Money Advice Update - December 2019

Money Advice Update
December 2019
UK Finances comments on the Election results

The Conservative Party, led by Prime Minister Boris Johnson, has secured an overall majority in the general election. In his victory speech, Mr Johnson redoubled on his party’s commitment to take the UK out of the European Union on 31 January 2020. The majority Conservative government is expected to hold a Queen’s Speech, setting out its legislative programme, on Thursday 19 December. Commenting on the General Election 2019 result, Stephen Jones, Chief Executive of UK Finance, said:
“After months of stagnation and political impasse, the Prime Minister has been given a clear mandate. It is vital the government now focuses energy on delivering the Withdrawal Agreement and building an environment for a strong economy that encourages investment and confidence for businesses and consumers right across the UK. The banking and finance sector plays a vital role in our economy, employing over half a million people and providing essential services to millions of consumers and businesses, so it’s important the government enables an environment where competition in the industry can thrive. As this election campaign has shown, there are many shared challenges that the government and business must work together to address. From ensuring a just transition to a carbon-neutral economy to tackling the growing threat of fraud and economic crime, it is important that progress is now made to address these issues.”

UK Finance release latest mortgage figures for NI

There were 2,810 new first-time buyer mortgages completed in Northern Ireland in the second quarter of 2019, 4.1 per cent more than in the same quarter in 2018. Additionally, there were 1,780 new home mover mortgages completed in Northern Ireland in the second quarter of 2019, 4.7 per cent more than in the same quarter in 2018. There were 2,750 new homeowner re-mortgages completed in Northern Ireland in the second quarter of 2019, 16.5 per cent more than in the same quarter in 2018.
To view the statistics in more detail click here.
UK Finance also report on the card transactions by UK cardholders:

There were 1.5 billion transactions on UK cardholders' debit cards in August 2019, 9.3 per cent more than in August 2018. This reflected a total spend of £51.4 billion, 2.7 per cent more than in the same period in 2018. There were 290 million transactions on UK cardholders' credit cards in August 2019, 3.8 per cent more than in August 2018. This reflected a total spend of £16.3 billion, similar to the same period a year earlier. The annual growth rate of outstanding balances on credit cards stood at 3.6 per cent in August 2019, continuing the downward trend from its recent peak of 8.3 per cent at the start of 2018 and showing that consumers are managing their finances effectively overall.
To view the overall statistics click here.

Money Advice Trust launches the new Debt and Mental Health Evidence Form

From the 1st October, the Debt and Mental Health Evidence form (DMHEF) is changing. First launched in 2008 by the Money Advice Liaison Group, the DMHEF has provided creditors with a way to collect external evidence about a customer’s mental health situation to decide what support to give to that customer. A review was conducted by the Department of Health and Social Care, along with the British Medical Association, Money and Mental Health Policy Institute, Money Advice Trust, UK Finance, the Credit Services Association and other key stakeholders which has led to key changes to the form and process. The form is now shorter, GPs who agree to complete the DMHEF can no longer charge for this and firms are being encouraged to consider alternative forms of evidence when assessing an indebted person’s mental health.  The form is now hosted online by the Money Advice Trust.
To download the form click here.

Which? Warn to check if Black Friday deals are real

The hype around Black Friday creates the impression that every offer is worth trampling over fellow shoppers to get to, with retailers slashing prices to historically low levels for one day only. But Which? has found that's rarely the case. They tracked the prices of 83 products on offer in 2018's Black Friday deals across a full year - for six months before Black Friday and six months afterwards. To find out whether Black Friday 'deals' really do offer the rock-bottom prices many shoppers expect. And the answer? Usually not. They found that 95% of the Black Friday deal items investigated - which included popular tech, home and personal care products - were available for the same price or cheaper in the six months after. Even when extending the period of ‘Black Friday’ to the two weeks surrounding the day itself, to include Black Friday week and Cyber Monday deals, 74% of products could be picked up for the same price or less in the six months afterwards. And, while you might expect some products to fall in price over time, we also found that 61% of the items had also been the same price or cheaper in the six months before Black Friday. In fact, just four of the 83 products we tracked were at their very cheapest price on Black Friday. 
To read the full article click here.

