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CONSUMER CREDIT Feb 2011:Apr 2011 V66 No.1 The Consumer Credit Compliance Olympics Rebuilding UK Limited The storm clouds are gathering - again! Analysis or Paralysis Death by Data CPMA... more red tape regulation? Five Minute Manager Your CCTA Consumer Credit Trade Association Money Matters 4 The Consumer Credit Greg Stevens Compliance Olympics Chief Executive Welcome to the spring edition of Consumer Credit, I hope that you had a very enjoyable, and peaceful festive period, and that your New Year will be happy, and prosperous. The turning of the year however, does not take away our collective business issues. Growth of the UK economy in the fourth quarter 2010, was virtually non-existent. The coalition Government appears to be here to stay, apart from a few wobbles there is little to suggest that it cannot maintain the equilibrium of the arrangement, over the life of the Parliament. Within that current political landscape we remain dedicated to fighting your corner, across consumer credit and related issues. 2011 is a red letter year for CCTA, in June we celebrate our 120th anniversary. Our history shows, we have lobbied, informed, provided legal assistance, and supported our members through thick and thin. Our excellent working relationship with government bodies and regulators continues to go from strength to strength. 14 The storm-clouds are gathering again! As of 1 February 2011 the European Consumer Credit Directive came into place. All members should now be using the new documents, including the SECCI which replaces the old PCI. The CCD was 8 years in the making, and we have been lobbying against the excesses of the Directive since it first saw light of day in 2003. As the dust settles on its arrival, even more new regulation is mooted under the This issue: benign banner of the Consumer Protection & Markets Authority (CPMA). The Consultation Paper on the CPMA was published before Christmas. The radical Paper 3 A Case In Question co-produced by HM Treasury and Business Innovations & Skills Department (BIS) looks at new regulation for the Financial Markets. There are two proposed options. 6 News in a nutshell The first, which the government favours, would see more FSA type regulation, based on principles and rules. This Paper proposes radical changes to consumer credit by 17 Members Only 2012. We at CCTA understand that your businesses, large and small, are not normally involved in deposit taking. Any loan granted, or transaction undertaken, leaves your 20 Your CCTA money at risk. There is a very clear and positive case that consumer credit companies outside of the Banks, Mortgage Lenders and Finance Houses that do take deposits, 25 Member Only News should not be bound be the same style of regulation. 27 Paying Rent and Our Industry and Members have received a barrage of regulatory changes over the last 5 to 6 years, and further change may seriously impact on the overall market. It Your Credit Score would certainly impact more on medium, to small sized enterprises (SMEs), with both the cost of supervision and regulatory intervention, requiring substantial price 28 Good News For Lenders increases in products and services. 32 Industry Statistics The CCTA intends to be in the thick of the action, lobbying throughout the consultation process. As members, we will be asking you to forward a response to the HM Treasury & BIS consultation process by 22 March 2011, we will help you in the drafting of the document. If you are reading this, but are not currently a member, NOTE: With such a diverse membership I urge you to join us, and be part of the process. The time to make our voice heard is contributing, the views expressed in this now. We need a compelling argument to sway any decision made in haste, which magazine are not necessarily the views of CCTA. deal with problems of the past, that have already been addressed. CONTACTS We are told that in the current economic climate, with the possibility of a double dip Greg Stevens Chief Executive firstname.lastname@example.org recession, the recovery will come from enterprise, driven mainly by small companies. Jeanette Beaumont PA to Chief Executive, CCTA Complaint The proposed regulation could harm this growth and take many companies, out of Procedures email@example.com the market entirely. Let’s ensure that we have a grown up debate on consumer credit Graham Haxton-Bernard Head of Legal, Compliance and regulation in the coming months. Regulatory Policy firstname.lastname@example.org Debbi Gower Head of Finance email@example.com If you would like to discuss any of the points made in this article, please ring me Anne Threapleton Head of Marketing and Communications direct, or email at firstname.lastname@example.org email@example.com Greg Stevens Consumer Credit Trade Association. A company limited by guarantee and registered in England. Registered number 00034278. VAT number 232 4655 76. Registered office address: Suite 4, The Wave, 1 View Croft Road, Shipley, West Yorkshire, BD177DU. T: 01274 714959 F: 0845 2571199 www.ccta.co.uk 2 Q&A A case in question Joanne Davis Partner, Lender Services, Shoosmiths QUESTION: Dear Joanne, I have implemented the Consumer Credit Directive but I keep getting confused with the new advertising regulations, please can you help clarify when a representative example or representative APR is triggered. ANSWER: Thank you for your question, this is a very If you trigger the representative example, If a credit product advertised requires topical issue at the moment. you must show the information within the security you must include this in the The new Consumer Credit (Advertisement) example together and with equal advertisement and specify the nature of any Regulations 2010 (“the Regulations”) are prominence. The example must be headed security required, such as a guarantee or now in force. All adverts that fall under the “Representative Example”. The example indemnity. The Regulations also include a new regulations, and are published on or must have more prominence than any number of restricted expressions including after 1st February, must be compliant with incentive or any other information relating but not limited to, “interest free” unless the the new regulations. Any adverts in to the cost of credit. The test for product actually is, “no deposit” except circulation or published prior to the 1st prominence is objective and therefore can where no advance payments are required, February 2011 must be withdrawn and cease be based on size, colour, volume or “loan guaranteed” or “pre-approved” this to be published before 1st March 2011. anything that makes the example more would be in direct breach of the prominent. The main change is that the Irresponsible Lending Guidance and “gift” The regulations make it clear that all credit APR will now have equal prominence to or “present” unless there are no conditions adverts must be in plain and intelligible the other information with the that require the debtor to return them. language, they must be readable or clearly representative example. audible and must include the name of the I hope this has provided you with some advertiser, unless the name and address of The APR now has to be shown as “xx% basic guidance on the new regulations, but the dealer or broker is included. APR representative” and if it is subject to remember, it’s not just the advertisement change then the advert must state regulations that you must consider when If an advertisement includes a rate of “variable” next to the APR. If you include finalising any advertisement for credit. If interest or any amount relating to the cost an incentive or comparative indicator you have any further questions you would of credit, then you must include a within an advert then a representative APR like to ask, please contact me using the representative example. The Department must also be included. The representative details below. for Business and Innovation & Skills, APR must be given greater prominence released guidance in August 2010 which than any other comparative indicator or Joanne Davis sets out that an interest rate is not limited incentive in the advertisement. If the Tel: 03700 864171 to an annual rate of interest but would representative APR is shown in an Email: firstname.lastname@example.org include a monthly or daily rate of interest or advertisement which also includes an an APR. A 0% interest rate is also incentive then there is no trigger for the specifically included as a trigger for the representative example to be shown, as representative example. An amount relating the APR does not act as a trigger in this to the cost of credit is described as the instance. The representative APR must be amount of any fee or charge, or any an APR at or below that which the repayment of credit (where it includes advertiser reasonably expects credit to be interest or other charges), whether provided to at least 51% of customers expressed as a sum of money or a introduced by the advert. proportion of a specified amount. Feature The Consumer Credit Compliance Olympics In the starting blocks for the Consumer Credit Directive (CCD), ILG and new Consumer Protection and Marketing Authority (CPMA) consultation, challenges for businesses to stay on track! Never mind looking forward to London 2012, the UK’s consumer credit industry is facing its own Olympian challenges with the introduction of the new CCD regulations effective 1 February 2011, the associated Department for Business Innovation and Skills (BIS) Guidance and the Office of Fair Tradings (OFT) comprehensive and detailed Irresponsible Lending Guidance. Add into this the OFT’s recent swathe of Parliament on “the relation between the announced that secured lending will be enforcement actions following its review of consumer rights directive proposal and the moved under an FSMA style jurisdiction. “doorstep lending” (home credit) and its area of financial services”. Therefore we can see that regulatory hurdles ongoing focus on payday lenders. In January 2011, the Competition are crowding the tracks once again. The government’s “call for evidence” for its Commission (CC) published a notice of Takeover activity in the payday lending review of consumer credit and personal intention to make minor changes to the market is active, with Dollar Financial insolvency closed before Christmas. Matters Home Credit Market Investigation Order, to announcing its acquisition of Purpose arising from this review may be taken take account of the EU Consumer Credit Holdings (trading as payday UK). In addition, forward in the joint Treasury/BIS consultation Directive (CCD). The decision followed OFT Think Finance Inc has acquired Fortress that has implications for all consumer credit advice regarding the implementation into UK Group (UK) Limited. This means that a lenders, especially small to medium sized law of the CCD. The CC published a draft majority of the largest online payday lenders businesses and indeed consumers. A recent version of the Order as amended for are now US owned. paper has come out from the European consultation. It has also recently been 4 Irresponsible Lending Guidance The implementation of these new CPMA Consultation Many new and enthusiastic start up requirements comes with a cost, especially Amongst this, just when we thought the businesses, particularly those UK traders on the back of the major changes Consumer Credit Act 2006 and the CCD wishing to enter the payday lending market, introduced into the UK in 2004/5. Eagle regulations were a framework for the future, seem to believe that obtaining a consumer eyed businesses will no doubt have comes a consultation document on credit licence is the final hurdle to begin observed that the new “representative “reforming the consumer credit regime”. APR” threshold required in advertisements The government is proposing to transfer trading. This is, in athletics terms only the is based on a 50%+ level, reverting back to responsibility for consumer credit from the equivalent of stepping out onto the track, the pre-2004 UK requirements, and and these businesses must begin to OFT to the new Consumer Protection and removing the 66% threshold introduced by Markets Authority (CPMA – working title). appreciate that investing in compliance is a the 2004 secondary legislation. Others will necessary use of their resources. The OFT, have noted that the new CCD pre-contract The proposed preferred regime (option one in its Irresponsible Lending Guidance, document (the SECCI) is prescriptive in in the consultation) is one based on the expects creditors to: “take reasonable steps nature, but the new agreements are less so, Financial Services and Markets Act 2000, to ensure they have suitable business this reverses the requirements introduced meaning small and medium sized practices and procedures in place, to into the UK in 2005. businesses would be subject to an Financial facilitate their own compliance and to be Services Authority (FSA) style regulatory able to provide documents relating to the Two completely new requirements are introduced, firstly to give consumers regime. Aside from the huge impact of practices and procedures used, which absorbing such a change come the should contain sufficient detail to allow OFT adequate explanations about key features of the credit agreement prior to it being associated ongoing requirements such as to be able to form a view as to whether the regular reporting. Option two is to retain concluded, and secondly a further new procedures appear appropriate”. the existing CCA regime, albeit at present requirement adds a new clause 55B into the Consumer Credit Act, and requires lenders to without a future regulator being confirmed. There is also a requirement to monitor The consultation will no doubt address the check consumers’ creditworthiness before any compliance. need to maintain the requirements of the EU advance of, or increase in, credit. Lenders are The guidance covers each stage of the required to base their assessment on Consumer Credit Directive in any regime, and lending process, including detailed sections sufficient information from the borrower deal with any potential conflict of interest on explanations of credit agreements and where this is appropriate, and from a credit arising from its “lighter touch” treatment of assessment of affordability, and identifies reference agency where this is necessary. credit unions and friendly societies, business practices which may, in the view of Both the BIS Guidance on the new considered alongside the many small the OFT, depending on the exact regulations, and the OFT’s Irresponsible businesses operating in consumer credit, circumstances, constitute irresponsible Lending Guidance, contain additional were option one to be adopted. lending practices, however it is not an material for these new requirements, Businesses in areas considered to be “high exhaustive list. increasing the complexity of understanding risk”, often those operating home credit or The OFT expects creditors to have regard the compliance requirement. payday lending operations, would be likely to both the letter and the spirit of the Undoubtedly the OFT will be looking to subject to higher levels of scrutiny. In both of guidance. Some behaviours relate to legal defend its own position and the effectiveness these markets the majority of market share is requirements, others are behaviours OFT of its work. This means businesses, particularly taken up by a limited number of providers, considers may be improper without being those perceived to be in “risk” areas need to but there are many hundreds of small and unlawful. Many businesses are preparing a review their policies, procedures, complaints medium sized businesses playing active parts separate, specific policy to show how they handling and compliance, to ensure they are in local communities and areas by providing intend to comply with the Irresponsible best placed to provide positive evidence additional credit choices. Lending Guidance. should the regulator request a site visit. Under the current FSMA regime there are a For those businesses where OFT imposes number of differences to the way consumer requirements, failure to comply can lead to “Business can help themselves credit firms operate. A small selection is a fine of up to £50,000 per breach, or shown here: action to revoke a company’s credit licence. to be in a strong position, • applicants for licenses under the Financial Alongside this, the cost of trade association firstly by making full use of their Services