Brits in the dark over their personal finances as consumer debt hits £218bn

One in five Brits are failing to keep track of their personal finances, with 40% of millennials admitting they have no clue how much they spend compared to what they earn each month.

The news comes as Bank of England data from December 2019 showed households have £45billion more debt on credit cards, personal loans and overdrafts compared to the start of 2010 – a 25 percent growth in 10 years.

In total, for every adult in Britain, there is around £4,300 worth of debt sitting on credit cards, personal loans and overdrafts.

The survey of 1,000 consumers commissioned by Compleat Software also reaffirmed that debit and credit cards have officially overtaken cash as the preferred method of payment among shoppers.

More than three quarters (77%) stating they prefer to pay by card compared to just 8% who still rely on cash.

Men were also less likely to keep an eye on their personal finances, with 23% of men saying they didn’t keep track of their financial situation compared to just 13% of women.

Personal debt has been a rising concern over the last few years with the number of young people declaring bankruptcy rising 10-fold to 2,000 between April and June this year, according to accountancy firm RSM.

Neil Robertson, Executive Chairman of Compleat Software which commissioned the new report on consumer spending and savings habits said: “Many young people lack financial experience; at the same time, low interest rates and easy access to credit and loans means more and more are being tempted by the prospect of easy money.

“But many of the credit cards being aimed at young people have high rates of interest and it can be extremely easy to fall into a cycle of debt that they can’t get out of. Especially if they aren’t taking the time to understand what they’re spending.”

He added: “It’s not just young people that are becoming susceptible to high levels of debt. Many of those high interest rate cards are also being used by those on low incomes, or with low credit scores and these people are being slowly pushed into debt which many struggle to get out of.

“There are plenty of financial tools and sources of advice out there for people who are struggling to get out of debt. But there needs to be more education provided, especially to young people, to try and stop people getting in too deep in the first place.”

Upgrade for lending platform

LendingMetrics has unveiled a new version of its multi-award-winning* automated underwriting platform ADP.

Finance providers – who will go live with the latest iteration of the software this week – now have access to a range of new features designed to increase leverage of consumer data and further improve the quality of decision making. The upgrades include Experian’s MXIN-Lite XML valuation tool, Excel export of data, a log of editor changes, improved data search functionality, and additional catalogue items.

Managing Director of LendingMetrics, David Wylie, said: ‘These changes give users extra scope to fine-tune their decision making and the ability to make even better lending decisions.’

‘The upgrade is designed to ensure ADP remains the most flexible out-of-the-box solution for lenders looking to automate their underwriting, so they can make far quicker decisions and handle even larger numbers of applications.’

ADP was launched in 2016 to free lenders from the cost burden of manual loan underwriting and give them access to data analytics and the Open Banking revolution. Integrating with all major credit reference agencies, it allows users to make almost instant lending decisions and quick credit rule changes. Operational/credit risk staff can control changes in real time through a simple user interface.

Resolution Fundation Research Report on consumer credit – comment

Paul Went, Managing Director for Shawbrook’s Consumer Division, said: “The main reason that many low-income families fall into extreme indebtedness is mainly due to not being fully aware of what they’re getting into.

“If lenders, and particularly credit card providers, were more upfront and transparent in relation to their propositions, then maybe those within low-income households would be able to properly assess these offerings before applying for a product and then subsequently entering into an agreement with an absurdly high APR.

“The report from the Resolution Foundation highlights the need for lenders to take more responsibility regarding educating consumers, helping them make the correct decisions before jumping in on a deal that fundamentally may not be right for them or their situation.

“When it comes to personal loans, we believe in being transparent and fair with everyone that applies by providing a clear picture of the rate they’ll get, right from the outset. Although this report is concerning in several areas, it does highlight an area of improvement and increased responsibility for lenders that we fully support.”

This comment is in response to research carried out by the Resolution Foundation on 15/1/20: https://www.resolutionfoundation.org/publications/an-outstanding-balance/

Just Mortgages Academy starts training 11 brand-new brokers

Eleven new trainees have started five weeks of intensive training with Just Mortgages’ Broker Academy that will see them go from raw recruits with no previous experience in the industry to fully-fledged Just Mortgages brokers.

