal. The difference between the average and top paying rates is considerable, so moving to a better deal can go a huge way in helping savers limit the impact on their pots.

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Demand for debt advice likely to increase

Anyone who has needed to see a debt advice professional over recent years will know how much more difficult this has become due to the soaring demand for these services from the many consumers who are struggling with their finances and finding it difficult to repay their debts. Many have had to wait for long periods of time in order to get an appointment with a debt counsellor to discuss debt problems and issues.

There are now fears that the situation could actually get worse with the demand for debt advice rising as a result of government cutbacks amongst other things. The austerity drive that was announced by the government last year and is due to be imposed over the course of this year and next year will have a profound impact on the finances of many people, such as those who see their benefits cut or those that will see their jobs go due to cutbacks in the public sector, which can then have a knock on effect in the private sector.

However, officials have said that it is not only the austerity drive in the UK that will drive people into worse financial situations but the similar situations that are going on around the world, which has a knock on effect on the UK. Some even think that the UK could be in line for another recession, which would bring dire news for businesses and consumers alike.

One official spoke about the cutbacks and economic situation in the UK and in other countries, stating: “At the moment it just seems to be a worldwide trend. I think the inevitable consequences of that is it is going to be a difficult period ahead, not just for the UK but for much of the world.”

Tags: Financial Services, knock on effect, debt advice, financial planning, economic situation, consumers, appointment, fears

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Posted in: advice,Demand,increase,likely

Debt problems increase as home repossessions set to surge

There could be debt problems for thousands of homeowners after a leading bank chief warned that a surge in the number of home repossessions would follow if the base rate of interest increases.

Richard Banks, Chief Executive Officer of UK Asset Resolution, the government company that manages the £80 billion mortgage portfolio of the bailed out banks, also warned that the government’s efforts to try and help people that are struggling with their mortgage debt (by keeping them in their homes), it could lead to more severe debt problems in future.

The organisation is the country’s fifth-largest mortgage lender and has around 750,000 customers, although 23,000 of those mortgages are over six months behind with payments.

It was set up by the government to run the mortgages of nationalised lenders such as Bradford & Bingley and parts of Northern Rock.

Speaking to the Guardian newspaper Mr Banks said that lenders need to adopt a tough love approach, and that the projected number of people falling behind on payments could get ’scary’ if lenders did nothing to prepare for inevitable higher rates.

He warned: “You can see if you don’t do something about it, you can see a tsunami.

“It’s treating customers fairly, not nicely, because if you can’t afford your mortgage, you are only increasing your indebtedness.

“If we allow you to increase your indebtedness, that’s not really fair to you.”

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Posted in: increase,problems,Repossessions,surge

One third of people see personal debt increase

As most people know, the personal debt problem in the UK has become increasingly worse over recent year, and there are now many people that are experiencing great difficulties in terms of their finances as a result of rising debt and falling income. The soaring cost of living has added to the misery of the many people that are lumbered with unmanageable debt levels.

A recent survey was carried out in to the levels of debt amongst UK households and it emerged that many people had seen their personal debt levels increase over the past year alone. In fact, one third of consumers are said to have seen their personal debt levels, which does not include any mortgage debt, increase over the past year.

Of the one in three people who said that their personal debt levels had increased over the past twelve months around 10 percent said that their debt had increased by a large amount. When interviewed about their debt repayment habits around 7 percent of those polled were found to be making only the minimum repayment on their debt, which means that they will be paying the debt off for a far longer period and will pay a fortune in interest.

An official involved in the research stated: “The nation has been left reeling with inflation now at 4.5 per cent, the highest levels since 2008, and the crippling effects of soaring living costs. It therefore comes as no surprise that people have seen a rise in the amount they currently owe, compared to 2010. “It is vital credit card borrowers ensure the minimum amount at least is paid off each month, as a missing or late payment could result in the customer forfeiting their promotional rate or incurring fees as well as putting a black mark on their credit file – setting up a direct debit to prevent this is a must.”

Tags: United Kingdom, Credit, rate, personal debt problem, percent, recent survey

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Posted in: increase,people,personal,third

One third of people see personal debt increase

As most people know, the personal debt problem in the UK has become increasingly worse over recent year, and there are now many people that are experiencing great difficulties in terms of their finances as a result of rising debt and falling income. The soaring cost of living has added to the misery of the many people that are lumbered with unmanageable debt levels.

A recent survey was carried out in to the levels of debt amongst UK households and it emerged that many people had seen their personal debt levels increase over the past year alone. In fact, one third of consumers are said to have seen their personal debt levels, which does not include any mortgage debt, increase over the past year.

Of the one in three people who said that their personal debt levels had increased over the past twelve months around 10 percent said that their debt had increased by a large amount. When interviewed about their debt repayment habits around 7 percent of those polled were found to be making only the minimum repayment on their debt, which means that they will be paying the debt off for a far longer period and will pay a fortune in interest.