and Markets Act (FSMA) regime membership, is likely to be a cheaper, and a are usually required to provide a business rather more positive, approach to staying in trade association: the CCTA plan and financial forecasts business. Interestingly some of the OFT’s provides model agreements at • most authorised firms must meet a general requirements in the recent doorstep lending review are over and above what is set out in modest cost, shares information solvency requirement and minimum capital legislation, have you spotted this? in its magazine and through requirement • reporting returns are usually required on a CCD Regulations other member communications regular basis The introduction of the CCD regulations and has a comprehensive • there is a broader range of sanctions than means that the UK now has one of the most schedule of training days under the CCA regime, with higher fines a comprehensive and detailed regulatory possibility, but breach of a rule does not regimes of any country in the world. The throughout 2011 at locations mean the transaction is void or enforceable pre-contract requirements of the CCD added around the country.” Similar arguments in terms of business size to the recently introduced post contract requirements in the Consumer Credit Act and impact, can be applied to many 2006, mean that consumers have more than Secondly, by developing resources to enable independent motor vehicle outlets offering enough information to make informed practical compliance (in addition to legal vehicles on finance to consumers, whose decisions about taking out credit, its cost and advice), either through a full in-house choice of and access to better vehicles may terms, and are provided with sufficient compliance unit, a compliance officer, or be restricted if their choice of, and access to, information about the ongoing state of their buying in expertise as needed. Thirdly, by credit is also restricted. account, for there to be no room for ensuring that staff are fully trained to properly This consultation affects the future of your consumer surprises. carry out the documented policies and industry and your livelihood, and you are procedures of the business. encouraged to respond. Helen Ward (MBA) Alizarin Associates provides a bespoke services to consumer credit Alizarin Associates, Chartered Accountant focused businesses and organisations, assisting them to identify email@example.com firstname.lastname@example.org and manage regulatory risk and enhance regulatory compliance. News in a Nutshell HR news Fraud facts... Figures reveal the bleak and complex Snow Days reality of fraud in the UK today At the end of the third quarter of 2010, data provided by the 265 Member organisations of CIFAS, the UK’s Fraud Prevention Service, demonstrates that fraud remains rife: • nearly 168,000 confirmed cases of fraud were recorded in the first 9 months of 2010 • facility takeover fraud remained to pay or not to pay... high, with over 16,000 confirmed cases With severe weather Employers need to decide: • which employees they are going to provide • products targeted by fraudsters occurrences seemingly on the with remote IT access demonstrate how fraud adapts to • whom employees should contact if they are economic conditions rise, putting in place a clear unable to make it in the continuing scourge of identity adverse weather policy could • whether employees will be paid if they fail to attend work fraud, which now directly impacts more than 70,000 victims of be a worthwhile investment. • what disciplinary sanctions will apply for impersonation (a 17.56% increase “snowball days”. from the first three quarters of 2009). Do employees have to battle the blizzards What if employees could have made it to get to work? into work but chose not to? OFT lauches If it is safe to travel, employees should come into This could be a disciplinary matter. In blatant or ‘Scamnesty’ month work as usual. If the workplace is open but employees are snowed in at home, employers persistent cases, employers may choose to investigate the matter in the usual way and take Money transfer scams revealed as could treat their absence as unauthorised and not action in line with disciplinary policies. leading consumer con as OFT pay them. launches nationwide ‘Scamnesty’ What happens if workplaces are forced However, employers may not be able to do this if employees’ normal transport is out of action due to close? On the 1st February 2011 the Office of Fair Trading (OFT) launched its to severe weather disruption. The employer If business premises are closed at short notice Scam Awareness Month, as new could encourage employees to explore because of unforeseen circumstances, such as figures reveal the UK's top scams. alternative transport, but shouldn’t pressurise heavy snowfall, and there is no work available for employees and risk their safety. employees as a result, employers cannot usually New research commissioned by the withhold pay without risking unauthorised OFT shows that 39 per cent of Do employees that fail to get to work deduction from wages claims – unless people who lost money to a scam in have to be paid? employment contracts have “unpaid lay-off” the past 12 months were victim of a clauses or employees expressly consent to being If working from home is not an option, employers money transfer or advance fee scam. laid off without pay. There are complicated rules could advise employees that any time off work in These dupe people into handing surrounding lay-off clauses (such as statutory these circumstances will be: over their bank details or paying an guarantee payments), so legal advice is desirable. up-front fee by leading them to • unpaid believe they are entitled to an • paid, but employees need to make up the time What cold weather protection do inheritance, donating to charity or at a later date employers have to provide? even helping release funds from a • paid, only if the employee takes it as Regulations govern indoor workplace corrupt country. annual leave temperatures. Generally the temperature The survey also found that: • unpaid, if taken as dependant's leave should be at least 16 degrees Celsius. (eg, if schools close - see below). There is no legal minimum outdoor • nearly one in every twenty people working temperature so employers lost money to a scam last year Can employees be required to take need to rely on thermal risk alone. holiday on ‘snow days’? assessments. • amongst these, the realistic nature This is not really an option unless contracted. of scams was the top reason for Employers cannot force employees to take a Employers should never falling for them. day's holiday without their consent. ask staff to disregard official weather and travel • of those who reported being What happens if severe weather closes scammed in the last 12 months, advice. schools or affects employees’ childcare seven% lost more than £4,000. Employees who have battled arrangements? into work, and then have to • 39% of respondents who had Statutory rules protect parents from suffering a cover for those who are been scammed in the last 12 detriment for taking time off because of an absent, can become resentful. months said they did not report it “unexpected disruption to childcare”. Arguably, Ideally their efforts won’t go to the authorities a school closure is not a disruption to unnoticed but days off in Run in partnership with 86 local “childcare”. However, if it was announced first lieu or other financial authority Trading Standards Services thing in the morning and alternative childcare rewards are unlikely. (TSS). The campaign calls on arrangements cannot be made, this could Employers should, consumers to drop scam mailings constitute an emergency situation and however, let employees leave they have received into designated entitle employees to statutory when appropriate to avoid 'Scamnesty' bins or boxes at local protection for taking the day off. treacherous travel conditions on libraries and public areas across the Strictly, the leave would be unpaid but the way home. country. Consumers can see if their not all employers will stop pay. TSS is participating at www.consumerdirect.gov.uk/scamnesty 6 The Consumer Credit Trade Association Money Matters Stuck in the middle Taxing times! VAT rise hits small to medium 200,000 small businesses to be size businesses the hardest targeted for Almost a third of small firms will need extra funding to cope with the tax check... increase in VAT, according to research by British bank Aldermore. A business lobby group has Some 35% of small and medium sized enterprises (SMEs) surveyed by warned small and medium-sized Aldermore said that the VAT rise will strain their cashflow in 2011. enterprises (SMEs) to keep proper Aldermore said businesses usually have to pay VAT to HM Revenue & financial records or face fines from Customs before they have received payment from customers, the taxman of up to £3,000. meaning that the VAT rise will bite into their working capital, increasing the need for funding. The Forum of Private Business (FPB) has Philip Monks Aldermore CEO commented, “Late urged directors of SMEs to seek advice and payment of invoices is already a serious concern keep records dating back at least six years, for many SMEs and the prime cause of their as HM Revenue and Customs plans to cashflow problems. The temptation for clients crackdown on what it calls “significant record- of SMEs to sit on invoices longer to shore up keeping failures.” their own cashflow in response to the VAT After July 2011, some 200,000 rise will be difficult to resist. small businesses will be HMRC is also reported to have become selected for one of HMRC’s more reluctant to allow businesses to new Business Records Checks, roll over agreements to defer tax aimed at raising an extra under its Time to Pay scheme. £600m over four years. Monks added, “HMRC should consider whether its eligibility Geoffrey Rogers, of Geoffrey criteria for Time to Pay should Rogers Chartered Accountants temporarily be loosened in and Tax Consultants and an FPB member, light of the VAT rise.” said: “Many small businesses are still facing an incredibly tough financial climate and signs that HMRC is set to pull the rug from under them are worrying.” Pension Tighten protection... FSA consults on changes to its handbook following your belt... government reforms to workplace pension schemes. The Financial Services Authority (FSA) has published a consultation paper outlining changes to the FSA Handbook following the Government’s confirmation of the workplace pension reforms. These reforms will significantly change the pension landscape so the FSA must ensure consumers remain adequately protected, and that interactions between FSA and Department of Work and Pensions (DWP) rules do not create unnecessary barriers within the workplace pension market. The policy proposals broadly fall into two categories: the use of Equifax snapshot on Business Failures for October/November group personal pensions (GPPs) for automatic enrolment, and 2010 suggests that businesses could be holding back on pay protecting consumers in the changing pension landscape. rises and recruitment in order to survive. Sheila Nichol, the FSA’s director of conduct policy, comments: Neil Munroe, External Affairs Director, Equifax comments: “given that “These proposals mainly affect those involved in the provision, this week’s unemployment figures showed no increase in private distribution and operation of group and individual personal sector recruitment, it could well be that survival has been at the cost pensions. But anybody who has a pension now, expects to make of growth. We believe companies may have maintained pay freezes contributions in the future, or who will be automatically enrolled from to ensure they can weather the current difficult conditions. 2012 will also be affected.” “Indeed, reinforcing this line of thought, in a recent ‘confidence’ survey we conducted amongst consumers accessing their credit file, nearly half (43.8%) said they have felt less financially secure in 2010, with 34.2% putting this down to job uncertainty. 66.4% do not believe they will be getting a pay rise in 2011. At the start of 2010, 63% did not think they would get a pay rise this year. “There is quite a lot of focus on the private sector to fill the employment gap anticipated in the public sector” concluded Neil Munroe. “But our latest figures do seem to suggest that new jobs are currently being delayed for the sake of survival. However there are positive signs that more lending to businesses is happening and this will help with cashflow management which could give commerce the encouragement it needs for growth in the coming months.” News in a Nutshell The banks that aren’t listening... FSA fines RBS and NatWest £2.8m for poor complaint handling The Financial Services Authority (FSA) has fined Royal Bank of Scotland (RBS) and National Westminster Bank (NatWest) £2.8m for multiple failings in the way they handled customers’ complaints, responding inadequately to more than half the complaints reviewed by the FSA. Cheque card... The FSA’s investigation found that there was an unacceptably high risk that customers may not have been treated fairly due to a number of no longer a guarantee! failings within the banks’ approach to routine complaint handling. Of the complaint files reviewed by the FSA, 53% showed deficient complaint handling, 62% showed a failure to comply with FSA requirements on timeliness and disclosure of Ombudsman referral rights, and 31% The UK’s Cheque Guarantee Card Scheme failed to demonstrate fair outcomes for consumers. is being withdrawn on 30 June 2011 RBS and NatWest have co-operated fully with the investigation, accepting Guaranteed cheque use has been in rapid that, the demise of the guaranteed cheque the findings at an early stage and decline over the past 20 years, since peaking should be co-ordinated centrally. have agreed to make significant in 1990, when over 1 billion guaranteed What’s the future for cheques generally in changes to their complaints handling cheques were written, numbers have the UK? arrangements, they therefore qualify dropped twelve-fold to just 88 million in 2009, for a 30% reduction in penalty. Were it making up only 7% of cheques written. Banks Whilst the removal of the Cheque Guarantee not for this discount the FSA would report that a large percentage of guaranteed Card Scheme is inextricably linked to the have sought to impose a financial cheques are actually written in situations ongoing and irreversible decline of the penalty of £4m on the firms. where the guarantee can’t be applied: for cheque, the Payments Council is Quotes: instance where the customer has posted the independently and completely separately Which? Chief Executive Peter Vicary- cheque rather than presenting it in person. reviewing the long-term future of cheques in Smith comments: The average value of a cheque written by a the UK. “This is yet more evidence of the UK’s consumer has risen and now stands at £268, The Payments Council has set a target date of banks failing their customers. It the maximum value limit allowed by the 2018 to close the central cheque clearing, appears that instead of taking Scheme is £250 and 88% of cards only however this date is provisional and will only complaints seriously, RBS and Natwest guarantee transactions up to £100. go ahead if acceptable alternatives are in have been paying lip service to the place and being used by all those who process. The fact that the banks in In light of their falling usage, the Payments Council review on the subject has concluded currently rely on cheques. question are 83% owned by the taxpayer makes these failings even Michelle Whiteman UK Payments harder for customers to swallow. If the UK’s banks want to win back the public’s trust, then they must fundamentally change the way they Sneaky fees in your credit card small print treat their customers.” Credit card providers are quietly introducing new fees Oliver Morgans, financial services expert at Consumer Focus comments: in an effort to squeeze more profit from customers. “The FSA suggests that if you called RBS with a complaint there was less Some are being actioned alongside new consumer protection measures, than a 50 per cent chance that it was which came into force on January 1 under the Consumer Credit directive. dealt with fairly. Calling your bank should result in a prompt resolution to Santander is charging all store card customers a £10 fee if they do not use their cards for six months. your complaint and this fine shows the