The Guardian reports Whistle blower reveal financial ombudsman service in disarray

The Financial Ombudsman Service handles consumers’ complaints about banks and insurance companies. A whistle blower has told Guardian Money that a “disastrous” management reorganisation has left the service in disarray, with the public waiting as long as two years to get justice.The whistle blower, a senior staff member at the FOS who wishes to remain anonymous, alleges that:
  • Consumers sending complex complaints to FOS can wait 10 months before a file is even picked up and examined.
  • The waiting time for pension disputes is seven months.
  • Wronged consumers can wait up to two years until their claims are finally adjudicated.
  • The number of unresolved general claims (non-PPI) that remain unresolved a year after being received now stands at 15,551.
  • Managers expected case handlers to resolve 4.5 complaints a week, but the real figure is 1.7
The service has been beset with problems in recent years. Channel 4’s Dispatches found that staff with inadequate training or financial competence were judging cases – sometimes without, it claimed, properly reading case files. Several staff have since turned whistle blower in a bid to get the Financial Conduct Authority to take action. According to the latest whistle blower, things are even worse now than a year ago.
To read the full article click here.

This is Money reports on three Amigo bosses quit as founder of the controversial lender once dubbed a 'legal loan shark' returns to the board

Chief executive Hamish Paton, who had been at the helm for less than five months, resigned from the company alongside chairman Stephan Wilcke and Chair of the remuneration committee Clare Salmon also announced her intention to step down. Dubbed a 'legal loan shark' by Labour MP Wes Streeting, the firm targets borrowers with a poor credit history. It offers high-interest loans to customers who must designate a family member or friend as guarantor to pay back their debt if they cannot. The departures come as founder James Benamor, who holds a 61 per cent controlling stake in Amigo through his investment vehicle Richmond Group, pressed ahead with plans to appoint two board members. Shares in the lender have plummeted by about 76 per cent in August after it said it would tighten credit check policies and reduce its focus on repeat customers to ease pressure the Financial Conduct Authority, which has brought in stricter rules. Last month, Amigo revealed more borrowers had fallen into arrears, forcing it to write off more than £45million in bad loans in just six months. Around £54million of Amigo's loans were at least 31 days overdue at the end of September, up from £33million a year ago.To reduce future losses, it said it would invest more in its collections department to chase payments.
To read the full article click here.

Credit Connect report that FCA tells Amigo to explain risks in guarantor review

The Financial Conduct Authority (FCA) has told guarantor lender, Amigo to explain more carefully the risks that people are taking on when they agree to guarantee a loan for a family member or friend. The FCA was concerned that guarantors were not always made fully aware of their obligations, nor of the likelihood that they would be on the hook for the loan. The aim of the review was for the FCA to understand better the role of the guarantor. The feedback from the review has not raised concerns with the guarantor loan product itself or made comments about the underlying business model at Amigo. However, the Review identified some areas where our customer journey could be enhanced.
To read the full article click here.
The Sun report on HSBC to give homeless people bank accounts – and it could save lives

Traditionally, banks required you to show proof of address and ID to open a bank account, which makes it tricky for homeless people who may not have ID or find these documents difficult to keep safe without a fixed address.But the new "no fixed address" service lets people bypass these usual requirements without the need for photo ID or proof of address.
The person will need to contact Crisis, Shelter, or other selected local charities in the NFA branch areas and they will help arrange an account for you.When it comes to receiving monthly bank statements, they will be sent to the charity address that is representing them or from the local HSBC UK branch. However, account holders would have access to online banking too. Since "no fixed address" bank accounts are standard accounts, there is no lending or overdraft facility, as well as no fees associated with the account.
To read the full article click here.

