Money Advice Update - March 2019

Money Advice Update
March 2019

UK Finance publish latest mortgage trends

In 2018,
  • there were 10,500 new first-time buyer mortgages, 9.4 per cent more than in 2017. This is the highest annual number of first-time buyer mortgages in Northern Ireland since 2004 when this figure stood at 10,600.
  • there were 6,600 new home mover mortgages, 6.5 per cent more than in 2017. This is the highest annual number of home mover mortgages in Northern Ireland since 2007 when the figure the stood at 12,700.
  • there were 9,500 new homeowner remortgages, 11.8 per cent more than in 2017. This is the highest annual number of homeowner remortgages in Northern Ireland since 2009 when this figure stood at 10,100.
 To read the full article click here.

City AM reports Consumer Spending Growth Slows and Retail Sales Fall on Brexit Fears

Consumer spending growth and retail sales fell last month as households cut back on non-essential items amid fears over Brexit and the UK’s economic prospects. Clothing, department stores and hotel spending all contracted in February, according to the latest monthly spend data from Barclaycard. Spending in pubs and restaurants, traditionally robust categories, also grew at a weaker rate. Consumer spending dropped to 1.2 per cent year-on-year in February, slowing down from 3.8 per cent in the previous 12 months. However, consumers increased their spending on essential items by 2.3 per cent led by growth in supermarket sales, Barclaycard said, while the BRC also reported a rise in food sales.
To read the full article click here.

The Access to Cash Review

This review was commissioned as a response to the rapid decline in cash use, among growing concerns about whether we’re leaving people behind who can’t use or access cash in an increasingly digital society. Ten years ago, six out of every ten transactions were cash. Now it’s three in ten. And in fifteen years’ time, it could be as low as one in ten. Consumer groups worry about the closure of rural ATMs and bank branches, leaving people without easy access to cash. Small business associations are concerned about the growing challenges of handling cash: closing bank branches and rising charges make it more expensive and riskier to handle cash. Rural communities see an increasingly digital world that only works for those with broadband and mobile connectivity.
To read the report click here.

Repossessions Taskforce - Review of Recommendations

The Housing Repossessions Taskforce was established in early 2014 to investigate the impact of repayment arrears, repossessions and negative equity in Northern Ireland. 
The Taskforce specifically focussed on the 2004 to 2008 period in which households accessed mortgages or second charge loans in an environment of rising house prices, more relaxed credit conditions and weaker regulatory oversight.  Two categories of borrowers were the primary concern of the Taskforce - those already struggling and households very close to distress.  
To read the full report click here.

Guardian Reports That NatWest Trials Fingerprint Debit Cards to Remove £30 Limit

Bank customers will be able to spend more than £30 using contactless cards and could never again have to remember their four-digit pin if a fingerprint technology trial starting in April proves a success. The pilot project from NatWest, the first of its kind in the UK, will use debit cards that contain an electronic copy of the customer’s fingerprint on one corner. If the customer places their finger on that part of the card while waving it at a retailer’s payment terminal, it will authorise a contactless payment above £30, and the customer will not have to type in their number. The first phase of the trial will be limited to 200 customers. If it gets the go-ahead, it will be the next step in the contactless spending revolution that has swept Britain since 2013. Last year more than 6bn payments were made using contactless “wave and pay” technology, but the £30 limit is restricting further growth, particularly for people filling up their cars at petrol stations or doing a large weekly supermarket shop. If a card is stolen, the thief will not be able to use it as a payment is only authorised if the user’s fingerprint matches the data on the card at the point of sale.
To read the full article click here.

The Financial Conduct Authority (FCA) Report on Multi-firm Review of Credit Card Fees and Charges

FCA has written to all credit card firms to highlight the findings of its multi-firm review of fees and charges in prime and sub-prime credit card products and firms. The letter outlined their findings and risks of potential harm to customers from poor culture and practice when assessing affordability in consumer credit. This multi-firm work covered both prime and subprime credit card products and firms. The primary area of interest was returned payment fees, over-limit fees, and late fees. They also looked at the distribution of fee types amongst customers with different credit limits. The goal was to understand the causes and application of the fees and the cohorts of customers paying them. Firms were compared against their peer group.  They found that some customers were being charged fees on multiple occasions and sometimes multiple fees in a single billing cycle. Incurring multiple fees could indicate that a customer is in financial difficulty and that appropriate action should be taken by the firm. For those with lower credit limits, the fees and charges represent a higher proportion of the outstanding debt.
To read the full letter click here.

FCA Issues a Letter to CEOs of High Cost Lending Firm

The letter sets out the FCA’s view of the key risks that High Cost Lenders pose to their consumers or the markets they operate in. The FCA sets out its intention to identify, diagnose and remedy the harms in this portfolio. This follows a new approach for the FCA to supervision, implemented in 2018. As part of this, they have put all the firms we supervise into different ‘portfolios’. Each portfolio is made up of firms with broadly similar business models, and the high cost lending portfolio covers the following products:
  • guarantor loans
  • high-cost short-term credit (HCSTC)
  • high-cost unsecured loans aimed at sub-prime customers
  • home-collected credit (HCC)
  • income smoothing products
  • logbook loans
  • pawnbroking
  • rent-to-own (RTO), and
  • community development finance institutions (CDFIs).
The FCA will be focusing on relending, affordability, complaints, buying/selling loans, changes to business model and ongoing compliance.
To read the full letter click here.