Customers who signed up with House of Fraser, Debenhams, Laura Ashley, Topshop and Dorothy industry is a long way off where it Perkins may all be hit if they only used their card for the introductory offer. needs to be. Banks have been getting The bank says it is bringing store card customers into line with its credit card and Zero card customers, away with poor customer service for who are charged a £10 dormancy fee if they do not use their account for six months. too long and we are calling for them to raise their game. Ultimately, poor Most credit card providers use the Visa and MasterCard exchange rates, which are close to the complaint handling is a sign of a wholesale market rates and published on their websites. market with weak competition. The changes coincide with a raft of new protection measures. From January, credit card providers will Consumers need a helping hand to have to pay off customers' highest debt first, provide an annual statement, give customers 60 days to know which banks are best at reject an increase to their interest rate, and allow customers to reduce their credit limit at any time. customer service.” Customers should have received their new terms and conditions in December. Source: This Is Money 8 The Consumer Credit Trade Association Money Matters Loyal savers... lowest interest! New deposit guarantee Banks reward loyal customers with pitiful returns 87% of savings accounts that were available six years ago are limit to be £85,000 now paying interest of 0.5% or less, while 62% are paying 0.1% The Financial Services Authority (FSA) has confirmed that the new or less, just £1 a year for every £1,000 saved, shows new deposit compensation limit for the United Kingdom will increase research by Which? Money. from £50,000 to £85,000 per person, per authorised firm, from 31 The consumer champion discovered that 35% still have money in a December 2010. savings account they opened six years ago or more, despite the pitiful rates of interest, and nearly 38% of savers said they wouldn’t switch This is the Sterling equivalent of the €100,000, deposit savings account because they think all savings interest rates are pretty compensation limit, which comes into force in all European much the same. In fact, if people with instant-access and notice savings Economic Area (EEA) member states at the end of the year. accounts and cash ISAs, moved their money to best rate versions of Further changes coming into effect those accounts, British savers would be £12bn a year better off. That’s on 31 December 2010 are: equivalent to £322 for every saver with an instant access or notice • fast payout rules, with a savings account or cash ISA. target of a seven day Which? Chief Executive, Peter Vicary-Smith, says: payout for the majority of “All too often, banks and building societies lure in savers claimants and the remainder with attractive rates of interest, then reward their within the required 20 days loyalty by quietly slashing rates to a paltry level • gross payout, which protects later on. It’s a scandal that banks seem to reserve the most pitiful returns for their customers by ring fencing their most loyal customers.” deposits if they have savings and loans with the same firm. Currently, any outstanding loan or debt would be deducted from any compensation • this new pan European requirement replaces the existing UK arrangement which has been in place since 2009, and which allowed for separate compensation cover for customers with deposits in two merging building societies. Just Are you making the most of low interest rates? Staying The Bank of England’s Financial Stability Report is warning that two thirds of borrowers who are now on variable rate Afloat deals could see their costs increase in 2011, and suggests that, 7 million homeowners currently on floating interest rate deals should start paying off their debts before rates rise. National Cost of Living According to an Equifax survey of Rises by £33 billion! consumers who have accessed their credit file, more than a third have been making the most of low interest rates Annual average household expenditure is estimated to to pay off more of their debts. be £35,261. The corresponding figure for a household However, nearly a third say they still where the main occupant is 65 to 74 is £22,017, and have the same level of debt as they did a year ago, £16,231 where they are aged 75 and over. suggesting that the rising MGM Advantage, the retirement income specialist, estimates cost of living and other that as a nation, we need to find an extra £33 billion to maintain financial pressures such as the standard of living enjoyed 12 months ago. A spend of an pay freezes and job loss estimated additional £528.96 per person. have made it hard for them to capitalise on the recent In December 2010, the latest 12 month inflation figure low interest rates. (Consumer Price Index) was 3.7%, and MGM Advantage estimates that to maintain their standard of living, a typical UK Neil Munroe, External Affairs household would need to spend an extra £1,258 a year, a Director commented: “For household where the main occupant is aged 65 to 74, £786 and these individuals, clearly if in older households it is £579. the base rate increases next year, they could face larger Aston Goodey, Sales and Marketing Director, MGM Advantage monthly mortgage payments comments: “Rising inflation is a hot topic at the moment and it is which could be hard to really hitting some retired people very hard. Food and non- manage alongside other alcoholic drinks for example, have increased by around 6.1% increases in living costs. over the past 12 months, one of the highest rises for any But despite this threat, our commodity or service.” research also suggested a reasonable level of optimism about family finances in 2011.” News in a Nutshell Free Debt 10 facts about credit and debt in 2010 Calculator • In a November survey 42% of respondents said that they feel more optimistic about their finances going into 2011 than they did for 2010. • 40% of smartphone users don’t use password protection. • At October 2010, Equifax reported an increase of • Men are more hopeful of a pay rise in 2011 129% in sales of its Statutory Credit Report The UK may escape a double-dip (37.9%), than women (25.8%). Service in the last 12 months, and by a recession, but Brits are still suffering staggering 205% for October 2010 compared to • 69% of respondents said their company has been the consequences of a tough affected by late payments this year, with 59% the same month in 2009. economic environment with salary reporting an increase in late payments. • Research conducted in March 2010 revealed that cuts and job losses hitting • The Quarter 3 Equifax Business Failures Report nearly a third (28%) of the buyers of credit reports particularly hard. New data from revealed a drop of 13.4% in the number of said they had taken the action simply because leading debt solutions provider, businesses going bust, compared to the same they wanted to better manage their finances. Atlantic Financial Management, period in 2009 • 73% of respondents in April 2010, said they had reveals that loss of income has been • 19% of Facebookers don’t use privacy settings not changed what they give their children as putting them at risk of ID fraud. pocket money, despite the fact that they have the top reason for Britons seeking probably had to cut back on other expenditure help with their debts in the past for the family. seven months. The company believes this trend could continue as the impact of the Government’s Spending Review is likely to see employers remaining cautious about pay rises or overtime in the months to come. Results compiled from 4,600 new cases between March and September 2010 showed that: • 34% of people in need of debt advice cited ‘loss of income’ as the catalyst for their financial problems • juggling multiple credit cards and a number of different creditors was the next biggest reason for needing debt help, with 23% stating this was the main cause of their financial woes Top 10 tips to improve your credit score • 12% of respondents poor financial Research by leading instant online credit information provider, Equifax, has revealed that management was responsible 36% of consumers surveyed found it more difficult to get credit in 2010. And it is expected that lenders will continue to place high importance on credit scores in 2011. • further reasons for debt included divorce/separation (9%) mental or physical illness (8%) and 1. Are you Registered? 5. Defaults unemployment (5%). The electoral roll is used by many companies for If you have a default on your credit file, it will stay identity verification purposes in order to combat on your file for six years and will affect your credit Kevin Still, Director of Atlantic identity fraud. It is vital, therefore, that you are rating. This is when you can use a Notice of Financial Management said: “Debt registered on the electoral roll at your current Correction. is not the personal choice some address. 6. Stop Applying consider it to be, as individuals are 2. Are you credit active? If you have been refused credit, obtain a copy of often left with few alternatives when Not having many credit cards or loans can affect your credit rating. But DO NOT carry on applying attempting to balance finances in a your credit score. So it’s worth considering elsewhere. Each search by a lender will leave a difficult economic landscape. With opening an account to establish a credit history, “footprint” on your credit file. Too many searches the prospect of job losses in the even if you pay it off in full at the end of every in a short space of time can be perceived by month. lenders as you over stretching yourself financially public sector coming out of the and could therefore negatively affect your score. 3. Change of Circumstances spending review, these findings are 7. Avoid a high balance If your circumstances have changed and you serious cause for concern. have had difficulties keeping up with credit Avoid carrying a balance that is more than 30% “We know that it isn’t always easier payments, then it’s important to say so. You can of your credit limit. Lenders may view this as to ‘see the wood for the trees’ when place a Notice of Correction on your credit file excessive debt and that you may not be able to explaining the background to any arrears, keep up with repayments. the debts start to pile up. So we especially if you have now got back up to date. A have developed a free debt 8. Be Direct lender will review this when assessing any credit It’s easy to forget a payment so setting up direct calculator to help families and applications you make. If you believe a debits and standing orders with your bank will individuals identify where they might lender/company has provided incorrect ensure payments go out on time. need help. By answering a few information on your credit file, you can raise a Notice of Dispute with the Credit Reference 9. Close it Down questions online the calculator can Agency and they will take this up with the lender. Make sure any accounts you don’t need or use assess an individual’s financial health are closed. Financial companies are paying more and provide actions to help prevent This will usually be resolved within 28 days. 4. County Court Judgments attention to the total amount of credit available worsening debt problems.” to an individual and whilst you may not be using If you’ve had a CCJ and it is now settled make them, dormant accounts could affect your credit For free debt calculator visit sure the settlement is recorded on your credit score. www.atlanticfinancialmanagement.co.uk file. If not contact the court to get confirmation details and inform the credit reference agencies, 10. Early Bird Catches the Worm otherwise it will stay on your file for six years. Try to pay off loans and credit agreements ahead of schedule. Lenders will look favorably on this. 10 The Consumer Credit Trade Association Money Matters End Legal Loan Cautious Sharking credit... Fierce industry lobbying of the government, has highlighted a call for the end of legal loan sharking. A Compass campaign meeting in December 2010 discussed the high cost of lending, which exploits Consumers borrow millions the poorest people in the UK. more on credit cards Believing meaningful change comes from the grassroots, Compass Consumers took on millions of pounds more of unsecured debt in are now taking the End Legal Loan Sharking campaign to a local level. October by flexing their plastic, the Bank of England reported. The Compass General Secretary comments: Consumer credit rose £287m in October 2010 compared to £72m “We have been speaking to council leaders that are adopting best in September, the highest increase seen since May, as borrowing practice to tackle high cost lending in their local areas. All councils will on credit cards far outweighed a small fall in other unsecured be facing budgetary pressures over the next few years. Investing in lending. The twelve month growth rate of consumer credit financial literacy and affordable lending is a low cost way to ensure increased 0.4 percentage points to 0.6pc, the steepest rise since that wealth stays in your local economy. For full details visit September 2009. http://action.compassonline.org.uk/council However, Howard Archer, economist at IHS Global Insight, said: “Despite the modest pick up in unsecured consumer credit in October, it remains very low compared to past norms, and we suspect that this will remain the case. Consumer appetite for taking on borrowing still appears to be limited while there is an ongoing desire of many consumers to reduce their debt.” Meanwhile, figures for secured lending showed that mortgage approvals for house purchases reduced further in October to reach an eight month low of 47,185. The figure was in line with expectations following September’s 47,369 and reinforced fears that the slow down in the housing market is intensifying, as approvals are running at just half their long run average rate of 90,000. Trust The Registry Improve your credit rating... Registry Trust Ltd holds registers of judgments against companies in the United Kingdom and is campaigning to encourage SMEs to ensure that their paid judgments get registered as satisfied. If a judgment is satisfied lenders are far more likely to extend credit, especially in these cautious times. Yet Debt management solutions even so, not all judgments are marked as satisfied and there is compelling evidence that full repayments are under one roof... being made without the benefit of registration. Companies which have paid their debts in full need to ensure that the Courts Service is told. The British Bankers’ Association (BBA) has called for the creation of a single body to regulate debt advice, under The British Bankers Association (BBA) take the viewpoint proposals to deliver a fairer deal for consumers. that: “A satisfied County Court Judgment (CCJ) provides a positive element to the entry and can make a difference to A joint study, from the BBA and consultancy firm Accenture, claims the way a lender looks on it. ”Registry Trust chairman, that a clearer range of options for people working to resolve their Malcolm Hurlston, said: “It is important that when SMEs debt would avoid confusion and worry. have paid off their CCJ in full, they make sure it is marked The study recommends changes in four key areas: as satisfied. If they get their satisfaction, together we • the creation of a single body to regulate debt advice, with a can get business rolling.” single debt management license and sole responsibility for An unsatisfied CCJ will have a significant delivering a national over-indebtedness strategy adverse affect on the scores/rating for a • a call for simpler debt remedies and increased emphasis on early business which will indicate a higher risk. intervention and resolution Current market conditions are generally • better use of customer information to identify people at risk of difficult for businesses and it’s important they losing control of their debts, to offer early help give themselves the best opportunity in tender situations, by appearing to be as low • improving financial education and providing a single, online debt risk as possible. advice portal. Source: Insolvency News News in a Nutshell 2nd hand car complaints – top a home of The Bank of England recently reported a 42% increase in mortgage holders who switched your own provider in November 2010, compared to the of the OFT list... same month in 2009. In research released by Equifax, 36.8% of those who had applied for a OFT warns people to know mortgage indicated that they had found it their rights before buying a difficult to get a competitive deal. Whilst this is still a relatively high number, it is almost a 10% used car, as complaints rise drop in the number of applicants who were The OFT has launched a campaign having difficulty getting access to good credit to help people know their rights deals in 2009. when they buy a used car from a For those who did have difficulty getting a dealer, as new figures released competitive deal, one in five believed it was today reveal a rise in complaints. In because they had previously defaulted on a loan, the first six months of 2010, the whilst over a third (35%) thought a key barrier was OFT managed advice service, the amount of money they had for the deposit. Consumer Direct received just over Neil Munroe External Affairs Director at Equifax 38,000 complaints about second comments: “The size of the deposit required for hand cars bought from dealers, an a new mortgage certainly still seems to be a key increase of about 18 per cent factor in getting a good deal at the moment” compared to the same period last explained Neil Munroe. “But there also appears year. Complaints about second to be a heightened awareness of the importance hand cars continue to top the list of of the data on an individual’s credit file”. calls to Consumer Direct, above mobile phones and TVs. Around 3.6 million second hand cars are bought each year, with consumer spending totalling £24 billion. But an OFT study found that many car owners end up fixing unresolved faults that are the dealer's obligation to correct, costing each of them an estimated average of £425. Dealers have a responsibility to sell cars that are of 'satisfactory quality'. This will vary Boot-Fair Britain depending on issues including the vehicle's age and mileage, but as Britons shun new home furnishing opt for second hand cutlery and crockery. 