Why should being vulnerable have to mean being worse off?

In 2017, one in five clients of StepChange Debt Charity had an additional vulnerability (such as illness), on top of their problem debt. New analysis from the charity now shows that they tend to be in a notably worse financial position than other clients. This underpins the importance of the financial sector’s current focus on vulnerability, and cements the charity’s view that better safety nets are needed to prevent vulnerable people from suffering disproportionate difficulty.

There are many reasons for vulnerability, according to the new analysis in Breaking the Link: a closer look at vulnerable people in debt. Among the charity’s vulnerable clients, the overwhelmingly most common reason was mental health difficulty (43%), followed by physical disability (4.7%), cancer (4.6%), and poor health (4.1%).

Debt problems are closely associated with certain forms of vulnerability, especially illness. 77% of clients with a terminal illness, and 68% of clients with cancer, cited illness as the main cause of their debt problems. Among those with mental health issues, 40% said illness was the main reason for their debt. Two in five vulnerable clients overall said that the main reason for them falling into debt was illness.

However, vulnerability can derive from situations, as well as personal characteristics – bereavement, relationship breakdown, poor treatment by firms and many other features could all make someone vulnerable at certain times, even if the vulnerability is temporary.

Vulnerable clients were significantly more likely than other clients to have a net household income of under £10,000, and significantly less likely to have a net household income over £20,000. 45% of vulnerable clients had a deficit budget (with less money coming in than going out), even after budgeting advice, compared with 30% of clients as a whole.

Over two thirds of vulnerable clients were receiving benefits, compared with half of those clients without a vulnerability. Yet their benefits were less likely to prevent them facing a budget shortfall, with 40% facing a deficit budget compared with 37% of those clients without a vulnerability in receipt of benefits.

Vulnerable clients were more likely than other clients to be in arrears on household bills such as rent, utilities, or council tax. And they spent an average of 70% of their income on essential household bills and food, compared with 65% among other clients.

Commenting on the findings, StepChange Debt Charity chief executive Phil Andrew said: “Among our clients, those who are vulnerable typically show higher levels of financial distress – but that shouldn’t be inevitable. While there has been progress, it’s clear that the finance sector, regulators and the debt advice sector could all still do more to help break the link between being vulnerable and being significantly worse off. There are questions, too, for Government. With mounting evidence that vulnerable people are not always being adequately supported in their times of need – including the DWP’s own recent survey on the impact on claimants of Universal Credit – it is only reasonable to ask whether changes to the welfare system are creating too many negative and stressful impacts on people who are least in a position to deal with them.”

Bank of England’s warning on 0% credit card deals signals growing concern

Following the Bank of England’s recent letter warning about the growing risks attached to the provision of 0% credit card balance transfer offers,

Daoud Fakhri, Principal Analyst at GlobalData, a leading data and analytics company, offers his view on what this means for credit card providers: ‘‘For the second time this year, the Bank of England has warned lenders about making unrealistic assumptions about their 0% credit card balance transfer portfolios. The Prudential Regulation Authority sent out a letter on 6 June warning that some credit card providers with high exposure to the 0% balance transfer market may be guilty of overly optimistic assumptions about customer retention rates, thus impacting on calculations of Effective Interest Rate (EIR) income.

‘‘Virgin Money, currently the subject of a takeover bid by CYGB, has made an aggressive play in the balance transfer market – it currently offers a 36 month 0% deal, one of the longest on the market – and consequently has an above-average reliance on EIR as an income source. This will leave it more vulnerable than most, should customers reduce their debt exposure more quickly than expected.

‘‘However, this is an issue for the whole industry, and credit card providers would be well advised to act on the PRAs advice to review their EIR assumptions and consider applying interest income-at-risk limits. Should the economy continue to underperform, consumers are likely to become increasingly risk-averse and reduce their indebtedness. Consequently, providers that have been banking on a given level of interest income will have to contend with a significant shortfall.’’

Stonebridge Group records record month for mortgage apps

Stonebridge Group, the mortgage and insurance network, has today (14th June 2018) announced its best ever month for mortgage applications with its advisers last month seeking £800 million of loans for clients.

