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A few days have passed since this shocking decision and it will be a couple of more weeks yet before we get some idea what can be done.

Although I very much support account holders who have been excessively charged for going over their unauthorised overdraft, I was quite concerned about how the banks could afford to pay out the refunds if they had lost this case. Some suggest the sum they would have had to cough up would have been around the £24 billion mark. 

In addition, the banks receive around £2.6 billion income every year from bank overdraft charges and other current accounts so this is a very great sum of money to lose.

Had the banks lost, another problem could have been the issue around credit ratings marked down through missed payments on loans as a result of 'bank charges'. This would then have been deemed unlawful. I dread to think of the ensuing litigation.

There is a small chance that the Office of Fair Trading (OFT) can still do something and I hope it is successful. I expect its lawyers will be scrutinising every word, but we will have to wait for its announcement next month to see what it plans to do next.

I believe this is actually the beginning of the end of excessive unauthorised overdraft charges as the banks have already started to cut their fees. There will be more competition from the banks, which will in turn bring down fees. The question though is, to what level?

There will be the odd bank or two that will still try and get away with high charges, but as customers can move banks this will not be a massive problem.

Some will claim the ruling is a good result for the taxpayer, but mainly from those who do not have bank charges to contend with. I understand this to a point, but spare a thought for those who just cannot get out of the bank charges trap. They are actually ‘funding’ our current free banking system.

I feel it’s wrong to expect those who struggle financially to pay for free banking for those who are better off. I’m sure some will argue these people need to manage their money properly, but most have triggers in their lives that start the debt cycle off. These include redundancy, illness or separation and along comes those dreaded bank charges. For some there is just no escape and they were pinning their hopes on the OFT winning the case.

Those who are currently struggling with bank charges should be refunded the difference between what is deemed to be a reasonable cost to the bank, say £12 and the actual penalty applied, usually £38, and this should go back as far July 2001. They should also be offered help and guidance on their finances.

Read more: What now for bank charges claims?

 

This is why I decided to build the DebtWizard website, to help others. Below is an example of how someone used the content of the website to plan a course of action and get back control of his parent's debts.

There has been no editing of this email; it is from a member of the website. He details what happened after he decided to call in on his mother on his way home from work and untangled a massive problem, his mother was shaking and crying whilst on the telephone…….

'Hi Mike - I can't begin to thank you enough for the detail provided within this site. It has been a fountain of reliable information for referencing over the past year and has helped turn my families life around!! This is my story:

Back in Feb earlier this year I dropped in to visit my mother for a catch up. I walked in the house and literally found her shaking like a leaf in tears with the phone in her hand. Obviously concerned, I asked what on earth the matter was. Being a very proud woman, she clamped up on me and refused to share her worry with me. Shocked at seeing my mother in the state she was in, I demanded to know the detail of what was making her so upset. After refusing to leave the issue, she eventually explained that she was having financial issues. Unaware of the depth of the problem, I asked how I could help. She went on to explain that ten different Creditors were chasing her for a total of £32,000.00 placing severe threats and demands of Court Action, Bailff Visits, House Reposession and considerable Interest and Penalty Charges whilst there were ten further utility and mortgage arrears to consider also.

Both of my parents being in their mid-sixties, I was shocked to learn the amount of debt they had accrued and couldn't understand how things had come this far at the age they were. I truely thought that the only people that found themselves in this kind of situation were unrulley spenders that lived beyond their means and lower bracket earners, not a married couple both close to pensionable ages.

After asking her to share the full detail of the outstanding balances across all of her accounts the debts varied across secured loans, credit cards, store cards, mail order catalogues, Bank Overdrafts, Mortgage Arrears, Council Tax arrears, Water Arrears...you get the idea? I tried to settle my mother and made a few off the cuff calls on her behalf to some creditors in the vain hope of settling something there and then, just to provide her with some piece of mind but quickly learn't the scale of the task of what lay ahead and came to terms quickly with what I needed to achieve. The reality being that there was either debt or arrears across every component of their lives which was taking it's toll on their overall health and general well being which was a massive concern for me.

