Monday, 27 June 2011

Who can sell my personal information?

*** UPDATE Ministry of Justice says it's not considering banning these "referral fees", but won't rule out a ban ***

Behind the brouhaha raised by Jack Straw over ballooning personal injury claims lies a nagging question about data protection.

Remember, it's all about the barrage of texts and calls that accident victims get from claims companies who want to bring a personal injury case for them on a no-win-no-fee basis, even when they haven't been injured.

Hence, a huge rise in hard-to-prove whiplash awards, at £3,000 a time. And the cost of car insurance rising by 30% a year.

What happens is that insurers, brokers and lawyers are paid referral fees by the claims companies for passing on the personal details of customers who have been involved in an accident.

Breakdown companies, police and even nurses have cottoned on as well, cashing in on a valuable commodity: accident victims' contact details.

So what are the rules?

Well, if your agreement with an insurance firm or an insurance broker contains a clause saying "We may pass on your information to third parties..." or something like that, then they can do it -- as long as you agreed.

Under the Data Protection Act, your personal information has to be used in the way you expect.

But nurses, police officers and ambulance drivers? How can it be OK for them to pass on people's names and even contact details?

In fact, it isn't. It's against the law. There would be an unlimited fine in a Crown Court.

The Information Commissioner prosecuted one case successfully this month. An employee of a claims company was fined £1,000 plus costs for receiving information on 29 patients who turned up at NHS walk-in centres.

It's thought the details came via a nurse.

But that was just one case, compared with millions of unsolicited texts and calls and a £14bn personal injury bill.

New mortgage rates reach low...

...that's if you can get them.

Rates for new fixed and tracker rate mortgages are at their lowest levels since the financial information firm, Moneyfacts, started following them in 1988.

The fall comes as expectations of an interest rate hike from the Bank of England over the next few months have receded.

The average tracker, which shadows the Bank of England rate, is at 3.37% and the average 5 year fixed rate is 5.29%.

However, Moneyfacts accuses lenders of widening the gap between their own cost of funds and the interest rates they charge to customers.

Also, over 40% of homeowners who already have mortgages are on Standard Variable Rates, which have stayed high.

Friday, 24 June 2011

Watch out for Greece

The governor of the Bank of England, Sir Mervyn King, has warned that bailing out Greece will only buy the Eurozone time, until the country finds a way of dealing with its huge debt problems.

At a news conference for the Bank's Financial Policy committee, set up to oversee the UK's financial stability, he said the troubled Eurozone countries posed the most serious and immediate risk to the UK.

Sir Mervyn said that although UK banks have limited direct exposure to the debts of Greece, Ireland and Portugal, they could have lent to other international banks which were exposed.

And he added that the bigger risk was a crisis of confidence in which banks stop dealing with each other because of fears that one of them might be heavily exposed.

The governor warned that simply lending a bit more to Greece would never be the answer to a problem which was about the country's solvency -- at best it would provide a useful breathing space for a more fundamental solution to be put in place.

Asked whether the crisis was like the collapse of Lehman Brothers which helped cause the credit crunch, he said only in that this situation was also a mess.

Thursday, 23 June 2011

Save us from rip-off card charges and internet nasties

Protection is on the way against credit card rip-off charges and nasty surprises over your internet purchases.

New European Union consumer law will restrict the surcharges, slapped on by traders if you dare to use a card, to the cost of processing the payment.

Goods bought over the internet will be returnable within 14 calendar days, up from 7 working days.

And surprise additional payments when you come to pay for something over the net, those expensive pre-ticked boxes which you never saw - you'll be entitled to a refund if you are stung.

The new protections are on the way, but they are still far off.

Euro MPs have just voted them in. But the Council of Ministers has to approve and implementation at the national level could take two years.

And will the measures be watered down over that period? Not clear yet.

Monday, 20 June 2011

£13bn cost of delaying pension changes

What might the government do to soften the impact on 300,000 women of being forced to wait until 66 to get their state pensions?

The Department for Work and Pensions' own figures suggest the cost of switching to a plan B would be £13bn.

As things stand, women's pension age will be equalised with men's at 65 in 2018 and then raised, to 66, along with men, in 2020.

That saves more than £38bn over ten years from 2016, including the extra tax and national insurance people would pay because they'll have to work longer.

The Plan B (or Option 2 as the legislation paperwork calls it) involves delaying the move to 65 for women to 2020 and the dual move to 66 until 2022.