May’s figures showed a considerable 16% month-on-month increase from April, with the previous best month for Stonebridge being back in February this year.

Stonebridge’s year-to-date figures for mortgage applications also show an overall 16% increase on the same period in 2017.

The network puts the increase in application business down to an increase in productivity from its advisers and AR firms, plus a 4% increase in the average mortgage applied for.

Mortgage application business was split between 55% purchases and 45% remortgages/product transfers.

The record month shows Stonebridge Group bucking the wider market trend with the Bank of England recently announcing that the number of new mortgage ‘commitments’ agreed by lenders had fallen to £61.1 billion in Q1 2018, a 5.9% drop on the previous quarter. This was the lowest amount since Q1 2016.

The network has close to 550 active advisers, spread across 250 AR partner firms; a further 16 advisers are currently in the network’s pipeline and will be brought under its umbrella shortly.

Jo Carrasco, Business Partnerships Director at Stonebridge Group, commented: “Despite some of the general market figures coming out of the Bank of England for recent months, and the year to date, we have had a very strong start to the year in terms of mortgage activity. Our applications continue to move upwards and to post a record month in May, following similar activity levels throughout 2018 is very pleasing.

“Productivity from advisers within the Stonebridge Group is predominantly the reason for this, coupled with an increase in the average loan size, and it’s clear there is a growing demand for mortgage advice from the general public, particularly given the increased complexity and the fact that clients want access to the whole of market.

“It’s for this reason that we are worried by some of the measures proposed in the FCA’s recent Mortgages Market Study Interim Report. The benefits of advice should be clear to all, and the fact the regulator appears to think lenders have over-egged the pudding in terms of following MMR is not helpful. Our advisers provide a quality service with the added protection that advice offers; for the regulator to be supportive of a process which pushes more consumers via direct channels and makes it easier to conduct execution-only business is a retrograde step, and should be resisted by all within our industry.”

Nationwide Building Society: The Most Compelling UK Banking Brand

Nationwide Building Society’s reputation rating of 7.3 out of 10 is dovetailed by extremely high recommendation among customers (8.1), making it the UK’s most compelling banking brand. According to research by Brand Finance, the world’s leading independent brand valuation and strategy consultancy, only 2% of Nationwide customers would consider a switch to another bank. Nationwide, which has revitalised its building society heritage, is also the brand that customers of other banks are more likely to switch to.

Banking brands like RBS, Barclays, and Natwest continue making efforts in repairing their reputations and balance sheets– but still have much more work to do. UK customers, in the post-crisis environment, have greater expectations of the banking sector and there is a high degree of dissatisfaction in the performance of the banks, undoubtedly connected to the taxpayer bail-out that followed the crisis, along with constant negative publicity around the banks themselves.

In a move towards online banking, most of the major banking brands have announced UK-wide branch closure programmes, which also plays a role in affecting the brand reputation. Brand Finance research proved that UK customers are eager to embrace alternative providers. Retail-connected bank brands such as M&S Bank, Sainsbury and Tesco all perform relatively well in terms of reputation, suggesting customers are looking to embrace brands seen more as consumer champions. But being ‘new’ may not always be sufficient – brands such as Metro and Virgin Money have only a moderate reputation and are not quite the game-changers they may have aspired to be.

As a result, customer discontent is not entirely reflected in the appetite to switch providers. Big factors are general inertia and the belief that switching banks is not easy in the UK and entails multiple hurdles. Efforts from brands to deliver a seamless seven-day-switching service when changing providers has not always been a success and the lack of a truly exciting alternative may also be a factor.

David Haigh, CEO of Brand Finance, commented: “The UK banking sector as a whole has perception problems to confront and is clearly in a delicate state of transition. UK banking brands are also confronted with ongoing digitalisation and challenger banks providing new, and often dynamic, competition. Some banking brands are adapting well to market evolution, but the future depends on combining new technologies with enhanced customer service, in order to build reputations, strengthen brands and generate greater levels of customer loyalty.”

