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.”

StepChange Debt Charity responds to FCA high cost credit proposals

The FCA today published the outcomes of a review into high cost credit, including overdrafts, doorstep loans, catalogue credit and rent-to-own borrowing. The proposals are being consulted on from today.

Responding to the FCA announcements, Phil Andrew, Chief Executive of StepChange Debt Charity said: “We have long argued for action on high cost credit. Its regular use to meet essential costs by those already struggling can lead to debt spiralling out of control. Our recent research shows the number of people who used high-cost credit for essential household costs rose to 1.4 million last year, so we welcome the focus the FCA is placing on protecting consumers in this market.

“We welcome the transparency measures on overdrafts as we found that over two million people in the UK are stuck in a constant cycle of persistent overdraft debt. However, we are looking forward to the FCA abolishing unarranged overdraft fees and introducing substantive steps to identify and support people in or at risk of persistent overdraft debt through the banking review.

“Rent-to-own is a very expensive type of credit, not just due to interest rates, but the price of the goods themselves, other possible add-ons and the length of period for repayment, so we believe the FCA is moving in the right direction by considering a price capping and banning point of sale warranties.

“We’ve previously pointed out that there’s a risk that a lack of access to affordable credit could push more vulnerable households into problem debt, so it’s right that the proposals focus on this too. The Government and the FCA need to look creatively at working with businesses to provide low- and no-interest loans, learning from successful schemes in Australia and elsewhere, while recognising the need for the welfare system to provide better emergency support for those who need it. Such an approach could truly transform the options available to those on low incomes and break the vicious debt spiral that high cost credit all too often creates.’

MAS response to the FCA high cost credit review

Responding to the FCA’s review into high cost credit, Money Advice Service Chief Executive, Charles Counsell, said today: “We welcome the FCA’s wide-ranging review into high cost short term credit, a review that has highlighted the complex array of products and charging structures that too often have critical consequences for consumers. We support any proposals that could improve the high cost credit market for its customers and look forward to responding to the FCA in more detail.

“Access to affordable credit and people’s ability to make informed financial decisions is key to day-to-day money management. Alongside savings, the responsible use of credit is a vital way for UK consumers to make bulky purchases and smooth income and expenditure. Our evidence shows that of the financially capable behaviours that people exhibit, it is managing credit that can have the greatest impact on their financial wellbeing. We are very pleased to see a growing range of alternatives to high cost credit including community or social finance-led solutions.”

FCA measures on high-cost credit welcome – but further action ‘must remain on the table’

The Financial Conduct Authority (FCA) has today published its high-cost credit review. The review outlines proposals designed to protect people who use overdrafts and high-cost credit.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “The FCA’s decision to introduce a cap in the rent-to-own market is welcome – and could make a significant difference to thousands of people. The regulator should keep the impact of its new measures in other sectors, such as doorstep lending, under review – and be prepared to reconsider the case for further cost caps.

“Similarly, while new measures on unarranged overdrafts may go some way in addressing the problems we help people with at National Debtline – the FCA should still be prepared to intervene with its ‘backstop price cap’ if consumer detriment persists in this area. It is important that this option remains firmly on the table.

“Today’s news has also been overshadowed by the government’s disappointing decision to step back from reforming logbook loans through its Goods Mortgages Bill. In light of that decision, the FCA needs to takes urgent action to improve consumer protection in this sector, too.”

What will be the consequences of FCA proposals?

The net result of the proposals in the Financial Conduct Authority’s High Cost Credit Review published on 31st May is that fewer people, particularly those on lower or uneven incomes, will be able to access regulated consumer credit as firms will be unable to lend to them.

This is no bad thing, according to the FCA, when the same effect resulted from its cap on payday loan charges in 2015. People should go without rather than take on high cost credit which might lead to debt problems. What the FCA did not say though, was go without what?

In 2017, 140,000 people who received debt advice from StepChange Debt Charity were behind on at least one of their essential household bills, such as an energy bill, council tax, mortgage or rent – two in five of their clients. Across Great Britain, the charity grosses this up to estimate the number of people behind on priority bills to be over three million. An estimated 9.3 million people last year used credit to meet a household need – with 1.4 million of these using high cost credit.

But many are finding access to regulated credit to use as a smoothing mechanism more and more difficult, and are turning to informal sources, often referred to as friends and family, but also unregulated illegal lenders. Statistics from StepChange show a significant increase in both the number of clients who borrow informally and the value of how much they borrow:

  • In 2015, 26.8% StepChange of clients (82,140 people) owed an average debt of £3,639 (totalling £298.9 million) to friends and family.
  • In 2016 28.3% of clients (96,121 people) owed an average of £4,512 (totalling £433.7 million)
  • and in 2017 this increased to 31.9% of clients (113,997 people) with an average debt of £5,070 (totalling £578.0 million).

Since 2014, the total amount owed to friends and family has more than doubled from £236 million to £578 million. StepChange has acknowledged the significant rise in unregulated debt held by its clients, but says it has no idea why. The FCA is not interested in conducting research into this phenomenon, even though its actions are likely to be the cause, because of course, unregulated lending is outside the remit of the regulator.

The Illegal Money Lending Team for England assess that 310,000 households borrow from illegal lenders. There is a grey area between borrowing from “friends” and borrowing from outright illegal lenders.

John Lamidey, Regulatory Consultant at Arminius Associates says: “Since StepChange considers that 140,000 of its clients behind on at least one of their essential household bills grosses up to over 3 million in the population as a whole, then 357,386 clients who borrow informally would gross up to 7,658,271 in the population as a whole.

“It follows that if over seven and a half million people borrow informally from unregulated sources it does appear that the applauded FCA regulatory interventions which have reduced regulated commercial lending significantly since 2014, and continue to do so, have “protected” many millions of consumers – right out of the market, leaving them to fend for themselves.”