48% said they bought or received second hand the vast majority of all second hand in favour of hand-me-downs and dining room furniture, while 12% say they car faults come to light in the first second hand bargains. three months, they will often be the acquired second hand linen. dealer's responsibility to fix. With the Christmas spend hangover and VAT Phil Cliff, Director of Santander Mortgages increases, millions of homeowners are looking commented: to embrace the age of austerity by furnishing their property with second hand household “Many buyers are so focused on saving for the items. Research conducted by Santander deposit and fees that they don’t have as much Lets off road... Mortgages has shown that more than 28% of home furnishings is now purchased second as they’d like left in the bank for furniture and furnishings. The average homeowner now BIBA welcomes new regulations hand, borrowed or handed down. spends £3,800 kitting out their new property to reduce uninsured driving and this amount can go a long way if buyers Only 58% of homeowners now choose to buy take the time to choose carefully.” The British Insurance Brokers’ their living room furniture brand new and 23% Association (BIBA) has today welcomed the news that the new Continuous Insurance Enforcement regulations have been laid in Home-A-Loan 2! Parliament. Under the new powers it will be an FSA Mortgage Lending Data published • new lending with a combination of high LTVs offence to keep an uninsured vehicle, Key statistics for Q3 2010 are as follows: and high income multiples continues to account for just over 1% of new lending as it rather than just to drive when • the total value of outstanding loans is did in Q2 uninsured. If vehicle keepers fail to £1,220bn, an increase of less than 1% on insure, or submit a Statutory Off last quarter • the proportion of loans to borrowers with an impaired credit history increased slightly this Road Notice (SORN), they could be • new advances in the quarter totalled £41bn, quarter to 0.44% liable to a fixed penalty of £100, 12% higher than in Q2 but much the same prosecution with a fine of up to as the amount advanced in Q3 2009 • the number of new arrears cases has fallen in each of the last seven quarters and was £1,000, and/or wheel clamping which • new commitments totalled £38bn, 6% down down to 36,600 in Q3 (-2%) could result in the seizure of their on the previous quarter but again in line vehicle with the attendant costs. with Q3 last year • the total number of accounts in arrears has also continued to fall, each quarter over the BIBA has been lobbying for the • in Q3, lending for house purchase past year, decreasing by 2% in Q3 to introduction of CIE since 2004 so is accounted for 64% of new advances, the 346,000 delighted that this new system will highest percentage in the series, and 61% of new commitments • consequently, the proportion of the be introduced. It will create a fairer residential loan book that is in arrears, and system for responsible motorists who • the proportion of new lending done at an hence not fully performing, also fell and now pay an average of £30 each year LTV of more than 90% accounted for just stands at 2.97% over 2% of new advances for the second within their premiums to cover the successive quarter • the number of new possessions in the costs of uninsured driving. quarter continued to decline, decreasing by • arrears totalling £44m on 16,184 accounts 8% to 9,145, the lowest figure since the end were capitalised in Q3. of 2007 12 The Consumer Credit Trade Association Money Matters Payday loan firms face action on direct debits Payday loan firms are putting customers at risk of deeper debt difficulties by taking money out of their bank accounts without telling them, it has emerged. The unusual suspects... Consumers repaying payday loans by direct debit have been warned to check their lender is taking the right amount on the right date OFT takes action against after the Office of Fair Trading (OFT) clamped down on firms misusing payment facilities. unfair debt recovery practices Payday loans are typically used to meet short-term borrowing The OFT has imposed requirements on a debt recovery requirements are designed to be repaid on the borrower's next company to secure improvements to its debt collection and communication practices. payday. Interest charges typically range from £13 to £18 for every £100 borrowed, yet the number of Britons taking out payday loans An OFT investigation found that the company had been chasing people for disputed debts without properly investigating the has quadrupled in the past four years, Consumer Focus revealed issues in dispute, in breach of the OFT's debt collection guidance. recently. The investigation also found that those being chased felt The practice of taking money from a debtor's account when they are unreasonably pressurised. already in difficulty could prevent them from meeting priority debts, The wrong person being pursued for a debt is a common theme such as mortgage payments, sending them further into debt, said in complaints about the debt collection industry received by the the OFT. It also believes that some lenders use this "continuous OFT. This is often rooted in inaccurate or incomplete data being authority" as a way to avoid having to make proper checks on a passed on by the owner of the debt when a debt is sold or its collection is sub-contracted. borrower's ability to repay. The requirements imposed set out that the company must:: Ray Watson, director of consumer credit at the OFT, said: • not pursue debts where it has been notified in writing that the “We have made it clear that we will not tolerate companies misusing debt is disputed until the dispute has been properly investigated repayment facilities and we will take action to ensure that unfair • ensure that its communications are not, or do not appear to be, terms are not used. Those who offer payday loans must do so threatening or to constitute unreasonable pressure responsibly and in accordance with the expected standards.” • deal sensitively with particularly vulnerable customers. What’s in a name? A warning shot OFT reminds debt management across your bows... industry not to use misleading names OFT update on debt The OFT is reminding debt management companies that they must management enforcement action not use misleading trading names and must make clear that they are commercial enterprises rather than charities or government services. The OFT announced on the 28th January, that 35 debt management firms have surrendered their consumer credit licences and at least The reminder follows action by the OFT to refuse an application from 15 are facing licensing action as a result of an OFT compliance review. a company to use the trading names 'The Bankruptcy Helpline' and The firms subject to licensing action have the right to make 'The Insolvency Helpline'. The said company has the right to appeal representations to an adjudicator before a final decision is made. this decision to the First-tier Tribunal. The announcement follows an OFT warning to 129 firms in The OFT refused to authorise the use of these names because they September 2010, after its review of the debt management sector could potentially mislead consumers into thinking they are dealing found widespread problems with compliance. with an impartial, non-commercial or governmental organisations, Since this warning was issued: rather than a commercial enterprise. Consumers need to be able to differentiate between the two. • 35 firms have surrendered their licences Ray Watson, the OFT's Director of Consumer Credit said: • eight firms have been informed that the OFT intends to revoke their licences 'Consumers must be able to • a further seven companies who did not respond are currently being distinguish commercial debt investigated management companies from free charitable or government services. • 79 firms have submitted evidence, which the OFT will now review. We will not agree to names that All firms were asked to provide evidence of compliance measures by could mislead consumers into 16 December 2010. contacting companies when they Ray Watson, Director of the OFT's Consumer Credit Group, said: might think that they are accessing free advice.' “We are determined to improve standards in this sector, as the failings identified by our review are unacceptable. Companies providing debt management services should be in no doubt that we will act against bad practice and ensure consumers are protected.” Feature The storm clouds are gathering - again! The storm clouds are gathering again in the debt markets. In Europe, Ireland and Greece are clearly on the slippery slope to levels of debt financing costs that are not sustainable alongside a growth economy. In short they can’t afford the price! Germany appears to be the only economy that is in true growth stemming from an export lead recovery. Even here there is a threat as the euro strengthens on the back of this success. There are clear concerns in the US about the American economy where the Federal Reserve continues to provide stimulus through Quantitative Easing (QE). Regardless of the headline numbers there are sectors demonstrating weakness akin to a double dip, not least here in the UK in the housing sector. Couple this with concern across the globe about the lack of strength in the US economy, all financial centres are looking over their shoulders. Despite this markets have shown increased strength with new highs being visited in the equity markets regardless of any disappointing data which comes out. The only explanation appears to be simple weight of money combined with portfolios being underweight in certain sectors. The weight of money is being generated by the central banks as they pump money into the system. The downside to this policy is future inflation, inflation has to emerge somewhere and where in previous cycles it has emerged in property, it now is creeping through elsewhere. One thing is certain, serious problems remain under the surface and as in Ireland and Greece they will crystallise in the months ahead. Debt charity warns... Insolvencies could rocket 20% With speculation that 500,000 public sector jobs Last year saw the highest number of personal could be lost by 2014, the charity believes that insolvencies on record and despite the current A UK debt charity has warned that the debt although personal insolvency figures have now reprieve; the potential job losses could push crisis looks set to escalate again, despite the fallen for the second consecutive quarter, the insolvency to an all-time high. latest figures indicating a drop in personal country is still sitting on a financial time bomb. insolvencies. Mr Rodger continues: “Although insolvency David Rodger, Managing Director of Debt volumes are the product of a number of According to Debt Advice Foundation, the Advice Foundation, explains: “Although 2010 contributory factors, unemployment, country is experiencing the ‘calm before the has seen a reduction in the number of people particularly new unemployment, is a key storm’ and predicts that the number of becoming insolvent, the prospect of half a determinant. If the predicted spending cuts go people facing insolvency could rocket by 20 million public sector jobs being cut with little ahead we could see insolvencies rise to in per cent following the outcome of the hope of the private sector picking up the slack, excess of 40,000 per quarter, which is 20 per Government’s spending review. means that the worst could be yet to come.” cent higher than present levels.” Source: Debt Advice Foundation 14 Markets Commodities to re-establish the house building Despite really mixed signals and some Oil, as with equities, has continued on its’ programme. The problem with the latter, weak data coming out over the last month upward path in anticipation of increasing albeit essential, economic activity is how trends have held their line so to some demand on the back of economic recovery to inject capital into the sector without extent prices appear to have divorced despite fears of another dip. It is almost ballooning credit through the mortgage themselves from economic data suggesting as if as more commentators express market. I suspect the answer will be a that sentiment is sweeping all before it. In concerns so the markets not only ignore combination of local government funded other words all news is good news, even if them, but take a totally opposite stance. housing projects, a return to council it is bad news! The continuing upward movement in the housing under another name, something gold price is at least consistent with the already in place via the housing Equities fear of inflation and possible blips in the associations, combined with continued economic recovery. Gold will remain the growth in the rental market. Developers Equities have reached their highest point since 2008 breaking and holding levels safe haven whilst these fears abound, as with housing stock on their books should through 5,800. The trend is your friend and it is a natural hedge for investors. be able to transfer these into property investors who joined the train back in management companies deriving profits September must be enjoying the ride! How Conclusion from rental income. The lack of bank sustainable all this is remains to be seen but Mr Cameron and the coalition government finance has hindered this so far but the the strength of the market cannot be continue to drip feed headlines relating to flow of finance could be encouraged as denied and there will only be a meaningful proposed cuts but there still remains little the capital base of the banking sector is downward correction if the current values detail about how they are to be achieved. restored and regulatory changes in the are shown to be false over time. Reality is The problem with a top down approach is fund management sector could also that the consumers who are in work have that the final figure can only be achieved release much needed capital. cash in their pockets appear willing to in a haphazard way. The reason for this There is much to do if we are to re-build spend it, regardless of what 2011 will bring. approach I suspect is a need for speed UK Limited but a start has been made and through which the government of the day the government now has the very difficult Currencies seeks credibility. Unfortunately invariably job of turning the fear of cuts today into Sterling has shown a weaker trend against the results are not achieved in a very hope and optimism for the future. We the major currencies during