The government rejects that option because the savings, at over £25bn, are less in the first decade, by around £13bn.

There are, presumably, other possibilities, such as stretching the change over a longer period.

However, delaying the change for women, while moving men to 66, is a non-starter.

European equality law forbids a situation arising in which pension ages of men and women begin to diverge.

Thanks to Laith Khalaf at Hargreaves Lansdown for this information.

Friday, 17 June 2011

Beware of being average

Many of the 5 million workers affected by the public sector pension changes could face much bigger hikes in their contributions than they expected.

In the bewildering swirl of figures, there's a danger of being flummoxed by the use of averages.

On average, for instance, pension contributions will be 3.2% higher, which is a lot more than it sounds.

What it means is that contributions might go up from around 6% of earnings to around 9%, though the exact numbers depend on the job.

But Danny Alexander, the Chief Secretary to the Treasury is promising today that 1.25m workers will have no increase or a very small one -- those who are earning less than £18,000.

The implication is that those earning more than £18,000 will have to stomach increases of a lot more than 3.2% in order to make that average figure work.

So how many will end up paying more? Could be millions.

Thursday, 16 June 2011

Tax cuts - your secret guide

Mr Balls wants a new tax cut. If it ever happened, it would slot into a busy history of cutting...and raising too.


1973 starts at 10%
1974 8%, then petrol rate set at 25%
1976 petrol rate cut to 12.5%
1979 single 15% rate
1991 up to 17.5%
1994 8% lower rate for domestic fuel and power
1997 lower rate cut to 5%
December 2008 to January 2010 standard rate cut to 15%
2011 20% standard rate

Basic rate income tax

1979 30%, cut from 33%
1986 29%
1987 27%
1988 25%
1995 24%
1996 23%
1999 22%
2007 20% (10% rate abolished)

The teeth to deal with financial rip-offs

How would you stop the PPI, endowment and pension scandals of the future?

You could have an enforcement body whose job it is to:

*ban flawed financial products,

*stop misleading promotions,

*and make firms compete honestly with each other.

Plus, you could tell it that when respected bodies such as Which? and Citizens Advice flag up that a lot of people are being ripped off in the same way, it must take swift action to make sure everyone affected gets full compensation.

It's called "mass consumer detriment".

Today's White Paper on financial regulation promises to give these powers to the new Financial Conduct Authority, replacing the consumer regulation side of the FSA and taking in the Office of Fair Trading.

Millions of ripped-off consumers will be wishing that the powers had been in place for years and that they'd been used to protect them.

Balls tax cut

What Ed Balls, Shadow Chancellor, is actually saying about a temporary tax cut:

"When the last Labour government temporarily cut VAT to 15 per cent for 13 months, he (Osborne) dismissed it, saying people wouldn't even notice.

He may not have noticed – but at the end of each month, millions of families did see extra money in their pockets, and thousands of businesses saw the difference in their bottom line.

As the IFS has said it proved an “effective stimulus”. And the economy received a much-needed injection which helped it return to growth, led unemployment to fall and saw the deficit come in £21 billion lower than expected.

So my suggestion to George Osborne is that, while he will not agree to reverse his mistaken VAT rise permanently, he should now reverse it temporarily until the economy is growing strongly again:

-       By putting more money directly into people’s pockets, it would be a boost for consumers who are feeling the squeeze from rising prices and rising taxes – especially pensioners and those on low and fixed incomes;

-       The inevitable increase in consumer confidence would help the struggling retail sector;

-       It would help to push down inflation – and so reduce the risk of a recovery-choking interest rate rise later this year;

-       And it would give the flat lining economy the jump-start it so urgently needs, boost jobs and help us get the deficit down for the long-term.

The question is not the cost to George Osborne of paying for this temporary emergency tax cut, but the price our country will pay if he carries on regardless.

Slowing down the pace of deficit reduction with a temporary VAT cut now would give the flat lining economy the jump-start it so urgently needs, boost jobs and be a better way to get the deficit down for the long-term."

Tuesday, 14 June 2011

Shoddy treatment for wealthy investors

Thousands of better-off investors are being let down by banks, stockbroking firms and money managers, according to the Financial Services Authority.

The FSA has issued a written warning to 260 chief executives after it checked a sample of files at 16 wealth management firms and found serious and widespread failings.

Although the names of the firms have not been disclosed, they are likely to include international private banks, High Street names and City firms.

Typically their clients would have more than £100,000 to invest. But the FSA's evidence suggests they have been given shoddy treatment.

