Money Advice Update August 2015

HMRC will be allowed to access personal bank accounts to recover debts

These new powers will allow HMRC to access bank accounts to recover unpaid tax bills. They were introduced alongside the recent government budget. According to the HMRC approximately 17,000, non-compliant individuals and businesses are likely to be affected annually. The powers can extend to taking cash directly from tax shelters like individual savings accounts.

This will affect debtors who owe over £1,000 of tax or tax credits debt. The Treasury has agreed to implement a number of safeguards including, the right to appeal; a face to face visit to every debtor before they are considered for debt recovery through this measure; leave a minimum aggregate of £5,000 across debtors accounts, always and will only put a hold on the funds in the affected account up to the value of the debt; for joint accounts the amount will be a pro-rata proportion of the balance and they will not target accounts which are held by parents on behalf of their children.

Click here to read the full article on the Telegraph website.


FCA publish thematic review on the Quality of Debt Management Advice

The FCA recently released their thematic review on the quality of debt management advice. This work was carried out based on previous market evidence which indicated that debt management was one of the highest risk activities.

The FCA found the advice from fee-charging debt management firms was unacceptably low. They discovered firms were not adequately assessing customers’ financial circumstances which could result in a unsuitable debt solution being recommended. Advice from free-to-customer debt management firms in our sample was generally of a higher standard, but there was still scope for material improvement. Approximately 60% of the fee-charging cases we reviewed were assessed as posing a high risk of harm to customers. This compares to 20% from the free-to-customer firms.

Other issues identified were inadequate exploration of all debt solutions, especially if the firm was not going to benefit; providing inaccurate information of the availability of free debt advice, or suggesting free advice was of a lesser standard; cross-selling products and poor risk management procedures.

Click here to read the full report.


FCA publish thematic review on Embedding the Mortgage Market Review: Advice and Distribution

The FCA published their review on the quality and suitability of mortgage advice following the implementation of the Mortgage Market Review (MMR). They recommend the review should be read in conjunction with ESRO’s independent research carried out on customer’s expectation of the mortgage sales process. The two publications consider customers’ experience of receiving advice and the extent to which firms are recommending mortgages which are suitable for customers’ individual needs and circumstances. The FCA considered the quality of advice to be mixed. While there was evidence of good practice, they found some firms did not have sufficient understanding of the customers’ needs and circumstance in order to provide appropriate advice or their processes were not flexible enough to allow for tailored advice based on individual customer need. The FCA outlined a number of recommendations for improvement to ensure the customer is treated fairly.

ESRO’s research highlighted that some customers were confused about certain aspects of the mortgage advice process, often disengaged when certain questions were asked and had a poor understanding of the product that was offered to them. The research did note that customers bring their own biases into the advice process which can influence the advice they receive.

Click here to read the FCA thematic review and here for ESROs research report.


FCA launches Understanding Consumer Credit information for firms

The FCA has published two documents to provide a better understanding for consumer credit firms what creditworthiness and affordability mean and an explanation of what permissions a firm may require to be regulated.

To read these documents click on credit worthiness and affordability and permissions.


FCA announces a Credit Card market study

The FCA has announced a market study into the credit card market. The credit card market has 30 million consumers accounting for £56.9 billion of outstanding debt. From previous evidence, the FCA is aware of a number of concerns, for example over-borrowing, confusion of what interest charges are being applied and making minimum payments or under payments. With this study they intend to gather information to help identify any potential issues and possible remedies.

Click here to read the full terms of reference for this study.


FCA censures the Co-operative Bank

The FCA has issued a public censure against the Co-operative Bank (Co-op Bank) for breaching its Listing Rules. The FCA alongside the Prudential Regulations Authority (PRA) jointly investigated the Co-op Bank and found they were not open with the regulators. The FCA found failing with information the Co-op Bank provided to its investors about its true capital position, while PRA found failings with the firms risk management. The FCA decided not to impose a fine, as both regulators acknowledged that the Co-op Bank has taken steps to implement a remedial action plan and that the money would be better spent on improving its future resilience.

Click here to read the full FCA press release.


Government announces a cut in Supported Mortgage Interest

From July 2015, borrowers that are entitled to payments of support for mortgage interest (SMI), many of whom are elderly and disabled, will see the amount cut from 3.63% to 3.12%. This was the first change since October 2010 when it was cut from 6.08%. The government introduced this cut due to steadily falling borrowing rates. SMI was established to help borrowers who were struggling to pay their mortgage.