An official involved in the research stated: “The nation has been left reeling with inflation now at 4.5 per cent, the highest levels since 2008, and the crippling effects of soaring living costs. It therefore comes as no surprise that people have seen a rise in the amount they currently owe, compared to 2010. “It is vital credit card borrowers ensure the minimum amount at least is paid off each month, as a missing or late payment could result in the customer forfeiting their promotional rate or incurring fees as well as putting a black mark on their credit file – setting up a direct debit to prevent this is a must.”

Tags: United Kingdom, Credit, rate, personal debt problem, percent, recent survey

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Consumer credit licence fees set to increase

Wednesday 2nd March 2011

The OFT announced this week that it will be increasing the cost of its overall fees for all applications, so as to ensure that a greater level of scrutiny is given to each case.

It is the OFT’s responsibility to assess all licence applications and decide whether the applicant is competent for the applied role, which could be debt counselling or other positions which are deemed ‘high-risk’ to the consumer, including sub-prime lending.

This increased ‘scrutiny’ means that the applicant could be subject to site visits, staff interviews and compliance reviews.

Ray Watson, OFT Director of Consumer Credit, said:”We strive at all times to minimise costs for regulated businesses but we must fulfil our statutory duty to protect consumers in their dealings with credit businesses. This increase will allow us to do so.”

In real terms, this increase will result in a sole trader paying £435 for a five year credit licence application, up £21 per year from previously. For all other applications from non sole traders, the price is £1,075, up a sharp £51 per year.

 Yet despite the affect that the fee increase will have on the debt management sector, many industry professionals are applauding the OFT’s action and hoping that it will act as a barrier to entry from applicants who are unfit for the position and who reflect badly upon the reputation of the private debt management industry. 

Manchester debt firm is liquidated owing creditors over £2.2m
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Monday 2nd August 2010

Mortgage broker ordered to repay £1.5m of client money used to pay off debts
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Personal debt levels increase in February

According to recently released figures the level of personal debt in the UK increased for the month of February, with average household debt reaching almost £60,000. This shows an increase compared to the previous month. The figures were released by Credit Action and showed that the average household debt including mortgages showed a slight increase in February compared to January.

Many debt advisors and charities have already predicted that this will be a very challenging year in terms of the number of people struggling with high levels of debt. There is set to be continued demand for debt counselling services, which is already difficult to come by because of the sheer number of people that are seeking this sort of assistance at present. Many debt advisors were expecting to lose their jobs this spring due to government and funding cutbacks but the funding was found for another year.

There are many people that are already living in the red in terms of their overdrafts, loans, and credit cards, and with fears over rising unemployment the situation with regards to personal debt levels could continue to get worse. Whilst there are a number of possible options and solutions for those that do have debts that they are struggling to repay many are finding it difficult to even get the advice that they need.

Officials have urged consumers to ensure that if their situations change in a way that leaves them struggling to repay their debt they should take action sooner rather than later before the problem spirals out of control. There are a number of debt charities that can help those that need to get advice and assistance although the amount of time it takes to get to see an advisor can vary.

Tags: level, year, sheer number, government, consumer debt, February

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Consumer credit licence fees set to increase

The OFT announced this week that it will be increasing the cost of its overall fees for all applications, so as to ensure that a greater level of scrutiny is given to each case.

It is the OFT’s responsibility to assess all licence applications and decide whether the applicant is competent for the applied role, which could be debt counselling or other positions which are deemed ‘high-risk’ to the consumer, including sub-prime lending.

This increased ‘scrutiny’ means that the applicant could be subject to site visits, staff interviews and compliance reviews.

Ray Watson, OFT Director of Consumer Credit, said:”We strive at all times to minimise costs for regulated businesses but we must fulfil our statutory duty to protect consumers in their dealings with credit businesses. This increase will allow us to do so.”

In real terms, this increase will result in a sole trader paying £435 for a five year credit licence application, up £21 per year from previously. For all other applications from non sole traders, the price is £1,075, up a sharp £51 per year.

 Yet despite the affect that the fee increase will have on the debt management sector, many industry professionals are applauding the OFT’s action and hoping that it will act as a barrier to entry from applicants who are unfit for the position and who reflect badly upon the reputation of the private debt management industry. 

Manchester debt firm is liquidated owing creditors over £2.2m
Wednesday 11th August 2010

Bankrupt football legend probed by police over loan fraud
Monday 2nd August 2010

Mortgage broker ordered to repay £1.5m of client money used to pay off debts
Wednesday 14th July 2010

Barclays lifts lid on banking write-offs
Wednesday 20th February 2008

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Posted in: Consumer,Credit,increase,licence

Parents save more in anticipation of tuition fee increase

The controversial hike in university tuition fees has resulted in parents putting more money aside for their children’s education, according to new research.