The detail of the debt:

Read more: This is why I built the Debtwizard website

 

A torrid affair

So the affair is out, Mervyn King caught in bed with Royal Bank of Scotland (RBS) and HBOS and we would not have known about it if it was not for his confession. 

The Bank of England (BoE) governor Mervyn King has revealed today that the bank bailed out RBS and HBOS with a secretive emergency loan of £61.6bn last autumn, apparently to prevent loss of confidence with the financial system. 

I can understand why this was done, one only has to remind ourselves of what happened to Northern Rock, but I expect a few shareholders that were buying into the banks are not happy that a bit of skulduggery was going on behind the scenes. I have often said that I believe we the consumer will never really know what went on with the banking crash and I wonder if we will ever know ALL the facts. 

My only concern now is what else has been hidden and covered up, who else has slipped into Meryvn's bed that we don't know about. It goes without saying, you just cannot trust the banks anymore, spin, more spin and spin, I see that blasted spinning top again!

 

Debt Management Industry takes a step nearer to being regulated.

I was at the Debt Resolution Forum in Manchester last week along with the Office of Fair Trading (OFT), Insolvency Service and Ministry of Justice (MoJ).  I also had the opportunity to get a one-to-one with two of the speakers the Deputy Director of the OFT, Nigel Cates, plus Phil Kelly from the Insolvency Service. There will be some positive developments for consumers next year and maybe not such good news for debt collectors.

The forum was opened by Greg Hands, shadow Treasury Minister and attended by 180 delegates, mainly from the debt management industry, some banks and other associations but no representatives from the CCCS, Citizens Advice Bureau or National Debtline, I often felt I was the only one shouting for the consumer.

Read more: Who else has been caught in bed with Mervyn King? & Debt Management Industry takes a step nearer...

 

Am I the only one thinking like this? Do I have something here?

I'm not challenging the numbers that the Council of Mortgage Lenders (CML) and Ministry of Justice (MoJ) put out; my argument is that many people believe the situation is getting under control when in my view it isn’t. These press releases are not giving a true reflection of current market conditions, my reasons are as follows;

  • the number of homes being sold by families to private landlords, under 'sale and rent back’ schemes, is not taken into account.
  • It takes between 6 and 12 months to have a home repossessed, and the figures released are based upon house holders who experienced difficulty up to almost a year ago.
  • The CML is only collecting the number of first charge holders. There is no record of how many second charge holders, usually secured loans, that are repossessing homes.
  • The introduction of the Mortgage Pre-action Protocol last year could be delaying what will be eventual repossession for some home owners.

Sale and rent back schemes are conducted to prevent the home being repossessed and the seller then usually remains in the property, albeit owned by someone else, paying rent and effectively becoming a tenant.

The Financial Services Authority (FSA) estimates that some 50,000 of these homes have been sold under this scheme over the past few years and it is thought that up to half of these have been sold in 2008 alone. No one knows what the figure will be for this year.

I believe that because 'sale and rent back' was not an option back in 1991 when 76,000 homes were repossessed , the true figure for this year, without 'sale and rent back', would be 80,000 - 85,000 homes, making it higher than those figures back in 1991.

Read more: House repossession figures, all smoke and mirrors?

 

Spare a thought for the unemployed

Although the rise in unemployment is slowing down it is still a worrying trend for many families on how they will cope, previously we all thought it would not happen to us which meant we never put funds aside, there was no safety net.

Another concern is how these individuals will motivate themselves into getting back to work having had rejection time and again when applying for jobs, some firms don't even acknowledge the applicants letter.

From experience many will not address their debt issues for well over a year from when they first arose and will often ignore the fact that they have a serious debt problem growing everyday. Some will unfortunately drop into depression or turn to alcohol, gambling or even crime in an attempt to solve their debt problems.

Many will eventually find new jobs but some will not match or improve on their previous salaries and as a result thousands will free-fall into debt. From this a segment will end up proposing either an Individual Voluntary Arrangement, (IVA) or go bankrupt.