The trainees come from across England and Wales and have a variety of different backgrounds and professional experience. They were chosen from more than 900 initial applicants through a rigorous selection process in the autumn. They started at the firm’s training facility in Bedford at the start of the year and are due to graduate from the Academy on 7 February.

The first two weeks of the programme are devoted to ensuring the new recruits pass their CeMAP 1 exam. A blended learning approach is used, with traditional classroom instruction backed up by Just Mortgages’ own Learning Management System, which allows trainees to study in their own time and provides a more dynamic and interactive learning experience. Just Mortgages has received accreditation to enable the trainees to sit the exams at the firm’s own training facility.

Once they have achieved CeMAP 1, the newly-qualified brokers spend then three more weeks onsite developing a range of skills that will enable them to succeed in the market, including an understanding of the sales process, how to build rapport with clients and effective questioning to understand clients’ needs.

The brokers also receive training in all the necessary technology, and advice on how to use social media effectively to drive new business.

“The Broker Academy is a great way to bring new blood into the industry,” explains Rodney Sloan, Head of Training for Just Mortgages. “It’s not about producing identikit brokers delivering scripted pitches. People buy people, not robots, so we want to encourage all our new brokers to let their personality shine through.

“The training programme is hard work but we’ve invested a lot of time and resource into making sure it’s fun too.”

Government needs expertise of financial services organisations to help coordinate SME funding schemes

Commenting on the publication of two reports from the National Audit Office which examine the coordination of business support schemes by Government, and the impact of the British Business Bank on SMEs’ access to finance, Simon Goldie, Head of Asset Finance at the FLA said: “Greater coordination between the Department for Business, Energy and Industrial Strategy (BEIS) and HM Treasury would be a good starting point, but Government really needs to harness the expertise of financial services organisations to help them assess the effectiveness of their existing schemes, and to provide some fresh thinking on how to integrate existing networks like the UK’s Growth Hubs and Local Enterprise Partnerships into the broader effort to help SMEs find the right funding at the right time.”

Vanquis Bank partners with HooYuto digitalise KYC processes

Leading customer onboarding and KYC technology firm, HooYu, has announced a partnership to digitalise Vanquis Bank’s KYC processes. The HooYu KYC journey has been selected to provide additional identity proofing during the customer lifecycle when customers perform a potentially high-risk action on their accounts.

Vanquis Bank is part of the Provident Financial Group, a UK and Ireland business with over 140 years’ experience in lending to consumers who are not well served by mainstream lenders. With millions of customers, Vanquis needed to find a way to help balance fraud prevention and KYC with a great customer experience.

Existing customers calling in to the change the details on their account were in some cases having to wait weeks before the change could be approved. The team at Vanquis Bank is continually looking to improve how their products work for their customers and that they are easy to apply for and manage. Vanquis Bank decided to implement an ID document validation solution that would speed up customer lifecycle management and improve the customer experience.

Sue Singleton, Process Change Assurance Manager at Vanquis Bank said, “By adding HooYu to our KYC tools, we can improve some of our higher risk customer processes and can now facilitate customer requests without asking the customer to post in copies of documentation. Our agents deal with thousands of customers a day and now what could have been a delay of weeks for our customers, can be achieved in a matter of minutes with HooYu.”

David Pope, Marketing Director at HooYu said, “It’s been great to see the results of Vanquis implementing the HooYu digital journey and how the HooYu UI and UX tools are helping their customers though the KYC process.”

Debt charity welcomes ban on gambling with credit cards

The Gambling Commission has today announced a ban on gambling businesses allowing consumers to use credit cards to gamble.

The ban, which comes into effect on 14th April, applies to all online and offline gambling products, with the exception of non-remote lotteries.

The announcement follows the commission’s public consultation on gambling with credit cards, which took place late last year and to which the Money Advice Trust responded.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “The Gambling Commission’s ban on gambling with credit cards is a welcome intervention and should go some way to reduce the risk of harm caused by using borrowed money to gamble.

“However, this action alone is not enough. The Gambling Commission needs to continue its work to see what other measures it can introduce to prevent the risk of harm from using other forms of borrowing.

“At National Debtline we know the financial and personal impact gambling addiction can have on peoples’ lives. A joined-up approach to improve protections and support for people in vulnerable circumstances and struggling with addiction is required by the regulator, firms and financial services alike.

“Anyone worried about their finances should seek free and impartial debt advice from a charity-run service like National Debtline.”

