Posts Tagged ‘Office of Fair Trading’

Bank Charges – What did the Law Lords Say?

November 26, 2009

Mouths appear to have dropped open everywhere at the decision of the law lords on bank charges. Certainly it is difficult to understand on what basis the decision was made.First let us be clear what they – appear, anyway – to have said. This is only that the Office of Fair Trading does not have legal power to investigate value for money.

What they have NOT said is whether the charges were, or were not, value for money. Nor whether the charges were fair or unfair.

Indeed, their decision is correctly being described as a technicality. In other words, no matter what the case itself is about, the manner of conducting either the case, or the matters contributing to the case, were incorrect on procedural grounds. At least their opinion is that it is incorrect in that way.

I am not a law lord; evident as it may already be to you, I want it to be clear!

But I have great difficulty in seeing how the Office of Fair Trading is not empowered to investigate value for money. This has been at the heart of trading rules and laws for as long as recorded history.

From the standards for weights and money itself, to the arcane details of contract, value for money has been at the heart of legislative process. How can fairness be expressed without reference to value for money?

I am not even sure this is in keeping with the new Lending Code!

My advice is to move your accounts away from the big banks. Many of the building societies have much more reasonable approaches. And the Co-op Bank may be another good repository for your current account. Certainly you are going to have to spend time and though reading the terms and conditions.

Perhaps we should look to a funny little comment by a correspondent on TV tonight. This was to the effect that the cost to the banks would be billions of pounds, and that was concerning the highest ranks of government.

Perhaps once again we are seeing the unreasoned triumph of the banks over the people. Welcome to the new feudalism.

A very saddened  Joseph Harris – Debt Control Man

Author: Control Your Debt Crisis on Your Own Terms

http:www.controlyourdebtcrisis.co.uk

New Lending Code 2: mental health, systems

November 6, 2009

Debt and mental health
This section of guidance is relevant to both personal and micro-enterprise customers.
173. The impacts of financial difficulty can be especially acute for customers with mental health problems. Subscribers should consider their processes and systems to ensure that they can be responsive to a customer in financial difficulties, from the point at which they are made aware of a mental health problem. [Reproduced with the kind permission of the British Banking Association – here]

The Lending Code is now part of the formal equipment of the Office of Fair Trading, and sits more certainly side by side with holding of Credit Licences and with such fair dealings rules as the Consumer Protection Regulations.

Monitoring remains with the Lending Standards Board [that was the Banking Code Standards Board], but penalising becomes a matter for the OFT.

This is why this is such an important advance. It is now a requirement for creditors and debt collectors to take into account mental problems where there are financial difficulties. This is already covered in the CPRs, under the guise of vulnerable debtors. Vulnerable includes the elderly and those without funds.

While the Debt and Mental Health section is by no means as definite as I would like, it is such a big strengthening of the position of debtors with such health problem that the wording is to be praised as improving the experience of such debtors.

By featuring the good practice guidelines of the Money Advice Liaison Group, the other members of the vulnerable classification are effectively included. The more definite advice in the guidelines also becomes part of good practice.

It is also worth glancing at the 2005 comments of the Treasury Select Committee.

Joseph Harris, Debt Control Man
Author: Control Your Debt Crisis on Your Own Terms
http://www.controlyourdebtcrisis.co.uk

Banking Code Changes Update

July 27, 2009

In trying to sort the changes out, particularly in how they affect defaulting debtors, I have been led a merry dance.

I think I have emailed or phoned or both, almost every player in this game of musical chairs.

Finally I remembered that the last time I needed to make sense of this area I got sense from the Banking Code Standards Board. So my thanks to them once again.

I have since spoken to others to try to get detail of how exactly the changes will take effect from November 1. That is pretty close for all those who will be affected, especially the helping organsiations like the CABs and Law Centres.

It seems that while most of the Banking Code disappears into the winding corridors of the Financial Services Authority, the parts dealing with lending move to the Office of Fair Trading – except they don’t.

The wording of the new Lending Code [possibly that is the title] is to be managed by the British Banking Association, which has always done it, and it will be monitored by the Standards Board, which has always done that!

