Money Advice Update June 2015
High street banks, consumer groups and the government have signed up to an industry-wide agreement to minimise the impact of branch closures
The major high street banks, consumer groups and the government have signed up to an industry-wide agreement to work with customers and communities to minimise the impact of branch closures and put in place alternative banking services.
The protocol commits the banks to:
- work with local communities to establish the impact of the branch closure, prior to its closure
- find suitable alternative provision to suit individual communities
- put satisfactory alternative banking services in place before a branch is closed. Options for this will include free to use cash machines, the proximity of alternative branches, and Post Office branches and mobile banking arrangements
The protocol will be reviewed by an independent reviewer after one year.
To read the full article click here.
R3 calls to bring back Criminal Bankruptcy to combat fraud
R3 published a report calling for criminal bankruptcy to be be re-introduced to help return money from fraudsters to their victims.
Insolvency practitioners say that Criminal Bankruptcy Orders would allow the retrieval of funds from defendants more effectively than is possible under the current system of confiscation or criminal orders.
Criminal bankruptcy would mean all of an individual’s assets could be realised to repay victims (rather than just the proceeds of crime), and overseas assets would be easier to retrieve.
To read the report click here
Equifax is first-to-market with unique analysis to optimise collection strategies
Equifax has launched Equifax Recovery Insights, a solution providing unique analysis of customers’ behaviour once in default and helping organisations optimise their collection and recover strategies.
The data provided will allow in-house departments, debt collection agencies and purchasers to assess the likelihood of repayment and identify the most effective strategy to handle each account. Equifax is marketing the solution to client groups including banks, utility providers, automotive financers and debt collectors and purchasers.
The product allows businesses to build a clear picture of indebted customers, identifying which ones are more likely to make repayments and at what level. Effective profiling and segmentation can help creditors deal with customers in a fair way and meet regulatory requirements. The data, for example on whether an individual is paying off other debt and by what amount, can be used to create tailored payment plans for customers, based on what they can realistically afford. The solution saves businesses time and money by focusing their resources on debtors that are likely to make repayments, rather than pursuing those who genuinely cannot repay their debts.
To read the full press release click here
StepChange Safe Harbours Report
StepChange published a report to highlight the difficulty many struggling consumers face in getting help from creditors and essential bill providers.
The proposal is for a new statutory right to protection from interest, charges and enforcement on credit debts and arrears on household bills while people make repayments at a sustainable rate following debt advice. It plugs a gap in protection for people with temporary financial difficulties; currently only insolvency options like bankruptcy offer people such statutory protection. This is a false economy: people with temporary or resolvable financial problems could be helped to avoid much more costly debt problems with the right protection available.
To read the report click here
CML - House purchase lending down in Northern Ireland in first quarter
New CML data on the characteristics of lending in Northern Ireland in the first quarter of 2015 saw house purchase lending down year-on-year but re-mortgage lending increase.
In the first quarter of 2015:
First-time buyers in Northern Ireland took out 1,400 loans to purchase a home, valued at £110m. This was down 35% compared to the fourth quarter 2014 by value and down 30% in number of loans. Compared to the first quarter of 2014, total number of loans decreased by 13% and the amount borrowed decreased by 8%.
Home-owner house purchase in Northern Ireland decreased in the first quarter of 2015 to 2,400 loans, which was down 33% compared to the fourth quarter 2014 and 11% down compared to the first quarter of 2014. These loans came to £230m, down 38% compared to the fourth quarter and down 4% on the first quarter 2014.
To read the full press release click here
Arrears and repossessions continue to fall, says CML
Latest figures from the Council of Mortgage Lenders show a fall in the first quarter of this year in the number and the proportion of mortgages in arrears or ending in repossession. A decline was experienced in all arrears bands, and across both owner-occupier and buy-to-let lending.
In NI a total of 1,107 cases were received into the Chancery division, a 35% decrease on the same quarter last year (1,705), and the lowest number received during the January to March quarter since the time series began in 2007.
Click here to view the latest high court statistics.
FCA challenges firms to review approach to consumer vulnerability
Research published by FCA reveals that some vulnerable consumers seeking help from financial providers are meeting ‘a computer says no’ approach, putting them at risk of further detriment.
The FCA’s Occasional Paper on Consumer Vulnerability, is the first step in a conversation with firms to determine how the regulator and industry can work together to address issues around vulnerability. The UK’s aging population, as well as changing trends in public health and society, means that developing more inclusive policies will become increasingly important.
The FCA’s research shows that many consumer protection policies are designed for a ‘typical’ consumer and sometimes not flexible enough to capture individual situations. Therefore, if frontline staff can recognise the signs of potential vulnerability, they can more easily refer customers to specialist support where appropriate.
For more information visit: fca.org.uk/consumer-vulnerability.
Payday lenders failing customers in arrears, says FCA
The payday industry is beginning to take a more customer-focused approach to its business, but a review of the first twelve months of the Financial Conduct Authority’s (FCA) regulation of the sector has shown that too many firms have been failing to meet the requirements to treat customers in arrears fairly.
The FCA has carried out a thematic review into how payday lenders and other high cost short term credit providers collect debts and treat borrowers who experience financial difficulty. The review which covered 60 per cent of the market revealed unacceptable practices from many lenders, including failures to recognise customers in financial difficulty, failure to direct people to free debt advice and firms offering inflexible repayment options.
However, the FCA’s work also showed that many firms have taken steps over the past 12 months to change behaviour and ensure that they are able to meet the FCA’s requirements. These include changes to senior management, training staff to deal with struggling customers and improving monitoring, compliance and managing risk.