Spending on international travel increases but accommodation hits a slump, new research finds

UK consumers look set to spend more on international travel this year than in 2017, the latest findings from Ferratum’s Summer Barometer have found.

According to the international study, 35% of UK consumers are planning to spend on international travel this summer, which is a 5% increase from last year’s Barometer. This latest figure marks a significant jump compared to the 2016 Summer Barometer following the EU referendum, when just 10% were planning to spend on overseas travel.

However, while spending for international travel is set to rise, the outlook for accommodation providers is not as positive. Consumers’ desire to spend over €100 per night for a hotel dropped dramatically in this year’s survey, from 44% in 2017 to just 19% this year. The number of consumers who would opt for an Airbnb was very similar (18.7%) – an increase of just 0.7% from last year. As such, it is clear that UK consumers are still eager to limit spending where possible, even if their desire to travel abroad has increased.

Ferratum’s Summer Barometer also revealed that the UK leads the way in terms of online purchases, with 41% of UK consumers planning on spending on this activity. Clothing and fashion products are set to be the UK’s main area of spending this summer (12.9%), with social activities (11.7%) and travel (11%) following closely behind. Paying for family and children’s activities also made their way to the top of the list, with these areas accounting for 9.8% and 9.1% of consumers’ spending, respectively.

Tony Gundersen, Ferratum Money UK Country Manager, says: “The renewed interest in international travel is a result of numerous factors – with many consumers feeling more positive about their finances following an increase in the National Living Wage, along with changing perceptions towards the UK’s future relationship with the EU. However, this has not stopped the British public from seeking out a good deal online. UK spenders are keen to shop around for a range of services, ranging from flights and accommodation to summer clothes for the family.”

Almost 22,000 households were surveyed for Ferratum’s 2018 Summer Barometer. Respondents were aged from 18 to over 61 years old. In addition to demographic factors, respondents were asked about their disposable monthly net income, how much they spend on their summer holidays, what other activities they spend their money on, and if they are going to use Airbnb services or online banking while travelling abroad. The survey used each country’s respective currency. Responses were adjusted to reflect the respective purchasing power of each country. All survey respondents were anonymous.

Do children know the value of money?

In support of the tenth annual My Money Week (11-17 June 2018) Equifax has partnered with Young Enterprise in order to equip young people to grow-up with the life skills, knowledge and confidence they need to successfully earn and manage money. This year, Equifax will be the sole sponsor of its national competition, the theme of which is young peoples’ ‘needs and wants’. The aim is to explain the financial decision making process in a fun and interactive way to engage pupils.

Underlining the need for broader awareness amongst young people of the cost of the things they want – and how they might be financed – the credit information provider has released research which reveals that a third of parents admitted feeling pressured by their child to buy them the latest technology, and 35% felt pressured to buy fashionable clothing for their children.

My Money Week is a national activity week for primary and secondary schools that provides a fantastic opportunity for young people to gain the skills, knowledge and confidence in money matters to thrive in society.

“Our findings suggest that some parents are feeling under pressure to spend on their children when they may already be financially stretched,” explains David Stiffler, Vice President of Global Corporate Social Responsibility at Equifax. “As well as spending money on technology, nearly a quarter of parents said they have been put under pressure to keep up with the latest gaming devices and online apps, and a further 29% said their child pressured them to buy the latest toy craze.

“More than ever before, Equifax is committed to making a difference to the communities in which we live and work and My Money Week is a fantastic opportunity to encourage both parents and schools to help the younger generation appreciate financial values. The right attitude about money management starts at home so it is very encouraging to see a campaign that will teach children more about managing money in a way that is practical and relevant to them.”

The Equifax research also highlights how 11% of parents will spend between £51-£100 just on technology such as tablets, laptops and smart phones, for their child every school year. A further 10% admit to spending between £151- £200.

