Posts Tagged ‘banks’

Does the FOS Work for Us?

April 14, 2009

I have earlier praised the Financial Ombudsman Service for its very existence.

My thinking is that it will act as a check on creditor failures to observe the rules, and that findings would take into account these rules in dealing as ‘piggy in the middle’.

Well I’ve been in ‘the waiting room’ of the FOS now for over a year and I am far less certain of this. Even more important I am very concerned at the extent to which the debtor has still to fight to get a proper hearing.

I cannot give you full details of the cases involved, since to mention the companies could well bring those savage legal departments sniffing like the monsters in any one of a thousand science fiction films! I can say that the process of the FOS is wearing for the debtor.

That process is three-stage. More if you take the delays into account.

The queue does of course relate to the changes in the volume of work, and the time it takes to train up; no basic criticism over that since it has to take the banks’ unfairness on its shoulders. and we know there is plenty of that.

First stage of actual process is with the adjudicator. Here one is dealing with a new process, so in essence it is necessary to repeat the arguments you have given to make sure they are fully understood, together with one’s perceived faults in the bank or credit card company response.

If you don’t like that – and from my experience don’t expect to – you can ask for the adjudication to be reviewed. If you don’t like that you can request your case go to an actual Ombudsman. Each time you need to re-present your case to some extent.

Now I am sure many people are happy with their experiences at the FOS so I am not going to dismiss its work out of hand, but sometime this year I will be dealing with an actual Ombudsman and that will certainly tell me whether I still have praise for the process.

Any way, for the umpteenth time now I am having to prepare my response to what I consider an appalling adjudication which reads to me almost like a letter from one of the companies.

I plan to write more on the service, and on the whole process, here, in my book, and on my website.

Joseph Harris
Debt Control Man

Mortgage Relief? For Gordon…

December 3, 2008

 

For a moment I think we all believed the Government had actually wanted to help mortgagees. We should all have known better.
And talking of Better, it seems outside the financial casino no one gets real help.

Anyway, I know mortgages are not my speciality, but the fading, like the fairy dust it was, of the substantive part of the promise was remarkable.

First it seemed homeowners were going to be really, really helped with a six month – something or other with the banks holding fire on giving defaulters a hard time. Though I was never clear if it was a moratorium, a halt to rude phone calls, or just a six month delay before the repossession papers get served – any way eight banks said they’d do it.

That’s our curate’s egg of owned, part owned, and almost owned banks. Nationalised, as any self respecting linguist might say!

Then it seemed that homeowners at risk of having problems on their payments were going to be really helped by some long arrangement to give them breathings space. And that turns out ot be a mouse’s squeak of a ‘part’-deferral of interest payments for up to two years.

Which might be fine for those with interest only payment policies, but may be a tiny sum for many others.

And then it seems only one in ten would be helped at all by the final proposals…

Smoke and mirrors anyone?

Still it has all successfully hidden the laws for totally random stop and prove identity to be given to the police. And that one about lie detector tests for benefit claimants.

Er… will that be some miracle test that is reliable that we have never heard about, and will the identity proof turn out to be only these dodgy identity cards that Gordon loves so much?

Ah well, you don’t want to know about that anyway. But make sure you read the small print if you feel you would like some of this help with your mortgage.

Unless you want billions, in which case Gordon will mortgage you and I and several generations of our dependents, I suspect this tuppenny-halfp’ny aid on mortgages will come with chains…

Good luck.

Joseph Harris

Debt Control Man

 
 

 

Can Debt Really be a Way of Life?

November 13, 2008
Life has a habit of knocking us off our perches, does it not?
Anyway I’m back with the blog and thought a quick review of the national and international scene might be worth the time.

I can actually remember when most people would at least be aware of the saying ‘neither a lender nor a borrower be’. And then, right at the beginning of the ’60s, came to our shores the first hire purchase company [Union Discount if I have the name right – started by the man who later created the Bank of Wales].

Hire purchase (h.p.) was quickly dubbed ‘the never-never’. I am still not sure if this meant you never finished paying, or if it meant that you never fully paid.

The first implied that the company had you in its grasp, the second that one paid in such small amounts over such a long time that you never really paid its value. When inflation was serious (remember it has reached 15 per cent a year within the past 40 years) of course the value of the cash used to pay was indeed well below the worth at the time the contract was signed.

It may have been at first that the loan was secured against the item, but later the loan became separate. In a way credit cards work on a similar basis except that the loan is never tied to any goods specifically.

