Money Advice Update - July 2017

Money Advice Update
July 2017

Opening banking

A Competition and Markets Authority (CMA) investigation concluded that older and larger banks do not have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow. This means that many people are paying more than they should for their banking activities and are not benefiting from new services. To tackle these problems, the CMA is implementing a number of reforms, one which is Open Banking. This enables personal customers and small businesses to share their data securely with other banks and with third parties, allowing them to compare products on the basis of their own requirements and to manage their accounts without having to use their bank.
To read more about Opening Banking click here.

Bank of England sounds new alarm over consumer credit binge by the Guardian

The Bank of England is concerned about the rapid growth in consumer borrowing as debt increases on credit cards, car purchase schemes and personal loans. Reinforcing recent warnings from the Bank about signs of a borrowing binge. The financial policy committee (FPC) announced last week it was launching a review into the credit quality of new lending – underwriting standards and the risk models used by banks. Policymakers were worried about the risk to banks and other lenders from rising consumer borrowing, although they played down the risks to the wider economy.
To read the full article click here.

Bank of Mum and Dad lends £6.5bn this year reports the Telegraph

Number of first-time buyers helped by parents is symptom of intergenerational inequality and ‘broken housing market’.  Parents are predicted to lend more than £6.5bn this year to help their children get on the property ladder as first-time buyers continue to struggle to afford homes. This is a 30% increase on the £5bn loaned in 2016, according to research from Legal & General and the Centre for Economics and Business Research (Cebr), and means parents will be involved in more than 25% of UK property transactions.
To read the Cebr press release click here.

Bank of Mum and Dad risks tax trap

The Bank of Mum and Dad risks running up “accidental” inheritance tax (IHT) bills, according to research which found that almost half of parents and grandparents do not understand the tax rules on gifting. Nearly two out of five people are not aware their estate might be liable for inheritance tax on gifts to family members, a poll found. Key Retirement, an equity release provider, said its survey highlighted the “nervousness and confusion” over IHT rules, which resulted in many people failing the make the most of the reliefs to which they were entitled. The research also showed 58% of parents and grandparents want to be able to help children and grandchildren on to the property ladder.
To read the full press release click here.

£2 million per day lost to fraud report the Financial Fraud Action UK (FFA UK)

In 2016, the UK lost £2 million each day as a result of financial fraud, according to official figures released by FFA UK. The figures show the overall scale of financial fraud was £768.8 million, an increase on the £755 million lost in 2015. The figures are published as all major banks and key financial services providers across the UK come together for the first time for a national day of action to raise awareness of how everyone can protect themselves and their loved ones from financial fraud.
The full report is available here.
Read the Take Five steps to protect against fraud here.

Fraudsters ‘imitate bank domain names’, by This is Money

Criminals are targeting online banking customers by setting up websites that mimic banks’ domain names to persuade them to hand over personal details or download malicious software. These 'cyber-squatters' use official-looking domains to trick customers into handing over details. Online banking customers are being warned to watch out for copycat web addresses used to trick people out of their cash. Unsuspecting banking customers click on or type these web addresses into their browsers thinking they are bringing up the real website of their bank. However, once on the fake sites, fraudsters try to trick their victims into handing over personal details, log-in information or downloading dangerous malware that infects their computer.   Some of Britain's biggest banks are being targeted, among those heavily targeted is HSBC, which has 110 'high-risk' domains, Barclays and Standard Chartered have 74, NatWest 66 and Lloyds 22. In total, 324 domains were identified as high-risk at the five big players – in other words, there are hundreds of domains that look genuine which are owned by nefarious hackers.
To read the full article click here.

Contactless cards security flaw: FCA and banks to act by June, report BT

MPs order 'unacceptable' contactless card security loophole to be fixed, by June 2017. A security loophole that leaves contactless card users open to fraud will finally be closed as the Financial Conduct Authority (FCA) agrees to take action on the issue. After a grilling from MPs on the Commons Treasury Select Committee, the regulator will get banks to address the flaw, which allows ‘tap and go’ payments on lost and stolen contactless cards to carry on long after they have been cancelled. However, the UK Cards Association says that implementing measures to protect users will take until the end of June. The security flaw lies in whether the contactless payment is processed ‘online’ or ‘offline’ by a business. Top priorities were to remove any onus on customers to identify fraudulent transactions and to work on technical enhancements to reduce the likelihood of post-cancellation contactless fraud with the industry.
To read the full article click here.

Lenders in crackdown on 'secret' buy-to-lets, by the Telegraph

Bank and building societies are taking a keener interest in whether borrowers are renting out properties without their permission. This involves more scrutiny of borrowers at the mortgage application stage for instance, whether borrowers continue to live in the mortgaged property. Several lenders are reported to be going even further and adopting data-sifting techniques similar to those used by HMRC to spot tax-evasion. This involves trawling the internet to see whether properties they lend against on a standard, "owner-occupier" basis are being advertised to let by their owners. This would break typical owner-occupier mortgage contracts.
To read the full article click here.

Council of Mortgage Lenders (CML) report Home buying activity in Northern Ireland up 3% year-on-year in first quarter

CML report in the first quarter of 2017, home buyers borrowed £350m, down 13% compared to the fourth quarter 2016 but up 3% compared to the first quarter 2016. First-time buyers borrowed £190m, down 14% on the fourth quarter but up 19% on the first quarter last year. Home movers borrowed £150m, down 21% quarter-on-quarter and 17% compared to a year ago. Re- mortgage activity totalled £200m, unchanged on the fourth quarter but up 18% on the same quarter last year. First-time buyers affordability metrics in Northern Ireland remained better in the first quarter than for the UK overall. First-time buyers typically borrowed £95,000 (£133,000 in the UK overall), unchanged from the previous quarter. The average household income was £31,900 (£40,000 in the UK overall), up from £31,800.
For more information click here.