To read the full article click here
Housing Repossession Taskforce Report launched
The Behavioural Insights Team (BIT) launched a report which focuses on what could be done to encourage borrowers in financial difficulty to take action earlier, either by seeking advice or by engaging with their lender and the courts service. BIT worked with the Department for Social Development in Northern Ireland, as well as the courts service, the advice sector and lenders.
The report says, the past 15 years have been a particularly turbulent time for the Northern Ireland housing market, which has seen a much bigger fall in house prices than elsewhere in the UK. As a result, some households there have suffered significant problems through a combination of negative equity and mortgage arrears.
BIT sought to review the processes currently being followed by the courts, lenders and the advice sector - and the ways in which these organisations communicate with borrowers in difficulty - with a view to improving those aspects of their services that affect borrowers’ behaviour.
To read the full report click here
FCA publishes insurance thematic report into insurance
The FCA has published their thematic report into the provision of premium finance to retail general insurance customers. This review focused on the online sale of home and car insurance. It followed the customer journey up to the point where purchasers are required to input their payment details.
While insurance was the primary focus the report found the following areas of relevance for consumer credit firms:
- The report found that an adequate explanation of a proposed credit agreement was not always provided sufficiently early in the customer journey to enable customers to make informed decisions.
- Firms acting as a credit broker did not always disclose the name of the credit provider or details of their relationship with the firm.
- In some cases it was not made clear that a fee would be charged.
The full report is available on the FCA website.
FCA removes permission of three debt management firms
The Financial Conduct Authority (FCA) has stopped three debt management firms from offering debt advice services, after it discovered debtors were paying 90 per cent of their monthly payments in fees.
The FCA said the three firms – Sterling Financial Security (Sterling); Haydon Associates Debt Management Consultants Limited (Haydon) and Clear View Finance Limited (Clear View); failed to comply with the requirements that the regulator put in place.
These requirements were that the three firms, which are all based in Lichfield, Staffordshire, should have provided written statements to customers setting out their debt position.
Because of this failure, along with other issues, the three firms are no longer permitted by the FCA to offer debt management services to customers.
The companies will no longer be able to negotiate with creditors on their customers’ behalf or set up new debt management or reduction agreements. Most customers with debt reduction plans with the three firms have been paying 90 per cent of their monthly payments in fees, leaving 10p in the pound to pay down the debts for an unlimited period of time.
The FCA is reviewing the authorisation of all firms providing debt adjusting or debt counselling. To continue trading firms are being required to submit new applications.
Debt collection complaints up 50 per cent
The number of debt collection complaints referred to the Financial Ombudsman Service (FOS) escalated by 50 per cent in the year to March 2015, with some agents being accused of harassment.
The annual review shows the level of complaints made by consumers and shows big increases in complaints about debt collection, payday lending and credit broking, although the largest spike was in packaged accounts – which soared 278 per cent.
Payment protection insurance (PPI) still dominates much of the ombudsman’s workload. Around two thirds of its cases in 2014/2015 were about mis-sold PPI, though these complaints dropped by around 200,000 from the previous year.
While PPI cases will still take adjudicators at FOS years to work through, the nature of debt collection complaints was similar to previous years.
FOS’s review stated: “We saw a substantial increase in complaints about debt collecting this year. Disappointingly, like last year, we decided in some cases that the debt collector’s behaviour amounted to harassment.
“And we again saw a number of complaints where the wrong person was being chased for a debt.”
Payday lenders forced to reveal all loan costs
Payday lenders will have to show all their loan costs in future on price comparison sites, under plans published in a government report.
The Competition and Market Authority’s (CMA’s) report states that lenders will have to publish details of their products on at least one comparison website that is authorised by the Financial Conduct Authority (FCA).
The instructions, made via recommendations to the FCA to enforce, are designed to drive up price competition between payday lenders and help borrowers get better deals.
The CMA also urged the FCA to:
- Disclose late fees and extra charges levied by lenders
- Improve real-time data sharing between lenders and credit reference agencies
- Ensure that lead generators explain how they operate much more clearly to customers
- Force lenders to provide existing customers with a summary of what they’re paying.
The CMA states that in future, comparison websites should provide customers with clear, objective and comparable information on all potential payday loan costs, especially the total amount payable.
These websites should enable customers to compare loans by searching easily on the most relevant features such as loan amount and duration, the report adds.
To read the full report click here
MAS to implement peer review system
The Money Advice Service (MAS) is to roll out a peer review scheme to assess the performance of debt advisors in organisations across the UK, and make suggestions for their development.
MAS will fully fund the peer review scheme and recently awarded Recognising Excellent as the administrator. Recognising Excellence will recruit a pool of advisers to carry out peer reviews.
The Scheme will initially be rolled out to organisations directly funded by the Service in England and Wales, and then rolled out more widely across the sector. At first, this means the scheme will be active across Citizens Advice, Toynbee Hall in London, Talking Money in Bristol, East Midlands Money Advice, and the Greater Merseyside Money Advice Partnership.
This is the third element of a campaign to raise the quality of UK debt advice. The first of those elements has been the creation of a framework detailing what any organisation delivering advice needs to have in place with regards to functions such as finance and governance, while the second focuses on making sure those organisations have the right staff, as well as the necessary training and qualifications to deliver advice to the right standard. Building on these other elements, the peer review system provides a way for the results of these operations and staffing improvements to be audited.
To read more about MAS raising standards click here