Archive for October, 2009

Some unfair credit card terms are to be outlawed under proposals being put forward by the government.

It wants to stop card firms raising interest rates on existing debts and to prevent them raising someone’s spending limit without authority.

Monthly repayments must be used to pay off the most expensive debts first, and the size of minimum repayments will be raised to ensure faster debt repayment.

The body representing UK card issuers said it would study the proposals.

“We need to be able to demonstrate what impact these would have on consumer choice and the costs to customers of using credit cards,” said Melanie Johnson, chair of the UK Cards Association.

“We will be reviewing the evidence and we expect the government to do the same.

“These proposals risk disadvantaging more customers than they protect,” she added.

‘Exploited’

The government said that credit and store companies had to “clean up their act” because the relationship between card companies and their customers was “unfair” and should be challenged.

“It is not acceptable for card companies to impose complex and confusing terms and conditions that can leave people baffled, or to increase interest rates without proper explanation,” said Consumer Minister Kevin Brennan.

“Consumers should not feel each month as if they have been exploited or disadvantaged,” he added.

The latest proposals, which are now being put out to consultation by the Department for Business Innovation and Skills (BIS), include:

• changing the order of priority for credit card repayments, so that the most expensive debts, such as cash advances, are paid off first

• increasing the minimum amount that must be paid off each month to accelerate the overall rate of repayment

• banning the practice of raising borrowers’ credit limits without their prior consent

• restricting or banning increases in interest rates on debts already incurred.

Culture change

The government’s proposals were welcomed by consumer organisations.

“For too long, card companies have been allowed to apply the tricks of their trade to the detriment of millions of consumers,” said Phil Jones of Which?

“We think it’s simply wrong to entice people into spending more than they can afford and then to squeeze as much money out of them as possible.”

Malcolm Hurlston of the Consumer Credit Counselling Service (CCCS), said: “The government has put its finger on the four main problems that consumers have with credit card debt.”

“We believe that the banks should be able to change their practices on each of these but if they can’t, regulation will be necessary,” he added.

Teresa Perchard of Citizens Advice said new enquiries about credit, store and charge card debts was the biggest group of problems that people brought to CAB offices last year.

“In particular we see far too many people on low incomes who have drifted into very high levels of borrowing as a result of unsolicited increased access to credit.

Consumer Focus said: “Borrowers should be given at least a month’s notice, and a full explanation, of any interest rate increases by their lender.”

‘Fair principles’

The government’s latest plans follow other limits on credit card practices brought in earlier this year.

These ideas came after a government-organised “credit card summit” in November last year, at which card companies agreed to a set of “fair principles”.

Among other things, they agreed to stop raising interest rates when a customer fell behind with their repayments.

The government also pledged to ban the issuance of unsolicited credit card cheques and legislation to do this is now going through Parliament.

Source: http://news.bbc.co.uk/1/hi/business/8326485.stm

Students are resorting to gambling to pay off college debts and risk ending up in financial crisis – warns charity.

Students are resorting to online poker to pay off college loans, ending up deeper in debt, a gambling advisory service is warning.

Young students, away from home for the first time and alone in their rooms with a laptop, are increasingly being tempted onto betting sites, according to Gamcare.

Many are particularly vulnerable because they possess poor financial skills but try to copy mathematics students whose skills enable them to be more successful, said Andy McLellan, the organisation’s chief executive.

“We are picking up more and more people in these circumstances. They are in debt for the first time and wonder how to get out of it. They see maths students – who understand the risks – and believe they can do it, too,” he said.

“We don’t have solid statistics but there’s anecdotal evidence through our helpline and we have noticed a rising tide of this abroad,” he explained. “These students often don’t know how to handle money and don’t have the risk assessment skills required.

A US study of college students found that problem gambling affected 7.8% of students. One student was reported to have accumulated debts of $30,000. There have been calls for colleges to campaign against what has been called a “silent addiction” comparable to drug and alcohol problems.

The University of Lincoln has expressed concern about students spending their loans gambling online. One maths student told the college’s newspaper, The Linc, he had set up a poker account. “There is skill involved and it is possible to win but I would never be reckless enough to risk large sums of money,” he said, “While the stakes are low it remains fun but the enjoyment goes if things get out of hand.”

Gamcare, established in 1997 and partially funded by the gaming industry, published a report on gambling debt this week in conjunction with the Money Advice Trust, Manchester Metropolitan University and the Salvation Army.

It urged that more should be done to “prevent people from gambling excessively” and helps those who get into trouble. It suggested that debts of up to £60,000 “might be common” amongst problem gamblers.

Understanding of the problem is inadequate, the report found. “Awareness of the help available to problem gamblers…, particularly among GPs, is equally poor. There is an urgent need to improve education about gambling for young people, alongside or as part of work on financial literacy and understanding chance and risk.