The firms didn't know what risks customers were willing to take or what their investment objectives were. Often, they could show no record of a client's financial situation.

In 4 out of 5 cases there was a high risk that the investment portfolio was unsuitable for the client.

Investment insiders suggest that, in total, the targeted firms could have tens of thousands of customers.

The FSA found that there was a high risk that investors had lost out. If that is proved in follow-up investigations, the firms could have to pay compensation.

Clampdown on debt firms

Fair Trading clampdown on debt management companies

Much-criticised private debt management companies have been warned to raise their standards or face sanctions.

The companies advertise widely and often cold-call heavily indebted people, promising to help manage their borrowings and deal with lenders.

The Office of Fair Trading has unveiled new guidelines designed to eliminate suspect practices, including the tactic of retaining clients' money rather than passing it on to creditors.

Debt management firms will have to have ring-fenced accounts to safeguard clients' money and draw up clear contracts on how it will be passed on.

There are measures to prevent firms taking fees from client funds without warning.

And the rules prohibiting cold-calling have been reshaped. Unsolicited calls, texts and emails are banned unless people have given prior consent.

Since last autumn 43 debt management firms have surrendered their licences and the OFT has taken action to stop another 11 from operating.

Monday, 13 June 2011

How many PPI claimants are trying it on?

Banking insiders are suggesting an interesting reason that Lloyds Banking Group is not following Barclays' lead on PPI compensation.

You remember that Barclays caught other banks on the hop this morning by promising no quibble payouts to tens of thousands of complainants.

These were the ones whose cases had been on hold during the months of court wrangling over how thorough the banks would have to be in identifying cases of misselling.

Lloyds says it will be handling all complaints consistently, regardless of when they were received. In other words, everyone gets treated in the same way.

And -- here's the interesting bit -- it's been suggested to me that 20% of the complaints Lloyds receives may be from people who didn't buy Payment Protection Policies from Lloyds.

Most probably come via claims management firms and at least some of the claimants could be trying it on. That's what some bankers think, anyway.

The Lloyds line is that you have to establish how valid complaints are before paying out money willy nilly.

No quibble PPI compensation

Barclays is promising to compensate all customers whose PPI complaints were on hold, without quibbling about whether the complaints were justified.

They were on hold while leading banks fought a court battle with the Financial Services Authority over how many should receive payouts, a battle which the banks lost.

How generous is Barclays being?

It appears that tens of thousands could benefit. And it must be possible that some will receive payouts even if their claims were pretty flimsy.

On the other hand, figures from the Financial Ombudsman Service show that 75% of the Barclays cases it received were decided in favour of the complainant in any case.

What's more, Barclays has to pay £500 for each case that the Ombudsman has to deal with after an appeal. So contesting claims can be costly.

The numbers of complaints upheld by the banks are high as well, though Barclays won't comment on its own figures.

And they have large teams of people trawling through all these complaints. It's an expensive exercise if you are usually in the wrong.

Perhaps Barclays has decided that the cost of not quibbling isn't much higher than the cost of quibbling. It's certainly an easier route to take.

There is no sign of Barclays raising the £1bn provision it has made for PPI compensation.

Here's the link to a recent BBC article on who can put in a PPI claim and how to do it.

Friday, 10 June 2011

The incredible shrinking mortgage

Wouldn't it be great if your mortgage shrank and then disappeared? Ping!

That's the usual effect of high inflation.

Price rises are painful if you're in the supermarket, filling up the car or dealing with the heating bill.

But your debts stay the same. In reality, or in real terms, they drop in value.

At the current rate at which the RPI is rising, 5.2% annually, a £100,000 loan should feel £5,200 lighter after a year.


And looking back five years, the shrinkage is nearly £20,000. That's a fifth of the loan, gone up in smoke.

Sadly, it's not quite like that this time. In the past, when inflation has rocketed, wages have risen sharply as well.

But pay is rising very slowly if at all, in cash terms, which means that in real terms pay is shrinking too.

So you are earning less to pay off less, for the moment anyway. Make sense?

Whopping cost of cards

Credit card interest rates continue to ride at their highest level for nine years.

Latest figures from the Bank of England show that the average rate we paid on credit card borrowings was 16.72% over April and May, the steepest since February 2002.

Looking further back, the previous peak was 23% in 1995.

Meanwhile, on the other side of the ledger, savers continue to suffer.

Banks are paying an average interest rate on Cash ISAs of 0.55%.