Over the years the idea of credit grew and caught on. After all kings had always borrowed money – to fight wars if nothing else – and the Government of England had found itself with a debt in the seventeenth century.

That debt led to the creation of the Bank of England – a private joint stock company, empowered by parliament to handle the national debt!

The entrepreneur who had seen the opportunity later went on to bankrupt Scotland and force the union of the two countries. But that, as you can imagine, is a quite different story!

By about twenty years ago the idea of credit, that old frowned on idea of ‘buying on tick’, was accepted. Governments had early learnt how easy it was to run deficits on the nations’ dealings internationally – the balance of payments – and on the annual budget.

And we did not resist the idea of having more goods than we had earnt!

And companies, who always had been dealing with uncertainty, found debt a very good way of dealing with the lags between orders and delivery and distribution and sale. And then came the more relaxed control of the financial sector.

And the development of ‘derivatives’, and sub-prime mortgages. I don’t have to tell you much about those now, as they have been well discussed in the press, on radio and on television.

And in blogs…

I have seen all that well described as MLMs and Ponzi schemes, and the whole sector as a casino. And when those bastions of sobriety, the banks, joined in I am afraid there was nowhere else to go but down.

‘Down the rabbit hole,’ as Lewis Carroll put it so well, and in to Wonderland. Well a land in which the great and the good certainly seem to have well-developed senses of self-delusion.

And you spotted how our very own Gordon has taken centre stage, as though born to acting.

But then aren’t all politicians? [Paulson on his knees to Pelosi – I ask you!]

Meanwhile the massive $707bn that Paulson and Bernanke twisted arms to get the US Congress to approve to buy ‘toxic’ [don’t you love that term? It means poisonous!] debts from the banks is now not going to be for that.

Whatever; its purpose appears to be to pay the gambling debts of those big businesses, rather than to spur the US economy, which has a really big hangover from the ‘credit economy’.

Not incidentally that the $707bn tag is even very relevant to the new debt we are all going to have to pay off some time – through taxes – which as already reached about $2trn [that’s $2,000,000,000,000]. Maybe it needs some more noughts. It is big for sure.

It is about $300,000 for every man, woman and child on the planet – assuming a population around 6.7bn. In English say £200,000. But the possible real amount of toxic debt – silly me, I mean derivatives including sub-primes that have gone sour [not all have] – is about five times that.

So you owe a million; so do I. that puts our personal problems in perspective, huh?

Joseph Harris

Debt Control Man

 

 

The Interest Rate Puzzle

August 13, 2008

The indication by the Bank of England, that Bank Rate will be unchanged tomorrow, could be good, bad or unimportant to you. Which way it should go is a matter of opinion. I believe the threat of inflation has been completely underestimated and the depth of sickness of the economy not understood.

Perhaps you need a long memory to even fear big trouble, or perhaps pessimism informs me more than facts. My underlying advice is, however, hold on to your hat; there are strong winds coming.

Because of this I think it vitally important to understand what is happening in interest rates and to make the appropriate protest—I have already written five posts on that and gathered them into a page on this blog.

But if Bank rate has not moved for some weeks why are Credit Card companies in particular pushing rates up, even for their best customers? Might it be to get customers to pay for the banks own mistakes in gambling on investments?

Just opportunism, perhaps? Or perhaps the old yachts are worn out…

But enough of my sarcasm…

What I am really concerned about is the difference between Bank Rate and the interest rate charged on credit cards. Even if we add the inflation that affects banks, ‘headline’ inflation now around four per cent, that still doesn’t make 10% and hasn’t for a long time.

Apart from the few cards that add only five or six per cent, and they do have costs and need to make some profit, the general view has seemed to be that an addon around 10% is a generous minimum. Perhaps with the odd low rate for some part of the loan or a nought per cent transfer period that can be justified. Perhaps.

But what of the card that shot its rate from around 19% to around 30%? Had headline inflation moved 10%—or the Bank Rate?

Of course not. But losses had started appearing; strains of various types. You may have noticed your card(s) taken over by a bank, or taking over another card. That has been going on for about three years, and now with increasing frenzy as one wonders how many card funders there will be in a couple of years.

Like every other finance area the rules for lending became sloppy, the assumption of ever increasing growth a mantra. And why not? Didn’t Gordon—our very own Prudence—have everything under control. [At this time there are no prizes for the answer. Hands up those who realised in 1997, when he destroyed the regulatory framework, what must happen!]

The interest rate movements are by no means limited to credit cards, and there has been movement that it would be hard to justify in many other areas. The mail order catalogues have long made me wonder. Not so many years ago most did not charge interest to customers at all.