One recommendation was for firms to help vulnerable employees by blocking access to gambling websites at work.

The government’s Responsible Gambling Strategy Board this week also recommended developing “an integrated approach to problem gambling services in partnership with the NHS [and] training for GPs, primary care practitioners and other professionals to identify and screen for problem gambling.”

It also called for a national helpline that was “independent and separate of any existing treatment services”.

According to the Gambling Commission’s 2007 prevalence survey, 68% of the UK population had gambled within the past year and problem gambling was estimated to be running at 0.5-0.6% of adults. Hong Kong, the USA and South Africa all have higher reported rates of problem gambling.

Around two in three men (61 per cent) are not sleeping well due to stress over debts, according to a recent poll into personal money issues.

However, while that figure may seem remarkably high, it”s even worse for women as 75 per cent of female respondents to the talkaboutdebt.co.uk survey remarked that they were also having problems when getting to bed on an evening.

As a result, 27 per cent of respondents admitted to debt seriously affecting their quality of work, with one in five admitting to the stress being so extreme that they are unable to return to the office.

Jessica Bown, an independent financial journalist working for the free debt help website, said: “It is clear that debt stress can have terrible consequences and we want to make sure that people get the right kind of help and don”t have to suffer alone.”

Source: http://www.silentnight.co.uk/news_ext/19416709/debt-worries-causing-two-in-three-to-lose-sleep

One potentially interesting new trend in the world of debt management appears to be that some consumers are doing so well at paying down their balances that some creditors are trying to provide incentives for them to use their cards more.

A recent report on the Baltimore Sun’s “Consuming Interests” blog notes that one card company recently contacted the author asking if there was a way they could get them to use their card more often, claiming they wanted to be the “primary one you turn to when making purchases.”

The article may be a sign that instead of simply closing down inactive accounts, slashing credit limits and imposing new terms that make continuing an account unfavorable for a consumer, creditors are feeling a financial pinch from people simply using their cards far less often.

Another example of credit cards feeling the heat can be seen in Bank of America’s decision to keep its fees and interest rates steady until federal reforms go into effect early in 2010. Since some companies are going to see their profit margins erode by no longer being able to impose punitive rate hikes and high late fees after next spring, they have been trying to cash in now.

However, such methods have drawn criticism from members of Congress as well as from the public, prompting the Bank of America announcement. Congress has even been trying to move legislation that would enact the reforms even faster in light of these and other concerns.

A look at this month’s consumer credit report from the Federal Reserve illustrates how serious many Americans have become about debt management, having paid down their card balances and other revolving debt at a 13.1 percent annual rate in August.

Source: http://www.credit.com/news/credit-debt/2009-10-14/card-companies-seem-unnerved-by-new-debt-management-trend.html

The Conservatives admitted costs could rocket – but warned that institutions must do far more for students in exchange.

Business Secretary Lord Mandelson has also hinted previously that colleges might be allowed to charge more if they offered better support for working class undergraduates.

Students from England pay up to £3,225 a year in the controversial tuition fees which were introduced by Labour.

Scottish students have not had to pay the up-front charge since 2001 but undergraduates from the rest of the UK doing courses north of the border pay around £1,800 a year, or nearly £2,900 if studying medicine.

Many university vice-chancellors would like to increase the tuition fee while some have even called for US-style unlimited charges.

Critics warn it will just add to the already huge debts with which many young people now graduate.

A Government review of fees is due to start in the next few weeks but it is not scheduled to report back until after the election.

Shadow universities secretary David Willetts urged that the review should be made cross-party in the interests of openness.

But students and lecturers accused the two main parties of adopting a “cosy consensus of silence” in refusing to say if fees will rise.

The National Union of Students estimates the average cost of attending university now stands at more than £42,000.

Income from part-time jobs and grants can only do so much to pay meet the bill, which means the average graduate will have accrued nearly £20,000 of debt by the end of a three-year course.

Mr Willetts’ comments yesterday were seen as the clearest signal yet that the Tories are prepared to consider a rise in tuition fees. But he insisted the matter was “not simple” and had not been decided.

He said: “The only question was whether it should be £5,000 or £7,000. They [the universities] now realise that it’s not a decision like that. I say to them quite explicitly: ‘If the fee cap were to go up, what would be in it for students?

“‘You have to show the better experience for students. You haven’t yet done that’.” Mr Willetts also accused Labour of letting down young people after 141,000 university applicants – an increase of nearly 30 per cent on last year – missed out on university this year because of a shortfall in places.

Lack of jobs in the recession has helped to increase applications.

The Government also announced yesterday that independent experts would look at the chaos which had left more than 175,000 students waiting for loans and grants a week after most courses started. Ministers say the actual number of eligible claims outstanding is now nearer 77,000.