Wednesday, 8 June 2011

Time for a health check

Facing up to financial problems is a big deal for many people.

Some put it off for 18 months or 2 years, even though they are falling behind on interest and other payments. By which time the problem is much worse.

So the new money Health Check from the government's impartial Money Advice Service is a useful tool.

And here's is my Fiddler on the Roof take on it. Remember "If I was a rich man, didle deedle didle...etc"

The check doesn't provide the sort of detailed advice that you would get from a debt expert and an investment specialist, but it will point you in the right direction.

In fact, if you own up to serious debt problems, it offers a quick route out of the questionnaire to an action page which offers instant help, including contact numbers for debt charities who will assist.

The Money Advice Service wants millions to try it out, with a target of 500,000 in the first year.

Let's hope the people who most need the help will end up taking the Health Check.

They'll need to be on a computer, on the internet and know about the service.

Monday, 6 June 2011

Chasing 500,000 tax cheats

Her Majesty's Revenue & Customs has told me that the 500,000 people fingered by the papers over the weekend for having offshore accounts are in deeper trouble than first appeared.

They are the ones being targeted as tax cheats out of the millions who have bank accounts of some sort overseas.

Just to be clear on this, HMRC thinks that this group, which it says includes chip shop owners, taxi drivers and Blackpool landladies, are tax evaders as opposed to tax avoiders.

EVADERS don't pay the tax they owe.

AVOIDERS use loopholes and allowances to reduce the amount they owe.

There is nothing wrong with keeping money in an offshore account. The trouble comes if you don't declare the funds to the tax authorities here -- if you are UK resident for tax purposes.

Tax officers have raised nearly £500m in the last 20 months by offering amnesties to people with offshore accounts, allowing them to escape full penalties.

Friday, 3 June 2011

£700 to go bankrupt

A rise in the cost of going bankrupt could discourage people with financial problems from seeking a solution, debt experts are warning.

The fee for petitioning for bankruptcy has gone up by £75 to £525. With the court fee added on, the total upfront cost is £700.

The deputy head of the Insolvency Service, Graham Horne, says the increase is needed to "cover the overall cost of administering the service".

The charges, including court fees, have gone up by 37% since March last year.

A leading insolvency practitioner, Mark Sands from RSM Tenon, warns that the hike would put extra pressure on individuals who are likely to be under stress or depressed.

"So many people flounder around and don't see a way out," he says, "They are going to be put off exploring bankruptcy as a solution."

The £525 charge is a deposit to cover the cost of managing a bankruptcy, which allows the bankrupt to throw off the burden of debt and make a fresh start.

The Insolvency Service recovers a full administration fee of £1,715, less the deposit, from the bankrupt's assets or surplus income at a later stage. This sum is not being increased.

"The fee is staying the same," argues Graham Horne, "But we are increasing the proportion of that fee which we get on day one."

The Insolvency Service has seen its income squeezed because of the falling value of homes and other assets which are recovered from bankrupts.

Currently, the £1,715 fee is never fully paid in half of bankruptcies.

"It's unfair to families who are struggling," said a recent bankrupt who spoke to BBC News, although he added, "I felt that any money I had was going to be taken anyway."

"This increase in the cost of going bankrupt is likely to swell the numbers of people falling through the net of the current insolvency regime," comments Jon Elwes from the Money Advice Trust.

"Our advisers at National Debtline speak to people everyday for whom bankruptcy would be the best solution to their debt problem, but for the fact they can't afford the associated fees."

There is now a cheaper and easier alternative, the Debt Relief Order or DRO, which costs only £90.

An increasing number of people in financial trouble and looking to escape their debts have been avoiding bankruptcy and taking this lower cost route.

In the first quarter of this year there were 6,788 Debt Relief Orders, a 20% rise on the previous year.

But you can only ask for a DRO if your debts are under £15,000 and your savings and assets are less than £300.

"What if you have £16,000 of debt?", asks Mark Sands of RSM Tenon. "You're faced with that barrier of hundreds of pounds before you can opt for bankruptcy to resolve your difficulties."

"It's a very steep rise," adds Una Farrell from the Consumer Credit Counselling Service.

"We already have to do a lot of work helping our clients to get the money together to pay the fees."

But Graham Horne says the Insolvency Service is obliged by parliament to break even, a task which has become increasingly difficult.

"It has always been our policy that if bankrupts can pay something towards their debts then they should," explains.

"And we have to strike a balance between giving bankrupts debt relief and a fresh start, and the need to provide some return to creditors."