Russell Winnard, Head of Educator Facing Programme and Services at Young Enterprise, said, “It is important to have the right foundations from an early age to ensure that young people continue to manage their money well throughout their life. The aim of My Money Week is to improve financial capability for young people in primary and secondary schools. It’s all about teachers and parents inspiring young people to be financially literate, and the statistics from Equifax demonstrate just how important it is to learn about finances from an early age.”

NCR and SAPS Raid the Eastern Cape

On Friday, 01 June 2018, the National Credit Regulator (NCR) joined forces with the South African Police Service (SAPS) in an operation aimed at curbing illegal retention of consumer instruments including identity books, bank cards and SASSA cards, to enforce credit agreements.

The operation was conducted at different entities that conduct businesses in Grahamstown, Somerset East, Fort Beaufort and Humansdorp. During the operation, six hundred and eighty six (686) SASSA and bank cards as well as twelve (12) identity books were seized and four (4) criminal cases were opened.

The focus of this kind of operation is primarily to identify credit providers who are unlawfully retaining pension cards, bank cards, identity documents and personal identity numbers (PIN) of their clients as surety. “Retaining these cards is a contravention of the National Credit Act (NCA) and it is a criminal offence,” said Jacqueline Peters Manager of the Investigations and Enforcements Department at the National Credit Regulator.

She stated that this operation is part of the NCR’s ongoing strategy to root out predatory lending practices and to ensure that all credit providers, no matter where they conduct business, comply with the provisions of the NCA. “The exploitation of vulnerable and unsuspecting consumers by credit providers will not be tolerated,” added Peters.

“Consumers are cautioned to avoid credit providers who require them to hand over their identity books or cards as it is a criminal offence and it is usually coupled with reckless lending and overcharging,” concluded Peters.

Who will be checking just how thorough and impartial Richard Lloyd’s review of FOS will be?

Alarm bells are starting to sound as fears rise over the impartiality of the Financial Ombudsman’s review chief and his ‘perceived closeness’ to the service. On 4th June 2018,The Times reported on concerns regarding Richard Lloyd’s past links with the Financial Ombudsman Service (FOS), whilst previously working as a Director at Which? for five years until 2016 as well as his current chairmanship of Resolver, a consumer website that works with the service. These reported comments follow an interview for BBC’s Money Box show last month, during which Mr Lloyd advised he had not had any dealings with the Ombudsman for over two years and would be entering the review with an “open mind”.

The review of the Service is to be conducted quickly as Mr Lloyd is required to present his findings to the Treasury Select Committee before the Summer Recess, so while he vows to look at the ‘good, bad and ugly’, just how effective can this time–constrained Independent Review be? The Terms of Reference he has been issued with focus heavily on the findings of the Channel 4 Dispatches programme and miss the opportunity to extend the review so it addresses the concerns of all sectors. The Treasury Select Committee told FOS that the review should not be limited solely to the Dispatches allegations. For example it does not reflect the concerns of consumer credit lenders regarding the Ombudsman accepting dubious complaints made several years after the event, usually submitted by Claims Management Companies or no-win-no-fee lawyers and ironically, supported by some consumer websites like Resolver.

Some lenders claim that when they receive such a complaint the expenditure report is often very different from that stated at the time of the loan application. The claim is massaged to give a different financial picture at the time the loan was taken out from the application data given to the lender, in order to suggest that the borrower could not afford the loan at the time. Yet the Ombudsman’s approach is to accept the claimant’s assertions without making detailed checks of the discrepancies, allowing some unjustified pay-outs.

A spokesperson for the MoneyCheats project said: “In 2013, 4% of PPI claims referred to the FOS were made by people who had never had a PPI contract. If the 4% figure were sustained, then from 2011 to 2017 when there were around 1.5 million PPI claims to the FOS, up to 60,000 spurious claims could have been made by consumers who never had a PPI contract at all. When questioned, the Ombudsman said it does not compile records of the numbers of false or misleading claims it receives.

“For the independent review to have any true credibility it would be prudent for Richard Lloyd to utilise his open-minded approach so it encompasses the thoughts of both consumers and industry sectors regarding their experiences of FOS caseworkers and the Service generally.