Mortgage-seekers ignoring extra fees, reported by BBC

Homeowners are making a "costly mistake" by turning a blind eye to additional fees when they re-mortgage. The average fee for a fixed-rate mortgage is now more than £1,000 - the most expensive for four years, according to Moneyfacts. They report that borrowers and lenders tended to focus on mortgage interest rates, which remain among the lowest ever seen in the UK. However, Moneyfacts said that some borrowers would be better off by choosing a slightly higher rate with a lower fee, or no fee, when they re-mortgaged.
To read the full article click here.

Over 65s mortgage crisis: Debts to DOUBLE in 13 years report the Express

Homeowners will be more likely to still be paying off their mortgage after retirement in the coming years, according to predictions. A report has predicted that mortgage borrowing in older age is likely to become mainstream. The amount of mortgage debt held by over-65s is set to double in just 13 years by 2030, taking money owed by this group from £20.1 billion to £39.9 billion, according to a study by the International Longevity Centre-UK (ILC-UK) and the Building Societies Association (BSA).  Rising house prices, tighter credit conditions and low real wage growth mean there could be a significant shift in the customer base of the mortgage market over the next 13 years, the report found.
To read the full article click here.

Vulnerability, Debt and Mental Health
Financial Services Vulnerability Taskforce report Improving Outcomes for Customer in Vulnerable Circumstances

Financial services establishes new gold standard for customers in vulnerable circumstances. The first ever Financial Services Vulnerability Taskforce has today published a report outlining best practice recommendations for the industry as it aims to improve the experience and outcomes of customers who may be facing challenging personal circumstances. Ensuring that customers who are vulnerable are treated not only fairly, but with empathy and sensitivity to their circumstances is a growing priority. The Taskforce, which brings the financial services industry together with charities and consumer groups, has outlined steps designed to build on the work already undertaken by many institutions. The report sets out a number of specific recommendations, including that financial service firms.
To download the report click here

The Bereavement Principles

have been developed and endorsed by the following British Bankers Association (BBA) members and the Building Society Association (BSA): - Barclays Bank - HSBC Bank - Lloyds Banking Group - Nationwide Building Society - Santander UK - The Royal Bank of Scotland. They have drawn up a new code of practice to offer greater help and support for bereaved families. The Bereavement Principles have been developed for personal banking customers, to further assist families and relieve stress around alerting financial organisations to the death of a loved one by cutting bureaucracy and providing an even more sensitive service.
To download the Bereavement Principles click here.

Vulnerability: a guide for debt collection 21 questions, 21 steps.

The Finance and Leasing Association (FLA) and The UK Cards Association launched a new publication – Vulnerability; a guide for debt collection – that will help their members to better identify and support customers in vulnerable circumstances. The research team has developed 21 practical and commercially realistic steps that can now be shared across the credit industry for the benefit of customers, but also adapted for use in sectors as diverse as utilities, telecoms, retail and Government. The guide describes strategies to help staff deal with specific and often challenging vulnerabilities, such as serious or terminal illness, bereavement, addiction, and mental health issues.
To download the full guide click here.

The Money Advice Service (MAS) launch the Standard Financial Statement (SFS)

The SFS is an initiative designed to bring greater consistency to the way organisations assess people’s finances when they are in debt. The SFS will be adopted by all major debt advice providers across commercial and not-for-profit sectors. There will be a period of transition for the SFS as organisations begin to implement the scheme across their systems over the coming months. MAS issued a video focussed on the advantages of adopting the new format.

The Guardian reports one in four UK families have less than £95 in savings

The gap between rich and poor in the UK is growing, as savings and home ownership decline among the poorest families but rise among the richest, a report by insurer Aviva shows. In a sign of growing financial strain, low-income families had just £95 of savings and investments, excluding pensions, this winter, compared with £136 in the same period last year. That figure jumps to £62,885 among high-income families, up from £50,208 a year earlier. It means the savings gap between the richest and poorest has grown by 25% over the past year, from £50,072 to £62,790. One in four families in the UK are classed as low income, according to Aviva, with net monthly earnings below £1,500.
To read the full article click here.

Watchdog targets online gambling firms that 'load the dice' against players reports the Telegraph

Online gambling companies will have to change their "unfair" sign-up deals or face a legal challenge after the Competition and Markets Authority (CMA) announced that it was launching enforcement action against operators that it believes to be breaking consumer law. The CMA has been conducting an investigation with the Gambling Commission since last October into how the online gambling sector draws customers in with sign-up promotions and then does not allow them to withdraw money and quit while they are ahead. It said that some customers “might have to play hundreds of times before they are allowed to withdraw any money”. It is also concerned that minimum withdrawal amounts are far larger than the original deposit, meaning customers have to bet more to take out their winnings.
To read the full press release click here.

Financial Conduct Authority’s (FCA) strategic review of retail banking business models

The FCA is reviewing the business models used in the retail banking sector and evaluating the impact of changes on competition and conduct. Retail banking has been experiencing significant economic, technological, social and regulatory changes. The effects of these changes are expected to continue in the coming years, with ‘lower for longer’ interest rates, Open Banking, increased use of digital channels by consumers, regulatory interventions such as ring-fencing, and the remedies introduced by the Competition and Markets Authority (CMA). 
Aims of the review will seek to:
  • understand retail banking business models in greater depth by looking at the business models of firms to identify any potential conduct or competition issues
  • understand how free-if-in-credit banking is paid for, in particular whether it leads to any distributional concerns between different types of consumers
  • understand the impact of changes such as increased use of digital channels and reduced branch usage on business models and consider potential consequences for our consumer protection and competition objectives 
For further information click here.