HSBC Expat appoint Jaywing to redefine and engage international audience

Sheffield headquartered Jaywing has been selected by HSBC Expat to help redefine the way the brand engages with audiences who live, work and bank across different countries. Through its data-driven and creative capabilities, Jaywing’s work looks to help the Bank uncover the next generation of expats.

Jaywing’s remit extends to developing the HSBC Expat brand across all touchpoints to help differentiate them in an increasingly competitive market, ensuring their banking propositions resonate with customers through a memorable and authentic dialogue.

The HSBC Expat business, which is based in Jersey, provides specialist services, expert support and connections to help its customers build fulfilling and successful lives abroad for themselves and their families. Covering multi-channel digital and messaging strategy, plus always-on campaign activation, HSBC Expat will look to deepen customer relationships and expand its range of cross-border banking solutions to new audiences.

Maria Vardy, Managing Director at Jaywing said: “HSBC Expat has exciting plans for the future and we’re looking forward to joining them on their journey, bringing our considerable sector experience and expertise to help fulfil the brand’s ambitions.”

Kara Lisik, Head of Marketing , HSBC Expat and HSBC Channel Islands and Isle of Man said “HSBC Expat continually reviews and evaluates who and where our audience and customers are, and we’re looking forward to working with Jaywing as we navigate the best ways to engage with them.”

Appeal court confirms Shoprite granted credit recklessly to consumers

SOUTH AFRICA: In September 2014, whilst conducting a research exercise, the National Credit Regulator (NCR) identified deficiencies in Shoprite Investments Limited’s (Shoprite) (NCRCP6050) affordability assessment processes and established that Shoprite was likely granting credit recklessly to some consumers, says Nomsa Motshegare, CEO of the NCR. As a result, the NCR initiated a full investigation into Shoprite’s affordability assessment and credit granting practices.

The investigation culminated in the NCR launching a referral in the National Consumer Tribunal (NCT) against Shoprite. Shoprite opposed the proceedings in the NCT but, in September 2017, the NCT handed down in its ruling in terms of which it confirmed that Shoprite had on a number of occasions failed to conduct proper affordability assessments prior to granting credit to consumers and thus had granted credit recklessly. The NCT further declared that Shoprite had committed conduct prohibited by the National Credit Act (NCA) and ordered Shoprite to pay R1 million as a fine.

Shoprite was also ordered to appoint a debt counsellor, to assist affected consumers and make assessments on a case by case basis for purposes of determining whether to suspend and/or restructure consumers’ obligations under the reckless credit agreements.

Shoprite appealed the NCT’s ruling in the Pretoria High Court. On 18 December 2019, a full bench of three judges of the High Court unanimously dismissed the appeal with costs, and confirmed the NCT’s ruling almost in its entirety.

The NCT elaborated as to the reasons that Shoprite’s affordability assessment mechanisms, models and procedures were not compliant with the NCA and were reckless:

  • Shoprite disregarded consumers’ pre-existing credit payment obligations, contrary to the provisions of the NCA;
  • Shoprite “adjusted” credit bureau information to enable credit to be granted where the information in the credit bureau report indicated that consumers could not afford the proposed new debt; and
  • Shoprite disregarded or adjusted consumers’ pre-existing and future financial commitments in order to create affordability for the proposed new debt.

In dismissing the appeal, the High Court noted that the “most astonishing” aspect of Shoprite’s approach to affordability assessments is the fact that many consumers “still had negative affordability figures” even after Shoprite had carried out its “adjustments” to affordability calculations, yet Shoprite nonetheless proceeded to grant credit to these consumers.

The High Court also noted that the consumers affected by Shoprite’s conduct are mostly pensioners and individuals with low average income, i.e. largely financially vulnerable members of society.

Shoprite must now comply with the NCT’s order by making payment of the R1 million fine, and appointing a debt counsellor who will be making contact with affected consumers.

Credit experts warn of holiday pitfalls as 5.2 million jetsetters snap up January bargains

Credit experts TotallyMoney have advised that those booking holidays could protect themselves under Section 75 of the Consumer Credit Act by using a credit card, meaning customers could get their money back should something go wrong. The advice comes at a pivotal time for holiday makers with Flybe at risk of folding, following the devastating collapse of Thomas Cook and WOW Air last year that left hundreds of thousands massively out of pocket.