the past month efficient manner through confusion and must all hope they succeed. including the United States Dollar (USD). protectionism amongst the troops on the This certainly reflects the structural ground. This can already be seen in one way through recent industrial unrest on the difficulties the UK economy has and the related debt burden. The markets are tubes and in the fire service. I suspect this Chris Lee tending to indicate that although the is just the start of a winter of discontent. “Chris Lee has completed over 46 coalition appears to be grasping the nettle Let’s hope the government can hold the line despite an occasional wobble. years in the City of London, initially there remains scepticism with regards to in the trading rooms of International whether they can deliver. Couple this with The next step is to pave the way for obvious concerns about where the growth economic growth. This is difficult to Banks and in recent years in the fund is going to come from it is not difficult to achieve as we cannot really compete in management arena, focusing on imagine sterling being soft for some time. the manufacturing sector, at least not exchange traded alternative There are also concerns about future sufficiently to be the economic engine room of the country. Expertise led activities investments. His particular expertise inflation and the ultimate need to raise interest rates possibly just as the economy such as IT and top end engineering tend has been related to all aspects of risk is really picking up. None of this will not to be large employers, and our management on the basis that all provide strength to the currency. previous wealth creator, both for the investments are characterised by The USD has been in a steady decline for country and the chosen few, the financial sector is still in the recovery room, although buckets of risk with returns being some six months now and there seems little totally commensurate with the risks likelihood of this trend being broken in the hopefully out of intensive care. Consumer near term. There are huge concerns about led growth on a lake of credit is obviously taken. He is the author of numerous US employment and the demise of their not the way forward, so transition to a articles reflecting on the events of property market, coupled with deep rooted sustainable solution is bound to be slow. the day and how they impact on doubts about the easing strategy with the The construction sector has room for financial markets, biased to the belief Federal Reserve continuing to pump in recovery partly by continuing to be liquidity as seemingly the only instrument underpinned by capital infrastructure that market mechanics are simple, it available to them. projects, despite some cuts, and the need is people who make them difficult.” Source: Business Money Magazine, www.business-money.com. Bowdens Business Centre, Hambridge, Somerset, TA100DR. Base Rate comment: House Price Index comment: Mark Pilling (Managing Director) Spicerhaart Corporate Sales, the Alison Beech, Business Relationship Director, Valunation, largest independent network of estate agents in the UK and Europe, comments on Nationwide’s November House Price Index: comments on the Bank of England base rate decision: “Yet another house price index has reported a fall. The “It would have been a double blow to increase the base rate in the state of the current market is a result of economic same month as VAT rose to 20%. While borrowers have been granted a uncertainty and a decrease in mortgage lending, and temporary reprieve, however, as inflation remains well above the 2% yesterday’s figures from the Bank of England reporting an target it will not be too long before the base rate goes up. When this eight month low in mortgage approvals highlights the does happen, homeowners on variable rate mortgages who have just severity of the problem. There may yet be some hope for about been meeting their repayments at the current record low interest first time buyers however, it seems the FSA is finally taking rate level will suddenly find themselves even more financially stretched. the issue seriously as they have decided to revise their This, along with the VAT hike and likely rise in unemployment caused by proposed restrictions on mortgage approvals. Let’s hope public spending cuts, means we must be prepared for an increase in sensible lending to first time buyers is encouraged rather repossessions and assisted voluntary sales later in the year.” than hindered.” Members Only The wrong end of the telescope... Good news for lenders, interest rate drives the calculation of the APR not the other way around. Sternlight & Ors -v- Barclays Bank Plc & Ors Ian Norman Solicitor Lightfoots LLP This case involved numerous Claimants who His view was that the driver for the calculation of the APR was the interest rate and not the other way round, as contended by the brought claims based upon the same principle Claimants. Taking the Sternlight agreement as an example, the against a number of banks and credit card debtor had agreed, as a contractual term, to pay a monthly rate of 1.531% on cash advances. If the Claimants’ were correct in their providers in respect of credit card agreements assertions, the debtor in that agreement would have agreed no such (running-account credit agreements) regulated thing. Instead he would have agreed to pay interest at a rate of 1.3205%. The calculations were supplied by Nigel Young, a by the Consumer Credit Act 1974 (‘the Act’). mathematician and computer expert. It would mean that the interest The cases were gathered up by various County rate would have to be “derived backwards from the APR.” Courts around the country and were transferred The Judge held that there was a clear difference in the nature and to the Manchester District Registry of the High functions of the stated monthly (or annual) rate on one hand, and the APR. He concluded that the stated monthly or annual rate is the Court to be heard by His Honour Judge contractual term. He rightly found that the APR is a product of Waksman QC as test cases. The outcome of his statute, based upon a complex calculation, created in order to provide instant information to consumers on not only the rate of judgment is set out, in summary, below: interest but other charges. The Issues His Honour held that the APR is not to be regarded as the truthful The main issue pleaded by the Claimants in each case was that the requirement of paragraph 4 of Schedule 6 to the Agreements interest rate was miss-stated. This, they contended, was because the Regulations i.e. ‘the prescribed term’. In support of this finding, he annual percentage rate (APR) should be regarded as the driver for referred to the fact that credit card agreements enable providers to the calculation of the interest rate under the various agreements. vary the rates and charges over the life of the agreement. Accordingly, the APR is only reliable at the moment the agreement is As this was not the case in each of the agreements, if the Claimants’ signed, a fact which was accepted by the Claimants. If the APR, the contention was correct, each of the credit card agreements would be supposed ‘driver’ for the calculation of the interest rate cannot act as rendered irredeemably unenforceable if entered into before 6 April such over the life of the agreement, it suggests that it should not act 2007. This is because the interest rate is a prescribed term for the as the driver at all. purposes of s.61 1(a) of the Act and Schedule 6 to the Consumer Credit (Agreements) Regulations 1983 (‘the Agreements Regulations). In light of the above and for other reasons, His Honour Judge Waksman struck out the claims against the various credit card providers. The Judgment His Honour Judge Waksman QC found for the Defendants in each case. He stated that the Claimants’ proposition had a “surreal quality to it”. Summary This Judgment is excellent news for lenders and reinforces the Judgment made in a similar but not identical case by His Honour Judge Tetlow on 16 April 2010 in the Oldham County Court. That case was Brooks -v- Northern Rock (Asset Management) Plc. In that case, His Honour Judge Tetlow described a similar argument as “looking through the wrong end of the telescope”. This outcome, which as a High Court Judgment will bind Judges deciding cases in County Courts is to be applauded as it will no doubt see many such claims struck out or summarily decided in favour of creditors. Members Only Analysis or Paralysis Death by Data... prudent analysis is key to business success, over analysis can most definitely add to data paralysis. As the heading suggests, many businesses, and specifically those within our concentrated Financial Services sector, are being overloaded with all sorts of data. Appropriate data capture and analysis is key to business success, however, many organisations have perhaps gone too far. Some of the questions to be asked are; where does the responsibility lie for supplying data, who checks for duplication – for example, similar requests for data extracts being produced for many people - and who decides on the data request priority? Should this function be centralised or decentralised within functional units? Peter Maguire, a Principal Consultant with Arum examines the whole question of whether creditors have either gone too far or indeed not far enough in identifying, capturing and analysing data to drive business improvement and improved profitability. Peter Maguire Arum 18 These simple questions raise many a debate Death by Data to pay between 10am and 11am. This would and there is no easy answer. That said, One caveat to the above ‘request and obviously sit under Performance in POEM however, vast improvements can be made in delivery’ is that, although it sounds good in and Proactive as opposed to Reactive. This is the provision, timing and analysis of data by theory, it could end up and usually does with a great example of data being used to drive exploring some of the issues noted below. over duplication of similar types of output. business improvement. On the other hand This is extremely common within large the financial information we talked about Data Ownership creditor organisations where literally above could be a balance sheet which is Many creditor organisations have very hundreds of reports are produced on a generally produced periodically. This would powerful data at their fingertips, but often fail standard basis and new reports simply get sit under Management in POEM where for one reason or another to use it for their added on an ad hoc basis. reactive information is quite acceptable. own benefit. Companies must review their data output Data Output A key issue to data ownership is the question and be serious about cutting where need be of where this ownership and responsibility and adding in new ones where appropriate. Data in the Creditor environment can be lies. Does it sit with IT, data warehouse, It is a bit like reviewing our wardrobes or displayed in many formats, plasma screens, analytics or the end user? The simple answer garages and being serious about ‘chucking tele-collector performance boards/screens, may be that the data in itself is ‘owned‘ by out’ clothes and junk that have remained individual PC screens and paper. How many everyone, however, the end user should have unworn or unused for many years. Data is no times do we see huge reports being skipped the ability to request prudent data output for different! If you do not take time to do this, through by individuals so as to concentrate the benefit of the organisation. The provision paralysis will kick in and real analysis, with real on the few pages which are of interest to of that data could sit either within the end business benefit, will be lost due to not them? Do we look at all the output on the user function or within a data or IT support seeing the wood for the trees. plasma or only the few key statistics? Is all the function. End users typically want it within information relevant? How much could we their operations due to quick turnaround and Types of Data save on computer time, individual time, being in charge of their own destinies. The stationery, ink etc if we were able to identify move to a more centralised data ‘supplier’ It is worth perhaps looking at the different the individuals’ specific needs and report on within organisations is seen as cost effective. types of data which would add benefit to our these? business through proper data analysis. The Prioritisation is a typical big issue within end mnemonic POEM helps us identify the high It is generally felt that most large user environments and the common negative level reporting types, Performance, organisations could reduce their reporting within IT departments is the perception that Operational, Exception and Management. output by 50% with little or no impact on the end user may not really know what they operational performance, and giving want and may perhaps duplicate similar types We must also identify what output should be significant cost benefit savings. Although of data. Another problem lies in the fact that analysed on a proactive basis, as this can add savings are important, probably more the end user Collections function may know significant benefit to the organisation. Many important is the opportunity cost which what data/output they want, but do not have a senior member of staff waits nervously as would come with identifying the right reports, the expertise or ‘permissions’ to extract the month end approaches, in anticipation of the in the right format, produced at the right data themselves. This can create frustration latest bad debt provision figures published time, thereby becoming more efficient and and the business as a whole can lose by the Finance department. Would it not be effective. substantial amounts due to the end users more advantageous if individuals could giving up requesting information, and in influence and positively impact on these Summary some cases stopping them from being figures on a daily basis so that the month end figures become less of a shock? For instance, Prudent analysis is key to any business creative due to the inability of their new ideas in an operational Collections environment it success, however, over analysis can most being turned into new data output. would be obvious to use as much proactive definitely add to data paralysis. Frustration and ineptitude gradually creep into the department and we all know where information as possible to enable the Analytics will play an ever increasing role that leads to. Ownership of data must be management of that function to continually within creditor organisations in the future and seen as everyone having a stake-holding in it, adapt and change as proactive information are now being recognised quite widely for albeit it is acknowledged there are different on both staff and customers changes minute the benefits they can bring. responsibilities in the supply and by minute. It is probably acceptable to show Some words of caution though, as there is interpretation of this data. It is critical that financial information at the end of each evidence that some organisations have little there is a seamless link between data month on a reactive basis as data builds and or no analytics, whereas others are requests and output delivery whilst taking changes during the period in question. overanalysing and creating analytics empires account of potential duplication and If we look at these two examples, and take (note the law of diminishing returns) with data appropriate prioritisation based on business them to the next lower level, we may show being over-analysed and duplicated in many benefit rather than personal preferences. tele-collector Tom‘s promises/commitments areas of their organisations. SOME FINAL THOUGHTS • re-look and re-examine existing reporting • question the timing and priority of reporting • engage with end user departments to requirements, add, delete and amend requests, is it based on business benefit or encourage creative data output thinking, • identify where reports could be combined, favouritism? less duplication for example, six reports may contain 80% of • question individuals on what they look at • compare fields within different reports to try the same information, why not create one and what they don’t with a view to to trim down output master report by adding the 20% of missing reduction or deletion of output • note the savings you make on output fields thereby reducing reports by five? • see whether