And the OFT will, er, enforce fair treatment, and it has always done that!

So welcome to the new-old, different and unchanged system.

Well the changes have to be re-written, but it seems there will be little time for picking up any errors in wording or possible interpretation. And I understand nothing new will go in before 2011.

Not the advice of the Treasury Committee of 2005, nor that from the Money Advice Trust on behalf of MALG in 2007 – nor anyting else.

Well nothing of help to debtors, anyway.

Let you know what more comes to light.

Joseph Harris
Debt Control Man
http://www.controlyourdebtcrisis.co.uk

Negotiating With Creditors for Changes in Terms and Loan and Debt Schedules – 4

September 25, 2008

Let’s now talk about the repayments and the charges from creditors.

So far this set of blogs has covered the basic thinking for a negotiation, what the companies are like and the need for understanding the rules, and my ever-critical view of interest rates.

Repayments are a contractual obligation, and nothing I say should be seen as altering that basic point. There are however many different ways of viewing what this means in practice. Especially bearing in mind the matter of force majeure.

When the debtor – you and I – are able to pay without any problems there is no reason for varying the payment schedule, unless it is to match changes on your own income receipts or to put right a change made by the creditor using his supposed right to vary any terms unilaterally. There are reports of this being done to trigger late payment charges.

There are also cases of increasing repayments by 50% by upping the monthly percentage, which obviously causes budget stress and increases the likelihood of triggering charges.

More significant in the call for repayment variations is the reduction of personal disposable income. There are many ways this can happen. I would suggest that among these is loss of bonus, loss of job and taking lower paying jobs, the effects of inflation, additional family commitments and accident or ill-health problems.

The majority of creditors will discuss lower payments, though they have their own ideas of what lower means. For you this is a matter of redoing your budget and seeing how that places you. This is the information that will inform each of we debtors and this will also inform them.

Since it is my view that inflation is about to show some serious muscle I advise frequent and regular personal budget reviews.

You do need to think in terms of treating all creditors equally, so the usual way is to establish what you might be able to afford and apportion that in relation to each debt. If you have any difficulty sorting it out any of the online charities will give help. Maybe the excellent fora – forums if you prefer – will have mathematical geniuses who will put a little time in to giving you the answers.

Don’t take no for an answer and don’t let the creditors bully.

And then… and then… and then is the matter of penalties and special charges. These are applied in all sorts of ways and are purely profit centres for the creditors.

In a ruling early this year the Office of Fair Trading determined that charges should relate to the actual costs that the charges relate to. anything above that becomes a fine, and there is no legal support of companies to levy fines.

Unfortunately the OFT also stated a maximum level for a bundle of different charges and set it at £12. this was less than the previous figure of £20 – and sometimes £25 0r £30. Of course putting it this way was a gift to the creditors who immediately made all charges £12 [and I would be interested in any evidence of new types of charges being levied at that time].

Now it is my contention that these charges are mostly illegal fines. The reason rests on the rules of fairness and the point in the ruling about relating to costs. I will talk only about late fees, but this will stand for others as well.

Examine the way a late fee is determined and levied (as a fine). The computer – yes, the computer – has a program written by groups of clever fellows to do all the paperwork, calculate interest, instantly apply changes of all kinds, and react to the time a payment is received.

If the deadline is midnight and the payment comes in a one minute past – maybe one second – the computer automatically triggers the late fee script and sets it for the following statement. On the statement this requires a miniscule amount of bulk-purchased ink or powder and enough extra time on the automatic printing system to print one extra line.

If you have ever seen those in action you know we are talking about a fraction of a second. The script action requires no extra time since it is a choice of options. At a guess we are talking 0.0001p for the ink and 0.001p for the time.

So by my estimate a £12 levy includes a justifiable charge of 0.0011 and a fine of £11 99.9989p.

If anyone has figures to disprove this estimate I welcome them. The idea floated by one senior executive that there is a little man in a smoke-filled back office checking every charge is not just risible, but an obvious …er… mis-statement.