Those that did had an incredible rate of 29.9%, and that appeared to follow the earlier consumer credit system of hire purchase. Now hardly a catalogue has not made the main company a credit company with rates of 29.9%; one charged an absolutely horrendous 39.9%.

Now I see another, that long offered 29.9%, has joined these Olympian heights with a rate of just below 40%.

And that has a great deal to do with debt experience; 29.9% is like adding one third to the bill, depending on what type of loan we are referring to. Which means more of your hard earned money goes to the company and getting out of debt and avoiding default become harder and harder.

If you are subjected to an increase in your rate which you do not think is justified please contact the company and ask for the rate to be reduced, or to explain to you in writing, with justification, what the increase represents.

You might be pleasantly surprised.

Joseph Harris
Debt Control Man

Dealing With Creditors

August 12, 2008

Normally dealing with a debt is straightforward. You borrow money, agree a payback schedule and keep to that schedule. Everybody is happy and normally—if your creditor is one of the banks or credit card suppliers—you get phoned from time to time with offers of more money at special terms, including periods at 0% credit.

Who can resist—and don’t they love you when you say ‘yes’!

But when you tell them there is a problem or miss a payment or two how that changes. Suddenly you are besieged with hostility and suspicion. Your character credit becomes zero, never mind about your credit rating.

Not all companies are like that. Some show the greatest sympathy and helpfulness; others take a bit of pushing to meet you where you are now, rather than where you were.

But far too many decide it is open season on debtors and you are subjected to all sorts of threats, phone calls and horribly officious-looking letters. And whatever you say or write seems to be brushed aside.

And when you phone, or are phoned, you rarely speak to the same person, and sometimes not even with the same call centre. Every time you are invited to repeat all your submission to them and each time there is a promise to put it on the computer.

You have no idea what they might put on the computer, of course.

So, if you follow my advice, you write letters. And then, often as not, any reply ignores most of what you have written. You do have to persevere.

There are rules that the creditors must follow. And they are a lot more in your favour than creditors would like you to know. The rules are contained in law, regulation, licence and code.

Remember this next time there is one of those phone calls or letters.

Joseph Harris
Debt Control Man

Lessons from a bigger cousin

July 20, 2008

I have always been staggered at how kind the American legislative system is to big business. And reading the New York Times study on Debt http://www.nytimes.com/2008/07/20/business/20debt.html?_r=1&th=&oref=slogin&emc=th&pagewanted=all
has led me to believe we follow their lead at our peril.

Most staggering perhaps is the appearance of no checks on the lending practices of banks, mortgage lenders, loan operators or credit card suppliers.

The lesson is to beef up our own consumer protections and not to follow the path trodden by our American cousins. It seems they have invented a modern form of slavery for the majority of Americans, even if it looks pc [a bitter comment on the colour, race, age and disability blindness of the new plantation owners – even lack of income seemed unimportant to them].

When the economic history of this time comes to be written I hope the historians will have the courage and perception of Keynes and Galbraith in their descriptions of how the Great Depression came about.

In the meantime I can only recommend to make no new debt and to apply to the paying off of what debt you have [this will be according to your own needs and decisions]. And to fight vigorously any unfair treatment by any institution.

Joseph Harris

How’s Your Financial Competence?

July 19, 2008

I ask not out of nosiness, but because tomorrow various arms of the financial great and the financial good are gathering together in Cambridge [Money Guidance Pathfinder conference] and in three days will, it seems, work out how to teach us all better money management.

Well. No. I’m being unfair. This process started here in 2006 when the Treasury declared it would happen. And they did this because the OECD decided it should [though you will hear the government take the credit as though it was all their own work!].

And what it seems they are actually discussing is the detail of a pilot progamme in the north-east and the north-west of England to start next year.

The idea behind it is to give much more, and much more readily available, information on what credit in particular and money management in general is all about. And I think we have to applaud the idea, and the fact that it is making progress – it may even be that the UK is moving faster than any other country on it.

The conference includes banks as well as existing free information providers like the Citizen’s Advice Bureax, so there is a chance it really will deliver good advice.

But why, whenever I see the word stakeholder in these announcements, do I feel about to be in need of the guidance of Caveat Emptor[let the buyer beware – or look for the small print – or hold tight to your purse]?

At least we can watch and wonder with the hope that in a few years most people really will be made more aware of the dangers of bad money decisions, without the need to have been through the nightmare of bad debt first – as so many of us have been.

I am writing a blog page on the Money Guidance process, but I will take a few days to put it together.

Joseph Harris