But Mr Willetts said: “It is a shambles and it is causing enormous distress to many students.”

Source: http://www.express.co.uk/posts/view/134074/Student-debt-to-soar-

The Duchess of York has cancelled a lavish party to celebrate her 50th birthday today, adding fuel to rumours she is facing bankruptcy.

Fergie had hoped to toast her big day with a champagne celebration at her ex-husband Prince Andrew’s Windsor mansion, Royal Lodge.

However sources close to the duchess say she has been forced to scale back her plans drastically because of her cash crisis.

Instead, she will mark the occasion with her daughters, Beatrice and Eugenie, and a handful of close friends over dinner at a London restaurant followed by dancing at a private members’ club.

Her former husband Prince Andrew, 49, daughters Beatrice, 21, and Eugenie, 19, and Fergie’s on-off boyfriend Geir Frantzen, 42, will be among the guests.

This would be the latest blow for The Duchess Of York who days ago announced plans to shut her New York media firm Hartmoor LLC due to debts of over £700,000.

A close friend said: ‘Reality has hit home. Her debts are out of control.’

However, despite reports, her spokeswoman said plans for the birthday celebration were always going to be small and denied Sarah was going bankrupt.

She said: ‘She has faced some challenges and difficult times with one side of her business, Hartmoor.

‘She’s resilient, will work through the situation and bounce back from this.’

Fergie’s firm, which was based in an expensive office building on Madison Avenue in Manhattan, was set up in 2006 to cash in on what was believed to be America’s fondness for her.

The firm was to manage her seemingly lucrative career in publishing, media and public speaking.

The closure is said to have embarrassed the Duchess and has raised further questions about the state of her finances.

Last month, she was forced to deny money problems after being taken to court in the UK for unpaid bills.

Fergie is no stranger to financial difficulties.

In the mid 1990s she was chastised in the press after her extravagant lifestyle saw her run up a reported overdraft with Coutts of almost £5million, but she soon bounced back by reinventing herself in the U.S as the well-paid ambassador for WeightWatchers with a number of other endorsements.

Fergie, who received a lump sum of just £300,000 as a divorce settlement from Prince Andrew, had gained praise for paying off her debts without any help  from the Royal family.

But with the demise of Hartmoor her rebuilt image is likely to be shattered.

When she launched the company she told the U.S. Harper’s Bazaar she hope it would be ‘a global inspirational lifestyle and wellness company’, adding: ‘Hartmoor is a department store of everything I do.’

But to add to her woes, she has also been threatened with fresh legal action after an employee demanded she settle an unpaid bill for more than £17,000.

PR company office manager Richard Owen claimed that she owed him the money for the work he did to improve her image.

He issued Prince Andrew’s former wife with a legal demand to settle an outstanding invoice for £17,536.80 for work carried out in February and March.

Source: http://www.dailymail.co.uk/tvshowbiz/article-1220310/Duchess-debt-Fergie-forced-cancel-elaborate-5oth-birthday-bash-bankruptcy-fears.html

HARD-UP Burton families have seen their personal debt levels TRIPLE in the last year, an advice group says.

The amount of debt being dealt with by a Burton advice bureau has rocketed to £25 million.

East Staffordshire Citizens Advice Bureau (CAB) helped clients with £7.7 million of debt in 2005/06, but the figure has more than trebled to £25 million in the last year.

CAB bosses say it is crucial those with money troubles seek advice before a ‘molehill becomes a mountain’.

In one case, a client was referred to the bureau three days before being evicted from their property for mortgage arrears.

A possession hearing had already taken place but the client had not attended.

An emergency appointment was arranged with the bureau, which helped to show the client he could afford his mortgage and repay arrears.

The eviction was stopped and a repayment offer was made to the mortgage lender and accepted at court. The family managed to keep its home.

CAB chief executive Dawn Trigg said: “In this heightened time of a recession, there is a real need for people to seek advice.”

Latest figures suggest 2,471 people in East Staffordshire are claiming Job Seekers Allowance (JSA).

Of these, there are 260 claimants in the Anglesey ward, 132 in Burton, 221 in Eton Park, 218 in Horninglow, 231 in Shobnall, 264 in Stapenhill and 249 in Winshill.

Dean Piper, economic regeneration manager at East Staffordshire Borough Council, said: “Almost 30 per cent of JSA claimants in East Staffordshire are aged between 18 and 24, with a significant proportion in the 25 to 49 age range.

“A total of 74 per cent of people have been claiming JSA for up to six months, which highlights the short term impact of the down turn in terms of people being made redundant.

“This figure is expected to increase as those people who have lost their jobs over the last year struggle to get back into work.”

To encourage people to access help the CAB is holding an open morning at its new offices in Anson Court, Horninglow Street, Burton, on Friday, October 16 between 10am and 1pm.