There will also be others who will not be able to pay their mortgages and who will eventually lose their home. The high unemployment figures will have an impact on both the insolvency and house repossession figures.

Creditors also need to be more understanding and sympathetic towards borrowers who find themselves suddenly out of work and should take note when someone is a ‘can't payer’ instead of a ‘won’t payer’.

Debt can consume your life. These people need support from their families, friends and creditors both emotionally and financially. They also need to have clear goals on how they can manage their debts. The best way to start is to draw up a budget wizard, prioritise which creditors need to be paid first such as mortgage and rent, followed by utilities.

It is a clear fact that once you get control of your debts you regain control of your life.

Why the consumer watchdog needs to weed out dodgy debt firms.

Read more: Spare a thought for the unemployed & Why the consumer watchdog needs to weed out dodgy debt firms.

 

RBS Nationalised?

Just been hearing that RBS have posted a loss of 2.2 billion and that they are 84% owned by us, the tax payer. I call this pretty much Nationalisation don't you and confirmation that we are not out of the woods yet with the banks, that old spinning top is coming back again.

Personal insolvencies hit record levels in the UK

Disappointed that the BBC only gave 13 seconds to the news released today from the Insolvency Service on the number of consumers going insolvent.

Let's get it in perspective, for UK personal insolvencies, combined bankruptcies and Individual Voluntary Arrangements (IVAs) these are the highest since records began in 1960, worth more than 13 seconds in my book. They also never covered the number companies going bust either! Got to be a first for the BBC.

Unfortunately someone felt it was important to do a two and a bit minutes on the 40th birthday of Sesame Street. I know what I find more interesting, come don’t tell me you would prefer this?

I'm forecasting for 2010 personal insolvencies to peak at around 200,000, which dwarfs the forecast for the preceding year. At the moment I am still on target for my estimate of 130,000 for this year, we are at 98,568.

I believe these figures would have been even higher had the consumer been made aware that as from April 6th this year the Insolvency Service removed the mandatory requirement to advertise someone’s bankruptcy in the local paper. This massive change in policy which has received little media attention could impact on future insolvency figures as it is common knowledge that many consumers have put off going bankrupt for fear of having their name and address inserted in the local paper.

Read more: RBS Nationalised? & Personal insolvencies hit record levels

 

Shocking debt stats for last month

Been reading the new debt statistics for October 2009 and they look pretty grim what with 2,000 Consumer County Court Judgements (CCJs) being issued every day in the first 3 months of 2009.

Another bad one is that there are 25,250 applications for consumer credit being turned down every day and the good old Citizen Advice Bureaus are dealing with 9,300 new debt problems, again every day in England and Wales.

On the brighter side the average household debt will increase by £0.34 today (it grew by £11.11 a day in January 2008), so there is some good news I suppose. If you want to read more then go to UK debt numbers for October 2009.

Diamonds are definitely not this lady's best friend

Just been into London all afternoon with a major newspaper listening to a very very sad case of fraud and theft, it's got it all, vulnerable well to do single lady, crooked mortgage broker, first rate fraudster, hundreds and hundreds of thousands of pounds and of course diamonds.

Will let you know when this comes up, thus far it is unreported. This lady, who has my up most support, wishes to prevent others from falling fowl to this international fraudster which is why she is revealing all. This could make a book and Hollywood movie. This fraudster is so good he would have had most of us for breakfast.

Read more: Debt stats, Massive unreported fraud case, In a spin over the banks & Date to watch out for.

 

Credit cards to get their comeuppance

This issues raised by the White Paper should have been aired several years ago, with any leglislation not likely until  ‘after’ the next election.

Many would argue that it is the borrower’s own fault for getting into credit card debt, but remember over the past decade this country’s economy has been fuelled by around 1.5 trillion pounds of consumer borrowing.

Morally and socially we have been encouraged to spend and pay later through slick marketing and the easy availability of credit.  From this we have developed a culture of must have now.

We also have triggers in our life, perhaps when a relationship breaks up, with a loss of employment or with an illness and it has been all too easy to fall on the credit card back up.