The rise, which will apply to students starting their degree course in 2012, is the main factor behind a rise in savings in recent months.

The study by ING Direct bank found that accessible savings among those questioned rose by 3.6% in the last three months of 2010. The increase was largely driven by the 23% of parents who said they were saving more or setting up university accounts to help their children meet rising costs.

The standard level of tuition fees will rise to £6,000, up from the current level of £3,290. But some universities will be able to charge up to £9,000 if they fulfil certain criteria.

The study has been published as it was revealed that senior managers at both Oxford and Cambridge are intent on nearly trebling their fees to the higher rate, the maximum allowed.

ING Direct chief executive Richard Doe said: “While we’ve seen savings levels decline for much of the year, the final quarter has brought with it an unexpected bounce, clearly driven by parents saving in response to the proposed hike in tuition fees.

“We’ll have to wait and see if this leads to any sort of savings renaissance, as while Britons are clearly determined to restore their cash reserves in 2011, there will be a number of obstacles which will make saving difficult.”

James Knightley, ING Group senior economist, added: “2010 was a tough year for savers and unfortunately the environment will become even more difficult in 2011 given the scale of fiscal austerity.

“With wages failing to keep pace with the cost of living and households continuing to pay down debt, this leaves us with two possible outcomes for savers. We suspect that the most likely is that they further run down their savings in order to fund ongoing spending. Alternatively they can save more, but this will mean less money to spend on goods and services – a situation that will put the UK economic recovery at risk.”

The survey of 1,300 adults also found that many parents and children are having second thoughts about going to university at all in light of the increased costs involved.

Sarah Marten, a mother of two from London, told the BBC: “It feels absolutely impossible. I mean we don’t have that much surplus income. Interest rates are really low as well. And when you put those things together and you look at how much you can save, it’s going to be a really small amount.”

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Posted in: anticipation,increase,parents,tuition

IVA and Debt Management worries as borrowing on the increase

Debt Management and IVA help providers are concerned at reports that UK consumers are retuning to their old ways when it comes to spending money on plastic. New UK borrowing on personal loans, overdrafts and credit cards has overtaken the amount being paid off by consumers for the first time in six months, sparking fears that reckless spending could cause an increase in the number of consumers facing financial difficulty, and in need of a debt help solution, IVA advice or a Debt Management Plan.

According to the bank of England, unsecured consumer credit rose £52m in the month of December. This was mainly driven by credit card borrowing.

For the same period, the number of mortgages that were approved for house purchases fell slightly compared with the previous month, to 59,023. This is still higher than the past six month’s average.

IVA and Debt Management companies have noticed a trend during the downturn where consumers have been inclined to pay off debts, however this appears to be reversing. Some people have been reluctant to save particularly with interest rates being so low. For five months in a row, repayments have outstripped new unsecured consumer credit.

The main cause is credit card debt which has risen by £195m. In an effort to get out of debt, many people have enterd debt Management progarammes or signed up for an IVA. The demand for overdrafts and personal loans has remained low, with repayments topping new agreements by £143 million.

The total amount of net borrowing by individuals rose by £1.2 billion in December, which is double the average of the previous six months. Most of the borrowing is in the form of mortgages.

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Posted in: borrowing,increase,Management,worries

Debt collectors struggle due to ex-directory increase

The number of people that are now going ex-directory in the UK has been soaring over recent years, with more and more people electing to keep their details out of the phone book and cut back on the number of calls that they receive from people that they do not know. This is happening more and more as a result of consumers getting tired of cold callers trying to sell them products and services that they do not want.

However, this also poses a problem for many companies who are owed money by consumers, as it means that debt collectors find it far more difficult to get in touch with consumers that may owe the money to companies, which reduces the chances of them being able to recover the funds. The number of people that have decided to go ex-directory has surged to beyond the 50 percent mark for the first time, causing huge problems for many businesses and debt collection agencies.

According to figures around 58 percent of people are now ex-directory, and officials believe that with the increase in the number of people that owe money tracking down those that owe money will become harder and harder for companies. A spokesperson from the GB Group, which provides global tracing technology for the debt collection sector, said that this was becoming an increasing problem.

He said: “The biggest problem currently facing debt collection agencies is recovering bad debt quickly and with the surge in ex-directory numbers, it is now becoming an economical issue. A further problem is that the majority of people today use mobile phones, which are not listed in the telephone directory, making it increasingly difficult for companies to reach their customers. It is this data that GB Group has access to – in which cases individuals have provided lawful consent for their telephone number data to be accessed for specific purposes.”

Tags: number, time, consumers, telephone number, collection, gb group

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Posted in: collectors,exdirectory,increase,struggle