“If time does not allow for this, then perhaps the recommendation to the Treasury Select Committee should be to extend the deadline and terms of reference in order to allow Mr Lloyd (or someone else) to undertake a full investigation rather than running the risk of being accused of a ‘whitewash’ due to a lack of time.”

Rent in East of England up 27.1% since 2011 compared to 8.8% pay rises

High rents are here to stay so as a direct consequence employers must be prepared to pay much higher wages to staff to enable them to afford these much higher rents GMB Congress told

A new study by GMB of official data shows that between 2011 and 2017 rent prices for 2 bedroom flats in East of England increased by 27.1% to an average of £750 per month, whilst over the same period, monthly earnings increased by just 8.8%.

In England as a whole, between 2011 and 2017, rent has increased by 18.2 percent, with the average 2-bedroom flat costing £650 per month. Meanwhile wages rose by just 9.8%.

In East of England, Cambridge is the council that has seen the biggest rise in rent prises. Between 2011 and 2017 prices of a 2 bedroom flat rose by 41.2%, to an average price of £1,200 per month. Meanwhile, wages in Cambridge rose by just 7.2%.

Other East of England councils with a significant gap between pay-rises and rent are; Watford, where rent has risen by 41.2%, yet wages have risen by just 10.6%; Hertsmere, where rent has risen by 37.1%, yet wages by just 10%; Luton, where rent has risen by 33.3% since 2011, and wages have risen by 16.7%; and Central Bedfordshire, where rent for a two-bedroom flat has risen by 32.5% to an average of £795 per month, whilst wages have risen by just 12.1%.

The figures for the 47 East of England councils are set out in the table below. This is from a new study by GMB London Region of official data from the Office of National Statistics (ONS) for 47 councils in East of England. It shows the median rent of a 2-bedroom flat in 2017, the percentage change in rent-prices between 2011 and 2017, and the percentage change in monthly earnings between the 2011 and 2017.

Warren Kenny, GMB Regional Secretary said: “These official figures show increases in average rents for two bedroom flats of 30% or higher in 11 of the 47 East of England councils in the six years since 2011. The average increase for all the councils is 27.1%. By comparison average earnings in the same period rose by 8.8% in East of England.

“These high rents are here to stay. So too are younger workers living for longer in private sector rental accommodation.

“As a direct consequence, employers must be prepared to pay much higher wages to staff to enable them to afford these much higher rents.

“If employers don’t respond with higher pay they will face staff shortages as workers, especially younger people, are priced out of housing market.

“It makes little sense for these workers to spend a full week at work only to pay most of their earnings in rents. They will vote with their feet.

“Policy mistakes have made the housing position for lower paid workers worse. Council homes for rents at reasonable levels were aimed at housing the families of workers in the lower pay grades and did it successfully for generations.

“These were sold off – but crucially not replaced as a matter of Tory dogma. Housing benefits was introduced instead to help pay rents for those on lower paid and the costs to the taxpayer has ballooned to over £24 billion a year. It would have been far cheaper to build the council homes.

“The chickens are now coming home to roost on these policy mistakes. There is a massive shortage of homes for rent at reasonable rents for workers in the lower pay grades. There is now no alternative to higher pay to pay these higher rents plus a step change upwards in building homes for rent at reasonable rents.

“Higher pay especially for younger workers is now one essential part of the solution.”

CICM welcomes FCA’s focus on unarranged overdrafts in new credit review

The Chartered Institute of Credit Management has welcomed the planned review by the Financial Conduct Authority (FCA) into high cost credit and particularly its focus on unarranged overdrafts.

Philip King, Chief Executive of the CICM, said that it was important that all high-cost products needed to be looked at: “The review needs to build a full picture of how such products are used, whether they cause detriment, and if so to which consumers, and should include not only the higher profile products but also those that make the banks millions of pounds but are often not in the consumer’s best interests.

“We would also urge the FCA to capture data and investigate in the greatest detail the extent to which consumers are moving towards the use of loan sharks and unauthorised lenders, as a last resort, where FCA measures have resulted in a reduction in the availability of legitimate high cost credit.”