Which? reveals one in five have found errors in their credit report

One in five people who check their credit report find an error, new research from Which? reveals. The consumer champion surveyed more than 1,000 people to establish their understanding of credit reports and scores, and uncovered a significant number of people finding errors in their reports, many of which went uncorrected. The survey also found widespread confusion among the public about what information is recorded in credit reports, and how this is used. The findings come as the Financial Conduct Authority carries out a review of the credit information market, amid concerns regarding the purpose, quality and accessibility of credit information, how easily it is understood by consumers and how it impacts on their behaviour.
To read the full results of the survey click here.

Abcul report that Credit Unions in London form partnership to fight pay-day loans

A pioneering partnership of credit unions in London are working together to offer JustBorrow loans that aim to transform short-term borrowing in the capital – and make unaffordable payday loans a thing of the past. JustBorrow allows people to apply for a loan between £100 and £750 with their local credit union. If approved, the money is transferred quickly into the borrowers’ bank account with repayments automatically collected each month. Lakshman Chandrasekera, CEO of London Mutual Credit Union said: “We’ve developed this new loan facility so that it matches the speed, efficiency and user-friendliness that people now expect. We wanted to give Londoners a better alternative so that they can borrow for less this Christmas, and then save more throughout the year so hopefully borrow less next Christmas.” The partnership of 12 credit unions all share proven automated lending platform to deliver a short-term loan product that matches the end-to-end efficient and functionality of the high-cost lenders.
For More information about JustBorrow click here.

Two thirds of people struggling to afford Christmas and a third expecting to borrow for it, warns StepChange

New data reveals the effect of Christmas on people’s finances, with nearly seven in 10 (68%) unable to comfortably afford this festive season and nearly a third turning to credit to help fund Christmas shopping. The survey, conducted for StepChange Debt Charity, asked 1,533 people who use social media and will be celebrating Christmas this year about the pressures they feel to spend money and use credit over the festive period. The research revealed nearly a third (31%) of Brits celebrating Christmas will borrow to pay for it, with a quarter (25%) intending to use a ‘buy now, pay later’ scheme. This rises to a third (36%) among 16-34 year olds, a demographic more likely to have insecure or irregular income, which can put them at greater risk of problem debt. According to the survey, those who intend on using credit for Christmas say they will take an average of seven and a half months to pay back debts after the Christmas period, meaning their payments won’t be settled until late summer 2020.
To read the full report click here.

FCA makes changes to mortgage responsible lending rules and guidance

The FCA are making change to their responsible mortgage lending rules. The FCA were concerned that some consumers cannot switch to a more affordable mortgage despite being up to date with their mortgage payments. This includes those who can’t switch because of changes to lending practices during and after the 2008 financial crisis and subsequent regulation that tightened lending standards – often called ‘mortgage prisoners’. They concluded that consumers in this position, or who could be in this position in the future, are suffering harm, as they are paying higher than necessary mortgage payments. They are therefore amending our responsible lending rules and guidance help remove potential barriers to consumers switching to a more affordable mortgage and to reduce the time and costs of switching for all relevant consumers. The changes will mean:
  • that mortgage lenders can choose to carry out a modified affordability assessment where a consumer:
    • has a current mortgage
    • is up-to-date with their mortgage payments (and has been for the last 12 months)
    • does not want to borrow more, other than to finance any relevant product, arrangement or intermediary fee for that mortgage
    • is looking to switch to a new mortgage deal on their current property.
  • Inactive lenders, and administrators acting for unregulated entities, must review their customer books and develop and implement a communication strategy for contacting relevant consumers to tell them it could be simpler for them to re-mortgage.
  • mortgage lenders that use the modified assessment must tell consumers the basis on which their affordability has been assessed and provide additional disclosures about potential risks.
  • mortgage lenders are required to report which sales have involved the modified assessment when they submit Product Sales Data (PSD) to them.
To read the full report click here.