FCA Confirms Introduction of Rent-to-Own Price Cap

The Financial Conduct Authority (FCA) has today confirmed the introduction of a price cap to protect some of the most vulnerable customers in the UK in the rent-to-own (RTO) sector. The cap will be introduced from 1 April 2019 and will save consumers in the UK up to £22.7 million a year. In the Policy Statement published today the FCA has confirmed the following measures will apply to the RTO sector:
  • setting a total credit cap of 100%
  • introducing a requirement on firms to benchmark base prices (including delivery and installation) against the prices charged by 3 mainstream retailers
  • preventing firms increasing their prices for insurance premiums (eg theft and accidental damage cover), extended warranties, or arrears charges, to recoup lost revenue from the price cap​​​​​
Currently, in some cases, RTO consumers are paying in total more than 4 times the retail price of some goods. The cap is intended to tackle those very high prices.
To read the full FCA press release click here.

Cash Lady high cost credit market analysis 2018 by Credit Connect

The number of UK workers turning to high-cost short term loans (payday loans) as they struggle to cover their living costs and make ends meet continues to rise. Using data collected from over 700,000 payday loans requested between January 2017 and December  2018, credit broker CashLady has gathered together an in-depth analysis of the average borrower. What stands out from the data is that many of those requesting payday loans work in the retail sector. This does not come as too much of a surprise as it is an industry that has a longstanding reputation for low pay and lack of job progression. Cash Lady’s high-cost credit market analysis highlights how brands such as Tesco, Asda, Sainsbury’s, McDonald’s and Morrisons continue to appear high up on the list. In both 2017 and 2018, these five giant retailers were responsible for employing the highest percentage of staff who requested payday loans.
To view the analysis breakdown click here.

Charity Loans Cash to the Needy who are Shunned by Big Lenders Reports the Mirror

The Purple Shoots charity, which works across South and West Wales, offers small loans to hard-up individuals and hopes to go nationwide. Poverty, unemployment and ­isolation are the key factors that force people into the arms of high-cost credit providers. Karen Davies has shown just how lending should be – a model that our Fair Credit for All campaign, which we are running with Hollywood actor and activist Michael Sheen and his End High Cost Credit Alliance, thinks should be rolled out nationwide. Purple shoots offers small loans to individuals unable to get credit elsewhere or with no other option than to turn to high-cost lenders charging extortionate rates of interest. The loans help people on benefits and low incomes to start or run a small business – a vital lifeline towards a better future for people who can’t get loans or help elsewhere. In five years, Purple Shoots has given out 510 loans, worth £1.2million, and that has helped start more than 400 small ­businesses around Wales and got more than 500 people out of unemployment. Almost everyone the charity has helped and lent money to has previously borrowed via high-cost credit firms.
To read the full article click here.

Tully Receives FCA License to Help Improve Financial Capability of Consumers

For the first time since its inception, the FCA has issued a license for the provision of a digital debt advice solution. Tully is a fintech start-up created to improve financial capability, make it easier for people to manage their money and repay their debts faster. Tully’s mission is to improve financial capability and make financial support more accessible. Helping people gain a better understanding of their current financial situation, working with them to take control of their money and then building a plan to repay their debts. Built on an Open Banking platform provided by technology business OpenWrks, Tully is aiming to create an ecosystem that changes how people think about, understand and manage their money and debts. Tully will increase capacity in the debt advice sector with its unique and free to consumer online service. Using new Open Banking technology Tully will give people a fast, accurate and realistic picture of their financial position in minutes. It means for the first time people will be able to build their own, personal view of their finances and then keep this updated every month.
To view Tully’s website click here.

Consumer Vulnerability: Challenges and Potential Solutions

This paper sets out the Competition Markets Authority (CMA) key findings from its programme of work on vulnerable consumers. Supporting vulnerable consumers is an essential part of the CMA’s job. We can all be vulnerable in certain contexts: if we need to make a purchase at a stressful time, for example, or feel under pressure to make a choice between different options that we do not fully understand.  Some of us will experience vulnerability during particularly difficult periods of our lives, while for others vulnerability derives from longer-term challenges, such as physical disability or protracted periods of poor mental health. This paper explores the different dimensions of consumer vulnerability and considers what the CMA can do to help.
To read the full paper click here.

Payment Scam Victims More Likely to be Reimbursed Reported by the BBC

Consumers who have been tricked into authorising bank payments to fraudsters are more likely to be reimbursed by their bank in future thanks to new rules agreed by the industry.
Customers have lost millions of pounds through this type of scam, known as "push" or "authorised" payment fraud. Previously, because the payments were approved by victims, they were less likely to receive compensation. Now banks and building societies have agreed to do more to protect customers. Examples of authorised payment fraud include fraudsters posing as builders, solicitors, or other contractors who have carried out work for the victim. They submit a fake invoice containing the fraudster's bank details and it is often not easy to spot that they are not the legitimate payee. UK Finance, the group representing UK banks, said that in the first half of 2018 such scams cost consumers £92.9m. A new voluntary code, which comes into effect on 28 May, has been agreed between banks and consumer representatives and is designed to give better protection to customers and reduce the incidence of this kind of fraud.
To read the full article click here.