Click here to find out more about the SMI scheme.


Equifax research reveals over a third of consumers don't understand the influence on their credit score of being on the electoral roll

A positive credit score is vital when applying for credit. However, new research released by Equifax highlights that many consumers do not understand what can help or hinder their credit score. The research shows 33% of UK consumers believe that being on the electoral roll has either no impact or they don’t know what impact it will have on their credit score - 52% believe using a significant proportion or all of their available credit will have no impact on their credit score, or they don’t know what impact it will have.

More than 30% of 25 to 34 year olds didn’t recognise that being declared bankrupt will have a negative impact on their credit score. Just over 30% of 25 to 34 year olds believe that paying credit card bills on time either has no impact or they don’t know what impact it has on their credit score; only 16% of 45 to 54 year olds lacked knowledge about the impact of this information on their credit score.

Click here to read Equifax’s fact sheet on sorting fact from fiction - Helping consumers understand what’s on their credit report and how to improve their credit score.


Another mis-selling scandal could be on the way

The Mail Online recently reported that the Banks are preparing for a bill worth £825m over mis-sold current accounts. They say the ombudsman is receiving 200 complaints a day about high cost packaged current account that offer perks that customers cannot use. Since the early 2000’s, millions of customers have signed up for packaged accounts and there is growing concern as to how these accounts were sold to customers. Some are calling for the Banks to be fined as well as pay out compensation to customers. This latest issue will continue to erode the trust customers have with banks. The British Banker Association admitted there were failings in the past but that these should now be remedied.

Click here to read the full article.


StepChange launch the Becoming a Nation of Savers discussion paper

StepChange has published a discussion paper highlighting that many families still have not saved for a rainy day and has made a number of recommendation of how this could be rectified. Their research showed that:

  • People on low-to-moderate incomes, people in rented accommodation and people with younger children are least likely to have £1,000 in precautionary savings
  • Economic influences such as low income and high outgoings are factors which prevents many families from saving
  • Behavioural barriers such as bounded rationality, inertia and procrastination also prevent saving

In the paper, StepChange outlines a number of incentives including auto-enrolment, match funding and prize-links which have previously proved successful in getting families to save.

Click here to read the full report.


Money Advice Trust assisted 1.2 million last year

The Money Advice Trust (MAT) recently launched their annual report which highlights they helped over 1.2 million people in 2014.  MAT manages National Debtline, Business Debtline and the Wiseradviser training programme. The report highlighted that in 2014:

  • National Debtline provided 431,717 advice sessions to 287,149 people
  • 80 percent of National Debtline clients felt more in control of their financial situation as a result of the advice they received, while 98 percent were clear about the next steps they needed to take to deal with their situation
  • Business Debtline provided 64,923 advice sessions to 42,352 small business owners
  • 93 percent of Business Debtline clients felt more knowledge about financial matters and 54 percent were able to resolve their immediate problems and continue to trade
  • Wiseradviser provided 8,808 training places to advisers working in organisations across the UK, benefiting hundreds of thousands of clients
  • 86 percent of advisers trained through Wiseradviser reported that the training enabled them to better inform their clients, and 77 percent found their knowledge of money advice had improved substantially.

Click here to read MAT’s Annual Report.


Government plans to recoup Social Fund loans from wages

Inside Housing reports that the government plan to recover outstanding Social Fund debt directly from people’s wages. It is expected that this measure will save the government approximately £105m. Currently, the Department for Work and Pensions (DWP) only recovers this money from those who claim benefits. It is yet unclear how the DWP will exercise this power, although it will initially focus on recouping money from budgeting loans - interest-free loans to help spread the cost of one-off expenses, such as furniture, clothing and travelling expenses.

Click here to read the fill Inside Housing article.


Choice Housing becomes Northern Ireland’s largest independent housing association

Choice Housing is the result of a three way merger between Oaklee, Trinity and Ulidia housing associations. Choice Housing boasts a portfolio of 10,000 homes and plans to build 2,500 social and affordable homes over the next five years. Choice Housing will have an estimated annual turnover of £40m and is now a serious contender to receive homes from the Northern Ireland Housing Executive (NIHE), when it finally reforms. Choice will now be able to access funds from potential private investors, who previously reluctant to engage with Northern Irish landlords due to their small size.

Click here for more information about the new Choice Housing Association.