That said, consumers should not feel as if they have been exploited or disadvantaged and they have a right to clear information to enable them to help them avoid that. However they also have a responsibility to manage their finances properly.

One concern is that the plans could mean that some borrowers will be forced to pay back more of their debt earlier, which they may not be able to afford.

The proposals could go further by capping interest rates on credit cards making them in line with the bank base rate; for example, the card interest rate would always be say 10% above base rate, that way the card provider is protected should interest rates go up and the consumer if they come down, a bit too simple really.

One last point, I can see credit card providers laying off staff in the future as these proposals will seriously reduce their income over the coming years and reverse their current business models! Can't say I’m sorry to see this, they had it coming. Full article here.

Need help with your budgeting? If so then try our free budget wizard.

Thinking of a 0% credit card balance transfer? You may think again after reading our 0% credit card balance transfers - warning

Read more: Credit cards to get their comeuppance, FSA fines GMAC-RFC for mis-treating mortgage customers &...

 

Bohemian Bankruptcy

This is a brilliant piece work by some very talented individuals, we have had numerous comments on the website, here are just a few:

'Superb! Excellent lyrics and production which well illustrates a lot of people's problems at present. Sure it would do well if released.'

'They should go on the x-factor. Christmas No1.'

'Amazing arrangement. Particular reference to..."I sometimes wish I'd never gone buy to let"; "Foreclosure and summons, very very frightening fees" & my personal favourite..."Have to sell the wife on the streets of the city". Just brilliant.'

'Probably the best vodcast of the year!'

Drag Queen sings you through the economic crisis demonstrating that there is no better way then to illustrate this story in song describing the heart-wrenching tale of greed, power and loss with...

No longer available to view.            

Is it time to issue steel toe caps to the FOS?

The British Bankers Association has a voluntary code which says that Banks ‘Will deal quickly and sympathetically with things that go wrong and consider all cases of financial difficulty sympathetically and positively.  Under Financial Services Authority (FSA) rules, banks are supposed to treat hardship claims sympathetically.

But the FOS is still receiving complaints from hard up consumers complaining that the banks are just rejecting their legitimate claims.

It is so frustrating and annoying when I read that banks have been ‘asked’ to ensure that they do what they should be doing as of right.

Clearly the bank’s don’t think it is in their interest to help out on financial hardship cases, even though it is in the BBA voluntary code, (see page 25) and the 'Guidance for Subscribers code' (then see page 46), as the longer they can take to fob people off, the less it will impact on their business, as it COSTS them money!

Read more: Bohemian Bankruptcy and Is it time to issue steel toe caps to the FOS?

 

Halifax is certainly not ‘giving that little bit extra’ instead they plan to take it from its one million customers as it engages in what some see as day light robbery.

Under the new charges those account holders that have an authorised overdraft will have to pay up to £31 per month on overdrafts under £2,500, and a £2 per day charge on authorised overdrafts above £2,500. If the overdraft is unauthorised then the fee will be £5 per day, around £150 per month.

Although those with large authorised overdraft balances may benefit, this will seriously penalise customers with relatively small authorised overdrafts and who stay within their limit.

In some instances this increase on fees for certain customers could be as high as 300% at a time when we are waiting for the outcome of the test case. The test case currenlty in the courts is all about whether the OFT can investigate and assess bank charges. Once we know the outcome, which I understand will be within the next 10 days, then it will be round two if OFT win and virtually the end if the banks win, for the record I back the OFT.

It is difficult to comprehend when all we see on the news and in the papers bankers giving themselves massive six figure bonuses, part funded by bank charges from honest hard working consumers that have felt the need for an overdraft to help ends meet.

Halifax claim that the move is part of its plan to bring overdraft charges on all of its current accounts, except its student account, in line with its Reward Current Account, which was launched in February.

Consumers need to switch and ditch those banks that are devious in their business methods. See our article on this below.

You have until 6th December 2009 to do this so act now and go to a bank that offers a better deal. You have been warned.

Bank accounts to be made clearer and easier to switch

Bank charges latest news

Read more: Halifax grabs that little bit extra! 300% in some cases.

 

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