  • Section 75 of the Consumer Credit Act protects all credit card transactions between £100 and £30,000
  • An estimated 5.2 million Brits will book holidays this January, yet almost a third (29%)† of consumers don’t realise Section 75 covers them at all
  • More than half (55%) aren’t aware they’re protected by Section 75 for the cost of a hotel when booking directly
  • A third (34%) falsely believe that Section 75 covers PayPal transactions over £100

With many people left in the dark last year about if and how they’ll get a refund, customers can live safe in the knowledge that they’ll be able to get a refund under Section 75, providing the Debtor-Creditor-Supplier (DCS) Link isn’t broken.

This means the exchange of money between the customer, the credit card company, and the service provider must be maintained. Section 75 therefore wouldn’t apply when the DCS link is broken, which happens when using third parties, such as a travel agent.

Alarmingly, booking a holiday through a travel agent doesn’t cover customers if the operator folds. Customers should therefore confirm their holiday is ATOL-protected if booking through an agent.

Choose credit, not debit

Those booking their holidays directly, however, should be aware of Section 75 and its benefits before they do, to avoid being left short in worst-case scenarios.

TotallyMoney CEO, Alastair Douglas, comments: “In a world where things can often go wrong, Section 75 is a safety net. The trouble is, many don’t realise it exists.

“With great deals in January and many suffering from post-Christmas blues, it’s easy to see why people are keen to book a holiday. However, having something go wrong while away — during what’s often the highlight of your year — is an awful situation to be in.

“If it so happens you can’t jet off, or worse yet, you’re stuck and can’t get home, you can be left feeling like there’s nothing you can do. Section 75 adds an extra level of security that can really help.

“It was disheartening last year to see so many families stranded and out of pocket when Thomas Cook collapsed. If something like this happens again, being covered by Section 75 means you can contact your credit card provider to claim a refund.

“At TotallyMoney, we’re on a mission to improve the UK’s credit score and help people move on up to a better future. Not only could responsibly using a credit card improve your credit score, but being covered by Section 75 could also improve a situation that might otherwise be financially very stressful.”

Section 75 Top Ten Tips

To make sure you’re never caught out, here are 10 things to know about how Section 75 can help you when booking your next getaway.

1. Limits on claims
Individual items and purchases costing more than £100 and up to £30,000 are covered under Section 75. So whether it’s a cancelled flight or an all-inclusive family holiday and the company goes bust, as long as you paid on credit card, you could be reimbursed the full amount.

2. We’re talking credit, not debit
Section 75 doesn’t cover anything bought using a debit card. Chargeback protection is as good as you’ll get with debit.

3. They’re bust. You’re not broke
Buying from a company that goes bust before they deliver doesn’t mean your money’s lost. Section 75 requires credit card companies to get your money back.

4. Pay a deposit, get full value cover
When a deposit is needed for a holiday, use a credit card — even when the deposit is less than £100. Should anything prevent you from settling the balance (like the airline collapses), Section 75 lets you claim the full amount. Not just the paid deposit.

5. Pay part credit and part cheque, get full value cover
The same goes if you decide to pay part of the balance by credit card and the rest by cheque. Consumers can reclaim the full value of the qualifying goods and services even if the total balance wasn’t paid using a credit card.

6. Stay protected on closed cards
Say you buy a holiday, close the credit card you bought it with, but something goes wrong that’s not your fault, Section 75 means you can still make a claim.

7. Extra expense cover
If you book a holiday and the flight is cancelled, through Section 75 you could claim back additional accommodation and food expenses, providing those consequential losses were reasonable.

8. The Section 75 loopholes
Buying through a third party (like travel agents), additional cardholder purchases, or cash that’s withdrawn from your credit card won’t offer Section 75 protection. You need to have paid the company directly (so purchases made through PayPal, for example, aren’t covered).

9. Section 75 applies to all credit cards
When it comes to Section 75 there’s isn’t one rule for one credit card company and something different for another. All credit cards come with Section 75 benefits.

10. The claims process
First port of call: the service provider, for example the airline or hotel (depending on the situation). Failing that, go to the credit card company — this might be your bank or building society, not Visa, Mastercard or AMEX. They’ll get you to fill out a claim form and voila! Your money is back where it belongs.