report output times could be reduction • sense-check the reporting distribution list, altered, for example, from daily to weekly, • don’t be afraid to cancel/stop reports are they going to the right people? weekly to monthly etc • to the end users; make sure you always • question where the reporting production • challenge yourself to create a maximum of measure apples with apples. responsibility lies, within or without the user 20 reports with a maximum of 20 fields area within each report (POEM) Your CCTA WARNING... the CPMA... more red tape regulation is on its way, now is the time to make your voice heard, and protect the future of your business! As the dust settles on the arrival of the CCD, the threat of further restrictive and time consuming regulation looms on the credit industry horizon. Once again, small to medium sized enterprises (SMEs) seem likely to bear the brunt of the proposed integration of the Consumer Credit Market into the Consumer Protection & Markets Authority (CPMA), potentially operating under FSA type rules & principles. The HM Treasury/BIS Consultation Paper published on 22 December, appears to lean in favour of this integration, and the probable change to the OFT, would see a more supervised regulatory scenario in consumer credit. Our Industry and Members have received a barrage of regulatory changes over the last 5/6 years, and further change may seriously impact on the overall market. It would certainly impact more SMEs, with both the cost of supervision and regulatory intervention, requiring substantial price increases in products and services. The two options being proposed are detailed and complex, but in brief: Option One Option Two (favoured by the consultation paper) (favoured by the CCTA) ...is based on the Financial Services and Markets Act 2000, and ...is to retain the existing Consumer Credit Association (CCA) would see everyone involved in the credit industry, large and regime, albeit at present without a future regulator being small, operating under more FSA style ‘rule’ based regulation. confirmed. In addition to the huge impact of absorbing this change, would This middle ground alternative has innumerable ‘set-up’ options, be the associated ongoing ‘red-tape’ requirements, such as but would in theory, involve less ‘red-tape’ regulation and cost, regular reporting. for smaller businesses. Banks & Mortgage Lenders are better positioned to deal with Greg Stevens (CCTA - CEO) on behalf of the membership has more intangible ‘rule’ based regulation, as their current profit visited and spoken to all the other significant Trade Associations models could carry the cost of the extra regulatory burden in an effort to mobilise support. The enemy is at the gate, and before passing it onto the consumer at some stage. This leaves we need an immediate defence. the rest of the credit market, i.e. small to medium sized enterprises, more used to following a statutory OFT style code, If you would like further information please contact paddling its own canoe. email@example.com. What you can do to protect your business, now... • we will be asking you to forward a response to the HM Treasury & BIS consultation process, we will help you in the drafting of the document – Your window of the deadline is the 22nd March 2011, so time is of the essence opportunity is here... • we will also be drafting and distributing a If you don’t take the time to register your opinion the moment ‘template’ letter for use in lobbying your MP will be gone. At CCTA one of our primary, ongoing concerns is, • encourage others to join the battle – if you have lobbying the government on behalf of our members. On this associates who are not currently a member of a issue, we need to present a united front. This is your industry, trade association, pass on this information, and and your livelihood, join us in our fight to secure your future. urge them to make either make their own stand, or join an association who will represent their best interests. Look out for the draft response and lobbying letter, they will be with you shortly. 20 Welcome to the ‘5 minute manager’ This new feature aims to give easily TOP TWELVE TIPS digestible tips to those of you who 1. Find out as much as you can about the interview/story angle and others being interviewed are busy battling the big issues that and the journalist’s deadline. Ask what the first question is going to be. At this stage check affect your business. the credentials of the journalist, and if they are calling from a mobile phone, ask for their company and landline details. Tell them you will ring them back on their landline. Sometimes there are just not enough hours 2. If possible stall to give yourself time to prepare your responses, BUT always get back to in the day to research in full, the smaller the journalist before the deadline. If the journalist has made voice contact with you, the things that can have a major impact on the article may be written as though you agree with the view portrayed in the article if you day to day running of your company. In this provide no comments at all. series of articles we intend to do the 3. It is vital to prepare the maximum of three key things you want to get across and ensure legwork for you, offering key points on they are substantiated with examples. If you listen to broadcast interviews on difficult topical subjects in a ‘5 minute read’, that subjects, the same three points (or less) will be mentioned time and again. will save you both time and trouble. 4. Prepare the answers for the questions you are dreading most. ‘Handling The Media’ is our first title. 5. Get to your point quickly – preferably in your first or second answer. If there is something that you would 6. Use clear, plain English and avoid business or technical jargon at all costs. particularly like us to cover, we are open to suggestions. E-mail your ideas to 7. Rarely is the question aggressive, it’s the tone in which it’s asked. Listen through the firstname.lastname@example.org. aggressive tone, and answer the topic of the question. 8. Remember, you are the expert, it’s your company, and your industry. Correct any mistakes the journalist makes. If in the unlikely event you do a pre-recorded interview, and you are not happy with your response, ask to do it again. Handling the Media 9. Don’t be afraid to say you don’t know, you can always get back to them with a correct and fuller answer. I have dealt with Press and Media over many years, and I have often been asked 10. Remember, you are always ‘on air‘ when in the company of a are there any clear rules of engagement journalist, even if it is a social occasion. There is no such thing as ‘off the record‘, if a journalist smells a story. We have all seen to effectively deal with them. articles manufactured from ‘off the record‘ conversations. The rule We do have to remember that not all of thumb is be guarded, and polite, do not believe that they will Press and Media enquiries are negative, ever be your ‘mate‘. and that all queries dealt with in a 11. Enjoy the opportunity an interview affords. Don’t go into it as an proper and professional way stand the ordeal to survive, as it will show. organisation in good stead for future 12. Finally managing the local Press and Media can be beneficial for enquiries. The reputation of the your Company as you can use them to promote human interest organisation can be harmed if, no stories in your locality. Editors are always looking for positive editorial answer or evasive answers are provided. to include and the have limited resources to chase down stories. Greg Stevens CCTA Chief Executive The next story is always waiting to happen, if your business is part of it make sure that your actions follow the twelve top tips. CCTA leads the field with Bills of Sale Code of Practice On 28 January 2011, the government published • lenders have also agreed to adopt a standard information sheet for customers considering taking out a bill of sale. The sheet its response to the December 2009 consultation explains in plain English how bills of sale work and what the on the use of bills of sale for consumer lending. customer can expect from the lender. In the context of consumer lending, a bill of sale is used to secure a • new consumer credit requirements will apply to loans taken out loan on a consumer's personal property, typically a car. The under bills of sale from 1 February 2011 (introduced as a result of culmination of a series of meetings over the last 8 months, with CCTA, implementation of the Consumer Credit Directive (2004/48/EC) the OFT (Office of Fair Trading) and BIS (the Government Department (CCD)). These requirements will give customers new rights and for Business, Innovation & Skills) produced an announcement on 28th impose new obligations on lenders. January, that the Consumer Minister Edward Davey has decided not • the OFT monitoring compliance with its irresponsible lending to ban bills of sale, as this could restrict consumer access to credit, guidance, and taking enforcement action where necessary. reduce choice and increase prices. In addition, it is concerned that a ban could force some consumers to use illegal lenders. The In a related press release Consumer Minister Edward Davey government has also decided not to regulate bills of sale at this time. welcomed the fact that the majority of the industry has already Instead, it intends to give the industry a chance to "put its own house signed up to comply with the code. The package of measures in order" and rely on the following package of measures: covers bills of sale lending in England, Wales and Northern Ireland. Bills of sale are not used in Scotland. The government has • lenders who use bills of sale will be asked to comply with a new committed to look at reforming bills of sale for consumer lending code of practice, produced by the Consumer Credit Trade again, if problems continue. Association (CCTA), from 1 February 2011. The code contains increased protections for consumers, particularly those who are CCTA is setting up a Bills of Sale Group (Logbook Loans) to discuss having difficulty repaying their loans. An independent auditor and enable the industry to achieve compliance . will monitor compliance to the Code of Practice and report back to the CCTA if further assistance is required to aid compliance. The usage of the new Code of Practice is the 'last If you have any queries please contact chance saloon' for CCTA members and the wider industry to Graham Haxton-Bernard on 07793 258874 avoid additional regulation, or legislation to ban it. Your CCTA Post Conference Review 2010 When we settled on the 2010 conference title ‘Strategies for a Changed Economy’, we had not considered that ‘Strategies for a Continually Changing Economy’ would have perhaps been a more appropriate choice. With anticipated UK growth at an apparent standstill, we were delighted with the success of our conference and gala dinner, which was held at the Leicester Marriott on Thursday 16th December. Even the snowy conditions did not dampen enthusiasm for the day, or prevent the evening champagne flowing. Our sincere thanks go to an impressive line up of speakers. The range of information provided covered a full credit spectrum, and inspired lively debate. Feedback from the day confirmed that there was indeed, something for everyone in the schedule. Speakers: Event Sponsors: Nigel Cates Office of Fair Trading (OFT) Oyster Bay Systems How Compliance And Customer Care Bring Benefits To All Shoosmiths Richard Thompson Financial Ombudsman Service (FOS) Exhibitors: Handling Complaints In A Changed Economy Oyster Bay Systems Corelogic Teletrack Peter Hurst Chief Executive, CIFAS UK Fraud Prevention Service Anchor Computer Transformational Fraud Prevention Systems Chris Leatherland Head of Financial Crime and MRLO Welcom Software Stuck in the Middle With You Trust Online Richard Brennecker Director of Consultancy, Callcredit Credit Action The Challenge of Over-Indebtedness The day concluded with our Moulin Rouge themed Peter Sinnett Asset Finance Unit, Bermans champagne reception, gala dinner, and evening Adding Value with Documentation entertainment. A relaxed environment provided the Joanne Davis Lender Services Group, Shoosmiths perfect antidote to the serious discussions of the day, CCD - What Does It Look Like In Practice? and offered an opportunity for delegates to catch up with friends and colleagues. We would also like to extend our thanks to our event exhibitors, and in Our biggest thanks however, goes to the 73 delegates particular Oyster Bay Systems, our main sponsor. Without exhibitors support, who braved the weather and the Christmas rush to the day would not have been possible, and the friendly and relaxed join us, and ensured that the 2010 CCTA Conference atmosphere they managed to create, added greatly to the overall success. was a resounding success. Cheers! New Members CCTA would like to officially welcome the following new members to the association IT PAYS BPE Services Cheltenham Key Commercial Finance Limited London TO KEEP Flagship Asset Finance London 121 Finance Limited R & M Donaldson Newcastle Upon Tyne Mackenzie Hall Limited IN TOUCH... Harrogate, North Yorkshire Ayrshire CONSUMER CREDIT MAGAZINE TM Advances Limited Park-Ward Finance 2011 ADVERTISING PRICES Leeds, West Yorkshire Norwich If you missed the chance to advertise in this magazine, there’s always the next. The editorial deadline is 22nd Microcredit Limited MQ123 Limited London London April 2011, and our prices start at just £99 (exc VAT). For full details email: email@example.com TE Leckonby & Co Limited Sunderland or call: 01274 714959 22 One Minute Interview Q&A CCTA - Getting to know us... Which piece of music would make If you could live during any other NAME it onto your dessert island disc, period in history, which would it whatever mood you were in? be and why? Jeanette Ann Beaumont Platters - Twilight Time, brings back loads of Think it would be the twenties, the dancing, lovely memories. clothes, and the hairstyles. AGE What was your first job? What bores you? GPO Telephonist, told my grandfather I was Having to watch footbal,l enough said. as old as I feel employed as a ‘call girl’. Is there anything that when people You wouldn’t be the person you are find it out about you, always COMPANY today without...? surprises them? CCTA My mother who always pointed me in the Married at 17 had five children. right direction, even if I didn’t want to go. What childhood story about you JOB TITLE Happiness is? always provokes the most laughter? Going to London, staying in a swish hotel, When I was small I had an imaginary friend PA to Chief Executive seeing a musical plus shopping. called Fuzzy Wuzzy – at a bus stop I asked a lady if she was Fuzzy Wuzzy’s grandma because she had a head of very frizzy hair. What most annoys you on the television? Football. What quote or saying, do you most over use? Life is not a dress rehearsal. Whose advice do you always seek? My lovely twin sister. TO APPEAR ON THIS PAGE PLEASE What’s your favourite film, and why? Love horror films, probably The Shining is my CONTACT: favourite, I love being scared. Anne Threapleton firstname.lastname@example.org FULL PAGE ADVERTS: 1/2 PAGE: Happy Birthday outside back cover £420 to us... £835 inside back cover BOOK 4 £730 AND S ADS * AVE inside full page £710 1/4 PAGE: 1/8 PAGE: 10% *same 25th June this £210 £99 size ads year CCTA will be all prices excluding VAT 120 years old! Members Only - News CCTA member, DPR Consulting, Launches Debt Consolidation Accelerator to Support Responsible Lending DPR’s Debt Consolidation Accelerator is a rich, interactive web component that enables intermediaries and lending staff to quickly and accurately capture details of an applicant’s existing credit agreements and other scheduled outgoings ready to be processed by an affordability calculation or lending decision engine. David Patel Managing Director Unlike the traditional static worksheet from the bureau. For credit cards and other calculator, enabling the user to model approach that relies on the customer’s revolving credit facilities the monthly the most appropriate loan to meet the memory and often provides limited payment can be estimated (e.g. 5% per client circumstances and lender supporting evidence, the Accelerator month) or entered by the user. underwriting criteria. includes out-of-the-box integration with the Designed to fit seamlessly into DPR’s multi From a compliance perspective in terms of ‘big three’ UK credit reference agencies, channel sales and origination