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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 greg.stevens@ccta.co.uk                              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 jeanette.beaumont@ccta.co.uk                                           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 graham.haxton-bernard@ccta.co.uk
Debbi Gower Head of Finance debbi@ccta.co.uk                                      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 greg.stevens@ccta.co.uk
anne.threapleton@ccta.co.uk                                                       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: joanne.davis@shoosmiths.co.uk
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
  helen.ward24@btinternet.com
  paydaycompliance@btinternet.com                 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.                                                        greg.stevens@ccta.co.uk.




  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
greg.stevens@ccta.co.uk.                                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: marketing@ccta.co.uk
              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
                                                                                                  anne.threapleton@ccta.co.uk


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                                                                                                 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 [2010] 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 [2010] 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 [2010] 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 [2009] 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 [2010],            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.



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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
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Building successful systems on powerful ideas
+44 (0)1792 797222   John.Harman@OysterBaySystems.com   www.OysterBaySystems.com

								
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