A new debt advice line has also been launched on 01283 527985.

Ms Trigg said: “We offer free, independent and confidential advice to everyone, regardless of race, culture, sexual orientation, disability, age or income.”

Source: http://www.burtonmail.co.uk/burtonmail/displayarticle.asp?id=455331

One key aspect of debt management is that people need to understand that it is never actually too late for debt management, especially in England.

People often think that if you are in arrears with your mortgage, you have overspent on your credit cards and you haven’t got enough money to live on, that it is too late for debt management, no matter where you live in England.

But the reality is that debt management in any part of England is important. For example, even if your house is repossessed, you can still end up owing money on it, so you will simply carry on the debt.

Debt management will help you to sort out a realistic strategy for paying back your debts and getting on with your life, whether you live in rural England or in London. There really is no difference. Debt is debt and debt management is debt management. Indeed the recent recession has seen people affected by debt who never would have dreamed that they could ever end up in that situation. Although the wisest chose to do something about it and sought out good debt management advice.

So for a clear way through the maze and the fog that surround debt, sort out some debt management and debt advice at your earliest opportunity. Without good debt management you will find that your debt starts to take over your life and life really is too short to be controlled by debt.

Never, never assume that it is too late for debt management. Help is there in any part of England and all you have to do is look for the help and then start managing the situation you are in. It is simple and straightforward but only you can seek the help you need. That really is important and it is probably the best thing that you can do for yourself if you are in debt!

Government launches consultation about future of UK’s 150 debt management companies.

Debt management companies that negotiate with lenders on behalf of borrowers in exchange for a fee could become regulated by the government, which launched a consultation on the issue today.

The companies set up debt management plans designed to reduce monthly repayments for borrowers, but these can be expensive over the long-term after fees are added to the repayments.

Debt advice charities have long expressed concern about some companies operating within the burgeoning debt management sector.

The number of such companies has ballooned from 40 in 1999 to over 150 now and it is estimated that between 100,000 and 150,000 people enter debt management schemes each year.

A recent review of the sector by debt charity Money Advice Trust concluded that the advice given by these companies was mixed and that the Office of Fair Trading should require them to be clear about the cost of their services when they promote them.

It found some customers were only told the levels of fees very late in the process, leaving them feeling they were in a worse financial position than before they contacted such companies.

“If you are in unmanageable debt you need to get advice on the full range of options available,” said Beccy Boden Wilks of the Money Advice Trust.

“Often these companies only sell debt management plans or consolidated loans whereas you may be better off taking another route such as bankruptcy.”

The consultation is expected to conclude in December and the government will announce its conclusions early next year. Options being considered include regulation or an industry code of practice.

“Our aim is to help people take control of their finances and pay off their debts quickly and fairly,” said business minister Ian Lucas. “We want a system which is fair to everyone involved so that debt problems don’t spiral out of control.”

The charity Citizens Advice believes more than 40,000 of its clients could benefit from statutory regulation of the sector.

“Our evidence shows that there is a need for statutory regulation of debt management schemes. Self-regulation hasn’t yet proved to be sufficient,” said head of consumer policy, Sue Edwards.

“Where people have done everything they could to deal with the problem – sought advice, engaged with their creditors and are paying what they can objectively pay towards their debts – they should be left alone to get on with making repayments.”

She continued: “Unfortunately this isn’t always the case at the moment and while we do see some good practice, we also see cases where people doing all they can are still being harassed by creditors and threatened with enforcement action, extra costs and added stress.”

Source: http://www.guardian.co.uk/money/2009/sep/18/debt-management-consultation

More than one-in-five Britons over the age of 50 have seen their debt increase in the last twelve months, claims moneysupermarket.com, while an individual voluntary arrangement (IVA) could be the answer for many of them.

Research by the price comparison site found that 22 per cent of consumers in this age bracket have more debt than they did one year ago, with five per cent describing the rise as ‘a lot’.

IVAs seek to reduce debt by freezing interest rates and putting together a manageable repayment structure so that a debtor can be debt-free as soon as possible.

Those over 50 may be worried about entering retirement with significant debts to their name so may want to seek IVA advice immediately.

Tim Moss, head of loans and debt at moneysupermarket.com, said: “Anyone starting to worry about their financial situation shouldn’t bury their head in the quick sand of debt – problems are easier to tackle when addressed early.”

The study also revealed that 15 per cent of borrowing Britons believe debt will always be a part of their life and that 48 per cent of those who have seen their debt increase recently go further into the red just to pay the bills.

By Ashley Littley

October’s Credit Action report revealed the Citizen’s Advice Bureau currently deal with more than 9,000 new cases of debt every day.

Source: http://www.my-iva-adviser.co.uk/news/iva-news/ivas-could-help-the-rising-number-of-britons-in-debt-19394413