platform, the responsible lending and TCF requirements, delivering unprecedented speed and Accelerator extends the existing customer the Accelerator provides exceptional clarity accuracy by pre-populating details of all journey with new functions that support a to the consumer to support their decision known credit agreements in seconds, with a more detailed and compliant sales process making process and gives both lender and fully audited record of the client’s without compromising speed or ease of use. introducer a complete audit trail for expression of consent and of the data suitability and affordability. returned. For mortgages and fixed term The solution provides a highly sophisticated loans, the monthly payment is retrieved credit consolidation and loan quotation Manx Financial Group Plc Acquires ECF Asset Finance Plc Manx Financial Group PLC (MFG) announced today that it has alike. This partnership brings together two independent, well acquired ECF Asset Finance Plc (ECF), an asset finance house established brands within the asset finance market and provides an located near Manchester formed over 19 years ago to provide excellent platform for growth. We remain committed to the asset finance to UK based companies. finance market and look forward to working with our new colleagues at MFG in continuing to provide competitive products to businesses ECF’s products include Sale and Leaseback, Finance Lease, Hire of all sizes.” Purchase and Commercial Loans. ECF currently employs 16 staff and will continue to trade under the ECF Asset Finance brand from their The acquisition further expands the Manx Financial Group suite of current offices. financial services businesses, which already includes Conister Bank Limited, the Isle of Man’s only Independent bank, Conister Cards Garry Ridsdale, CEO of ECF Asset Finance, said of the acquisition: Services Limited, and the recently acquired Edgewater Associates, ”This is another exciting chapter for both ECF staff and customers an Isle of Man based independent financial advisor. Retail Financial Services Specialist Joins London Office A leading specialist in retail financial services, Clare Hughes, covered by the FSA. Clare is well known for her work in has joined the London office of McClure Naismith LLP as an defending regulatory actions brought by the OFT and FSA, Associate. Her appointment reflects recent growth in the and has extensive experience of working on matters firm’s financial services practice, and strategy of extending involving debt collection agencies, debt managers, brokers, the range of services provided to financial services clients retail banks, non-bank lenders and card issuers. across the UK. Commenting on her appointment, John Blackwood, Head Clare, who trained as a barrister, brings with her a wealth of of McClure Naismith’s Banking Unit, said: “Clare is widely Clare Hughes regulatory experience, she spent a number of years working recognised as an outstanding specialist in retail financial as a consumer lawyer at the Office of Fair Trading (OFT). services law. She brings with her an insider’s view of the workings of regulators, the regulatory process and a huge Following the OFT, Clare moved into private practice at a amount of experience that will be invaluable to our clients, prominent City firm, during which time she worked on all and will play a key role developing our financial services aspects of consumer credit regulation, retail financial services practice across the UK”. Feature Coming Soon Paying Rent how it affects credit scoring! Last month saw the end result of almost three years of research into the value of new data for better credit decisions. George Wilkinson, former Chair of CCTA and a past Council member for approaching two decades, has been the technical advisor on a study into this which will be formally reported on in the near future. He has a longstanding George Wilkinson interest and expertise in credit scoring and referencing. George Wilkinson Associates 'Risk and Business Strategy for Consumer Credit' George was asked to undertake this role by voters register either, so there are problems in Part of the study was devoted to estimating the Chair of Big Issue, Nigel Kershaw, as a identifying applicants too as many have the value of rent data alongside the part of the work of its new social investing empty files. Members will also recognise the traditional credit reference search, and arm, Big Issue Invest (BII). Nigel was keen to important changes in evaluating credit looking at how social renters could be better look afresh and objectively at its role in applications required to comply with the identified when applying for financial services financial inclusion and at current lending implementation of the EC Credit Directive products. Experian was very involved in decisions on social tenants. Housing and the OFT guidance, making this added undertaking a special analysis of many Associations have been fully involved and the information important. thousands of social tenant payments to these work was principally funded by The Friends Decline and bad rates could improve ends, given their expertise in this area. Provident Foundation with important modestly but meaningfully according to the contributions by many others. This was is in results. BII Project Director Sarah Foster, essence a ‘proof of concept’ study. micro-finance expert and formerly of The In our next edition, George will CCTA members will know only too well that World Bank and George will publish the key provide an article with more detail on there is sometimes limited data on tenants finding that ‘rent payment data can have a the work undertaken and the who apply for credit, this often makes financial, operational and social impact on a decisions difficult and expensive. Larger material number of credit decisions each implications for lenders. He will lenders with their own credit scoring models year.’ Also covered in the Report will be the outline an embryonic implementation will also be aware that tenants can have much analysis into how credit decisions are made plan to follow the now completed lower scores so decline rates are substantially for owners and tenants, the number made proof of concept phase. He has asked higher than for owners. Many are not on the each year and the role of credit scoring. CCTA Council if its members could provide feedback, and help ensure that the end result is a practical one. Members Only Narrowing the scope for claimants to succeed... Good news for lenders involved in PPI mis-selling claims The role of consumer law is to “give the consumer an informed choice rather than to protect the consumer from making an unwise choice”. David Wood Partner Whatever the subject matter, trends come 1. whether Black Horse complied with the any comparisons with other products where and go, what is fashionable today may not Insurance: Conduct of Business Rules they were advising only as to the suitability be fashionable tomorrow. In finance ("ICOB") in particular, the requirements to of a single product offered. The fact that litigation, yesterday it was bank charges, ensure suitability of the policy (ICOB 4.3) the policy was objectively expensive by today it is payment protection (“PPI”) and not to accept an inducement which reference to other available policies was “mis-selling”. Consumers are beset daily conflicts to a material extent with any duty therefore irrelevant where lenders were not with advertisements, newspapers or text to the customers (ICOB 2.3) advising on a number of different policies, messages, and direct marketing, with as would generally have been the case. In 2. whether Black Horse was negligent in the addition, lenders were not obliged to advise promises that payment protection manner in which it sold the PPI insurance refunds will be procured on their that a policy was of itself expensive, i.e. on a 3. whether the sale of the PPI created an non-comparative basis. behalf, but the message continues to belie the numerous issues the consumer must unfair relationship within the meaning of The result is that lenders were not obliged to overcome before establishing his or her Section 140A of the Consumer Credit Act advise on the high cost of a policy and/or claim. Those issues yet again came to the 1974 ("the Act"). take into account cost when assessing the fore with yet more disappointed claimants, overall suitability of a policy except in very So what does the judgment say and limited circumstances. Allegations that a the Harrisons, with another judgment clarifying the difficulties facing Claimants in what does this mean for claimants lender failed to advise on or consider cost making such claims. and lenders going forward? and/or compare the cost of the PPI to other policies are prevalent in PPI "miss-selling" This was another judgment of His Honour ICOB 4.3 claims, and it would appear now that many of Judge Waksman QC in Manchester High The Harrisons alleged that Black Horse failed these cases are likely to fail on these points. Court (in the appeal of the decision of District to properly ascertain their demands and This judgment is binding on the lower courts Judge Marston in Harrison and Harrison v needs because the questionnaire was itself and HHJ Waksman QC's guidance will Black Horse Limited  EWHC 3152 (QB) inadequate and there was no proper therefore have far reaching impact for on 19 July 2010), which saw another welcome assessment of the suitability of the PPI being claimants alleging breaches of ICOB 4.3. victory for lenders. Harrison followed Judge offered, in breach of ICOB 4.3. In particular, However, despite his views on cost, HHJ Waksman's earlier rejection of the PPI claim in they alleged that the PPI was too expensive Waksman QC's did find that length of cover Speak v Black Horse  EWHC 1866 (QB). and of insufficient length (the premium was was relevant to a customer’s demands and 17% of the credit and the PPI was for a term needs. In view of this, it may be that The High Court status of the judgment of 5 years against a loan of 23 years). meant it is binding on the lower courts, and consumers attempt to allege going forward the judgment is therefore helpful for all HHJ Waksman QC made it clear that lenders that the term of the PPI was insufficient. were only required to consider cost where However, claimants will likely have difficulties lenders involved in PPI "miss-selling" claims. proving causation on this point, particularly there was "specific information" that cost was In this judgment, HHJ Waksman QC relevant to the customer's demands and where they are found to have had full determined three issues which those involved needs. However, even where cost was knowledge of the term and appear to have in these types of claims will be familiar with: relevant, lenders were not obliged to make accepted the policy. 28 ICOB 2.3 that if they wanted a consideration of has been breached or an unfair relationship The Harrisons alleged further that Black Horse other policies they would need to do it exists will also offer real comfort to lenders. failed to take reasonable steps to ensure that themselves or consult a broker". This judgment is of particular importance it did not accept an inducement which was 3. This case can be distinguished from Yates because it is binding on the lower courts. likely to conflict to a material extent with any & Another v Nemo Personal Finance & The judgment affirms the common sense duty owed by Black Horse to the Harrisons, in Another on the basis that the Harrisons and pragmatic approach adopted in the breach of ICOB 2.3. It was alleged that there were not misled into thinking the PPI was lower courts and endorses HHJ Charles was an inducement because the commission compulsory. Here, "the Harrisons must Harris QC's finding in Vernalls that “a was 87% of the PPI premium. have realised that the PPI was optional or consumer is fully able to decide whether In this case, however, as will be the case with if not, their mistaken impression was of something is sufficiently attractive to make a large number of PPI sales, the existence of their own making. They Harrisons "should it an item that he wished to buy”. Lenders a tightly scripted process, which was therefore be treated as having had a real involved in PPI miss-selling claims will also followed, the fact that the actual salesperson opportunity to consider whether or not to be aware of the recent decision in Black did not receive any of the commission, and take the PPI" unlike in Yates where the Horse Limited v David Speak & Caroline the fact that a reasonable system had been customers had "no real opportunity to Speak  EWHC 1866 (QB). In that case, set up to prevent a conflict, meant that the apply their mind to the question of cost". HHJ Waksman QC found that generally inducement did not give rise to a likelihood 4. The fact that there was no breach of rule where a lender has robust systems and of material conflict. The size of the 4.3 in relation to cost, although not procedures in place, it would be “difficult” commission was not believed to make any determinative, counts against unfairness. for a customer to allege that a lender difference in these circumstances. misrepresented that PPI was compulsory. 5. The difficulties faced by the Harrisons on causation in respect of the length of PPI Accordingly, this decision, along with the Negligence findings in Vernalls and Speak, addresses were equally relevant to the question of The Harrisons alleged further that Black Horse an unfair relationship. the core allegations raised by consumers in breached its duty of care in respect of the PPI miss-selling claims. The judgment selling of the PPI and failed to advise on the 6. Non-disclosure of commission is further highlights the numerous issues that question of cost in breach of a common law something that may be taken into consumers must overcome before duty of care. The allegation was not pursued account when assessing whether an unfair establishing his or her claim by clarifying at the original trial. However, HHJ Waksman relationship existed but "the test is still the limited advisory role which lenders were QC held that "given that ICOB prescribed a whether there is unfairness as a result". obliged to assume. The judgment is detailed code on how an intermediary in the 7. There was no likelihood of a conflict of therefore the latest in a line of robust position of (Black Horse) should conduct interest arising and the seller did not act decisions by the Courts which appear to itself when purporting to give advice in improperly towards the customer. affirm Lady Justice Hale’s finding in The respect of a single product, i.e. whether to The key feature in the judge's findings on Office of Fair Trading v Abbey National plc recommend it or not, (there was) no reason the unfair relationship provisions seems to & Others  UKSC 6, that the role of why any co-terminous duty of care should be that simply because a policy is expensive consumer law is to “give the consumer an extend more widely". The judge found, does not render the relationship unfair. HHJ informed choice rather than to protect the moreover, that "the question of cost can only Waksman QC found that where a lender has consumer from making an unwise choice.” be dealt with by a comparison with other complied with ICOB and the customer is It would therefore appear that so long as a products", which on the basis of Black Horse's fully aware (or at least should have been) of lender has adopted robust systems and limited advisory role, was not a comparison the terms of the PPI and the limited advisory procedures to ensure compliance with Black Horse was required to make. role of the lender, such compliance is likely ICOB and prevent PPI miss-selling, it will be Lenders will again be reassured by HHJ to count against unfairness. HHJ Waksman difficult for consumers to prove allegations Waksman QC's finding that where a lender QC thereby endorsed HHJ Charles Harris of PPI miss-selling. There have been and is found to have complied with ICOB, it will QC's earlier judgment in the case of Vernalls will always be cases where decisions are likely follow that the lender has not been & Vernalls v Black Horse Limited , made about the PPI sale which are based negligent in its duty of care to the customer. unreported, 4 November 2010, where HHJ on the individual facts of the case, but Claims which fail in respect of breaches of Harris determined that a "consumer is fully Harrison, Vernalls and Speak provided ICOB 4.3 will therefore also fail on this point. able to decide whether something is clarification at least on some of the issues To the extent that there is a co-terminous sufficiently attractive to make it an item that which the court must address. However, the duty of care which is broken in relation to he wished to buy". most important aspect of any successful the length of the PPI, it is likely that the claim is a clear and robust recollection by same problems of causation will remain as Analysis the customer of the sale of the PPI outlined above. So what does this judgment mean for uninfluenced by what he or she may have consumers and lenders going forward? heard, or what may have been said to him Unfair Relationship or her by their advisers, about the claim. This has been an extremely welcome The biggest hurdle to overcome is to satisfy The Harrisons alleged further that the decision for lenders involved in defending relationship between the parties was unfair a court that the customer can clearly recall PPI miss-selling claims because it what was discussed at the time a loan was on the basis of the large commission significantly narrows the scope for claimants received, and the limited length and high taken out, which may be some years prior to succeed on such claims. The Court to the hearing. In this respect, the words of cost of the PPI. HHJ Waksman QC clarified the suitability provisions in ICOB 4.3, determined that appellant courts should be HH Judge Waine in Kerry & Kerry v Black making it clear that the cost of a policy was Horse, heard in Chesterfield County Court "most reluctant to interfere" with a judge's not generally relevant to allegations of finding on unfair relationships and dismissed moreorless at the same time as Harrison breaches of ICOB 4.3. Moreover, lenders must be heeded “The (Claimants’) the Harrisons' allegations. were not required to compare the cost of a statements are in identical terms and there HHJ Waksman QC determined that: policy to other polices in the market, even is not the slightest suggestion that one 1. The terms of the PPI, for example the cost where cost was relevant. In addition, it would claimant remembered certain matters and and term, were "clearly explained, known seem that so long as robust systems and the other claimant other matters. The of, and freely accepted by the Harrisons." procedures are in place, payment of a statements read like ones prepared by a The Harrisons made a free choice and commission was acceptable irrespective of solicitor used to dealing with this sort of there was no pressure put on them to its size. The decision therefore clarifies the claim. The statements were inaccurate in a take out the PPI, and these are all relevant scope of ICOB 4.3 and 2.3 and confirms that number of respects but not in any way due factors in considering whether an unfair the cost of the policy, in particular, as against to deliberate falsehoods by the claimants. relationship has arisen. other policies in the market, together with The statements did not hide the fact that the size of the commission, is in the main the evidence as set out was based on what 2. Black Horse could only offer one product irrelevant. It would also appear that so long and was not an independent advisor the solicitors had said and it seems obvious as ICOB has been complied with, such a that some parts of the statements were who would consider and compare a finding will count against unfairness. HHJ range of policies. The Harrisons inaccurate and not checked.” In that case, Waksman QC’s finding that causation will be once again, on the facts, the Judge found therefore "knew or must have known a real issue for claimants even where ICOB in favour of the lender. Training Events 2011 Course name Date Code EC Consumer Credit Directive – The Regulations 23 February CCDR/1/11 EC Consumer Credit Directive – The Guidance 9 March CCDG/1/11 OFT’s Irresponsible Lending Guidance 23 March IL/1/11 NEW Consumer Credit Licences, Applications, Renewals, Fitness and Requirements 6 April LR/1/11 NEW CCTA Code of Practice and Customer Service Excellence 20 April CPC/1/11 Default and Litigation 4 May DL/1/11 EC Consumer Credit Directive – The Regulations 18 May CCDR/2/11 EC Consumer Credit Directive – The Guidance 2 June CCDG/2/11 Complaint Handling and the Financial Ombudsman Service 15 June FO/1/11 Treating Your Customers Fairly 29 June TYCF/1/11 Consumer Credit Law and Practice – A Guide 20 July CCL/1/11 The Law Relating to Motor Finance 17 August MF/1/11 NEW CCTA Code of Practice and Customer Service Excellence 7 September CPC/2/11 OFT’s Irresponsible Lending Guidance 21 September IL/2/11 EC Consumer Credit Directive – The Regulations 5 October CCDR/3/11 EC Consumer Credit Directive – The Guidance 19 October CCDG/3/11 Exclusive CCTA Member Price: £236+VAT. Non Members: £286+VAT. Bringing out the best in your business Post it... Book online... BOOKING Complete the application form on the back page and post it to: Visit our website and complete the booking form in Training HAS NEVER CCTA Suite 4, The Wave, 1 View Croft Road, Shipley, and Events www.ccta.co.uk BEEN EASIER West Yorkshire, BD17 7DU. Fax it... Call us... SIMPLY... If you have any questions, Complete the application form or would like us to take your on the back page and fax it to details by phone: 0845 257 1199 01274 714959 Motor Stats HPI Receipts Summary November 2010 TOTAL MARKET TOTAL MARKET APRIL YEAR TO DATE CATEGORY NEW USED TOTAL NEW USED TOTAL PASSENGER CAR 2010 279591 177787 457378 2002849 1952516 3955365 2009 169142 136347 305489 1692549 1731231 3423780 % Change 65.30 30.39 49.72 18.33 12.78 15.53 LIGHT COMMERCIAL VEHICLE 2010 10190 7306 17496 92104 77061 169165 2009 10120 5837 15957 82943 73058 156001 % Change 0.69 25.17 9.64 11.04 5.48 8.44 HEAVY COMMERCIAL VEHICLE +3500 2010 2353 2307 4660 19693 18121 37814 2009 1683 1597 3280 20611 16335 36946 % Change 39.81 44.46 42.07 4.45- 10.93 2.35 COACH 2010 179 362 541 3279 4199 7478 2009 539 296 835 4334 6541 10875 % Change 66.79- 22.30 35.21- 24.34- 35.80- 31.24- MOTORCYCLE 2010 2999 1388 4387 43469 21467 64936 2009 2795 1294 4089 40193 21108 61301 % Change 7.30 7.26 7.29 8.15 1.70 5.93 MOTOR CARAVAN 2010 369 78 447 4587 2022 6609 2009 223 136 359 3223 1691 4914 % Change 65.47 42.65- 24.51 42.32 19.57 34.49 TOURING CARAVAN 2010 2636 603 3239 32761 9291 42052 2009 2470 453 2923 25639 10374 36013 % Change 6.72 33.11 10.81 27.78 10.44- 16.77 STATIC CARAVAN 2010 126 33 159 1416 465 1881 2009 77 31 108 1245 333 1578 % Change 63.64 6.45 47.22 13.73 39.64 19.20 AGRICULTURAL TRACTOR 2010 538 320 858 10558 4547 15105 2009 689 271 960 12229 4219 16448 % Change 21.92- 18.08 10.63- 13.66- 7.77 8.17- MISCELLANEOUS 2010 8728 3745 12473 99659 50741 150400 2009 8306 4551 12857 101011 54662 155673 % Change 5.08 17.71- 2.99- 1.34- 7.17- 3.39- Grand Total 2010 307709 193929 501638 2310375 2140430 4450805 2009 196044 150813 346857 1983977 1919552 3903529 % Change 56.96 28.59 44.62 16.45 11.51 14.02 General Stats UK Debt Statistics: Today in the UK: Striking Numbers: Total UK personal debt at the end of 372 people every day of the year will be declared 9,389 number of new debt problems December 2010 stood at £1,452bn. insolvent or bankrupt. This is equivalent to dealt with by CAB each working day The twelve month growth rate decreased 1 person every 53 seconds during a working day. 839,000 unemployed for more than 0.1 percentage points to 0.7%. Individuals 1,716 Consumer County Court Judgements (CCJs) 12 month currently owe more than the entire were issued every day during Q3 2010 and the country has produced during the last £57,706 average household debt average judgement amount was £3,312. four quarters. £178m personal interest paid in UK daily The average person will save £2.73 every day. Total lending in December 2010 fell by £20.10m daily write-offs of loans by banks £0.1bn, secured lending decreased by Citizen Advice Bureaux dealt with 9,389 new debt & building societies £0.3bn in the month, consumer credit problems every working day in England and Wales lending increased by £0.2bn (total lending every 15 minutes a property is repossessed The average cost of raising a child from birth to in Jan 2008 grew by £8.4bn). the age of 21 is £26 a day. every 3.87 minutes someone will be Total secured lending on dwellings at the declared insolvent or bankrupt 1,000 people are seeking some form of formal end of December 2010 stood at £1,238bn. debt rescheduling every working day. £1,153,000,000 total value of all purchases The twelve month growth rate decreased made using plastic cards today 0.1 percentage points to 0.7%. 98 properties were repossessed every day during Q3 2010 Source: Credit Action February 2011 figures. Total consumer credit lending to individuals at the end of December 2010 was £214bn. 548 new people became unemployed for more The annual growth rate of consumer credit than 12 months every day during the 12 months was unchanged at 0.6%. to end November 2010 UK banks and building societies wrote off 1,721 people reported they had become £9.9bn of loans to individuals in the last redundant every day during 3 months to end 12 months to end Q3 2010. In Q3 2010 November 2010 they wrote off £1.83bn (£740m of that £203,600,000 is the amount that the Government was credit card debt). This amounts to a Public Sector Net Debt (PSDN), including financial write-off of £20.10m a day. interventions, will grow today (equivalent to £2,356 per second). Young adults are walking a credit tightrope Independent research commissioned by Callcredit Information Group has today revealed that young adults appear to be getting more desperate for credit, as 7% of 25-34 year olds admit to applying for credit knowing that they may not be able to repay it. Key highlights: The YouGov research, which looked into British attitudes towards credit as well as strains on personal finances, also revealed that the Young adults risk credit woes number of 25-34 year olds that have applied for credit in the last • 40% of 25-34 year olds have applied for credit in last year year is double the national average. One in ten of the same age (double the average) group also admitted to having knowingly overestimated their • 10% of 25-34 year olds have knowingly overestimated their income on a credit application. income on credit application However, it isn’t just young adults that the research has shown to • 7% of 25-34 year olds have applied for credit knowing they might be struggling with credit, 12% of British adults said they would be not be able to keep up repayments unable to pay their mortgage payments if their income reduced by up to £300 a month. A worrying 5% of 45-54 year olds said Mortgage strain they would struggle to keep up repayments if their monthly • 12% of adults said they would be unable to pay their mortgage income dropped by up to £100. As many respondents identified if their monthly income reduced by up to £300 circumstances, such as job loss or bill increases, that had a significant impact on their personal finances last year, mortgage • 5% of 45-54 year olds say they couldn’t keep up repayments if repayments could be put under strain in 2011. monthly income dropped by up to £100 “These figures are extremely alarming” said Graham Lund, Personal finance pressures Managing Director of Callcredit. “It seems that a significant • 35% of adults said increases in domestic bills had a sudden and proportion of British people are struggling to balance their significant impact upon their personal finances in the 2010, 18% finances, with some people prepared to apply for credit knowing said the same of an increase in travel costs that they are not able to repay or exaggerating income on an • 59% of adults expect rising food prices to have a significant application just to get credit. This shows just how important it is impact on finances in 2011 for lenders to have a complete view of customer finances to understand their levels of affordability.” • 55% of public sector workers expect a salary freeze or reduction to have a significant impact on finances in 2011, almost double the average (28%) High Street banking Statistics [BBA] – December 2010 BBA statistics director, David Dooks said: “Remortgaging with banks was strong in November as borrowers chose to replace maturing fixed-term mortgages. “Credit card purchases were fairly strong in November in line with retail sales but repayments also kept up, so the annual growth rate for credit card lending was slightly lower. “Lending to non-financial companies showed its first net increase since February, partly reflecting finance for takeover activity.” Annual Growth Rates Mortgage Lending 25 24% value of approvals (shifted forward 1 month) 20 mortgages unsecured lending 16% personal deposits non-financial companies gross lending 15 £ bn 8% 10 0% 5 net lending -8% 0 Nov Feb May Aug Nov Feb May Aug Nov Feb May Aug Nov Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 07 08 08 08 08 09 09 09 09 10 10 10 10 The annual growth in the banks’ net mortgage lending was 3.2% Gross mortgage lending of £7.8bn in November was 13.5% in November, substantially ahead of the 0.8% for the whole lower than a year ago. mortgage market in October. Net mortgage lending increased by £1.5bn in November, Despite some increase in the growth rate for other loans, the lowest increase since August 1999, compared to £3.4bn demand for unsecured credit overall remained weak, contracting in the same month in 2009. by 1.6% over the past year. Mortgage repayments were strong in November reflecting Personal deposits have risen by 5.6% over the past year. the increase in remortgage approvals in recent months. Card expenditure statistics [CES] – December 2010 Spending on plastic cards in December amounted to £35.1 billion. Chart 1 Chart 2 This was the lowest December figure for spending on plastic Spending on plastic cards Percent of retail sales made on plastic compared with average monthly spending during the year that we cards (including automotive fuel) Annual growth rates have seen in these data. The annual growth rate of spending on all Three-month moving average plastic cards fell by 30 basis points to 7.1%, with debit card growth 25% 50% down by 30 bp to 9.4% and credit cards growth 40 bp lower at 2.2% (see Chart 1). Following on from a record spend in November, 20% 40% reflecting early Christmas purchases, the adverse weather will have 15% also depressed economic activity below what may be considered 30% 10% typical for a December. Reduced activity is evident from the decline 20% of 4.7% in the number of purchases compared with November. 5% However, with stronger general price inflation in December the 0% 10% decline in spending was a lesser 3.4%. -5% 0% With transaction volumes decelerating at a greater rate than values, Dec Jun Dec Jun Dec Jun Dec Dec Jun Dec Jun Dec Jun Dec average transaction values (ATV) for all plastic cards rose for the first 07 08 08 09 09 10 10 07 08 08 09 09 10 10 time in six months by £0.30 to £48.67 (see Chart 3). Chart 3 Chart 4 In December retail spending fell by 3.6%, with corresponding Average transaction values Average monthly expenditure transaction volumes falling by 4.5%. Spending on services decreased by 3.1% with volumes falling by 4.9%. For the year 2010, there was an Three-month moving average £ billions £70 25 average 1.3% growth in retail spending, while spending in the £65 services sectors fell by an average of 0.3%. 20 £60 The plastic card share of total retail sales (including automotive £55 15 fuels)1 was 66.9% in December (see Chart 2), an increase of 2.2% £50 compared to December 2009. In the food & drink sector the share 10 £45 was 61.5%. £40 5 At a glance key figures for December £35 £30 0 Total Annual growth Number of Dec Jun Dec Jun Dec Jun Dec Dec Jun Dec Jun Dec Jun Dec spending rates for purchases 07 08 08 09 09 10 10 07 08 08 09 09 10 10 £ billions spending millions Debit cards Credit cards All plastic cards 2010 2009 2010 2009 2010 2009 All plastic cards 35.1 33.9 7.1% 4.7% 714 681 1 CES 3-month moving average spending for December of £18.53 billion expressed as a Debit cards 24.7 23.2 9.4% 7.4% 552 512 percentage of a similar 3-month moving average for National Statistics ‘All retailing including automotive fuel’ (AGG 21) based on the value of Retail Sales at current prices Credit cards 10.4 10.7 2.2% -0.7% 163 169 (SA) that gives a figure of £27.71 billion. 34 in your business by reshaping your technology Building successful systems on powerful ideas +44 (0)1792 797222 John.Harman@OysterBaySystems.com www.OysterBaySystems.com
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