Joseph Harris
Debt Control Man

Your Debt Crisis, Making Notes

August 26, 2008

I don’t know anybody that really enjoys the nature and the discipline of making notes. And I most certainly include myself. But, in my view, notes you must make.

Unless you manage to come to a very quick agreement the debt negotiation can take months. I have four accounts entering their sixteenth month, and set fair for a few more. Don’t worry if they take time.

What is important is to realise that you cannot commit all that is happening to memory. Your memory is probably better than mine, but can you remember a phone call you made six months ago? Unless you are a rare person with a photographic memory I doubt it.

In negotiating for a settlement to your debt you will be approached by phone and by letter. Each time a record of some sort is placed on your computer file.

But will it be the same as what you believe took place? You won’t know; no-one is going to tell you. But your creditor will use that record to judge you, the debt, and how he wants to pressure.

So you must make a full note of the conversation. You can have pen and paper ready by the phone. Or ask the caller to wait while you get them, or get the file you have on that particular creditor.

And what should the note say? First the name of the caller, the company, and if it is not the original creditor the the name of that one. The date is vital, and the time of the call is important.

It is also a good idea to ask where the caller is based. The conversation will go differently if you are being called from a call centre in Bangalore, than if you are being called from one near your home.

You can interrupt the conversation to make a full note if you feel you need to. Sometimes a statement by an agent is so outrageous you want to make sure that it is recorded in full. The agent at the other end is making notes, and the conversation is also being recorded that end.

You are fully entitled to have the time to make your own notes, even to make your own recording if you have the equipment and the know-how.

If the creditor’s agent does make an outrageous statement you need to follow up with a complaint to a superior. This is best done in writing, since it makes a record that must be responded to. And it is available for the FOS or other third party to read and understand the failings of the creditor.

Recently, in a debt case before the FOS, I had a creditor pass the debt to a debt collector. I phoned the creditor and first received a helpful response and a promise of a return call. The young lady who returned the call refused to contact the FOS to confirm that the case was before them.

I now have a rather apologetic letter from the office of the Chief Executive Officer of that organisation. And I wrote to both the FOS and the Office of Fair Trading informing them of this failure.

How do you think the FOS will view that creditor when dealing with my debt case? And how will the organisation be viewed with other cases that go before it? And how will that look on the file of the Credit licence of that organisation at the OFT?

You have power to defend your position. Use it.

Joseph Harris
Debt Control Man

Interest Rate Action 2 of 3 – Complain

August 1, 2008

The Licence and The Regulations

The Office of Fair Trading (OFT) is responsible both for licensing operators in the credit industry and for the development of the Consumer Credit Regulations 2008. Both these are very important to us.
There are two licences, the Consumer Credit Licence and the Business Credit Licence. My concern is with the consumer variant, though I imagine the differences are of detail rather than principle.
Credit Licence. No company may be involved with lending or recovery without a licence, and no person may offer personal advice without being covered by one. And the OFT does revoke licences, so the terms of the licence are important.
It is worth writing to the licence section of the OFT complaining of the hike in rates that you have experienced and again using the terms unfair and unreasonable. If you want to specify any particular part of the licence you feel has been breached it is worth going to the OFT website and reading the guidelines. But it is essentially enough to point out this action is a misuse of any powers the company has, and the matter needs to be examined by the OFT.
Any complaint is taken seriously by them, but a lot of complaints is even better!
Regulations. The regulations arm of the OFT is very concerned with the concept of unfairness in relations between companies and customers, and this applies right across the world of business activity, not just finance.
It does recognise unfair advantage as being a very bad thing for companies to make use of. The Consumer Protection Regulations 2008 are pretty comprehensive and have 31 practices that are out and out considered not acceptable, and has a deal of other regulation with the emphasis that the regulations are not limited to the letter of the paragraphs but are concerned with the spirit of them.
This is a tremendous advance on petty legal approaches; it means that companies are expected to acknowledge a moral sphere to their actions. Not just what the words say, but the underlying meaning too.
In contacting this section you should emphasise that the company has taken unfair advantage by its force majeure imposition of an interest hike that is not justified by anything you have done, nor by any national change in interest rates.
The address of the OFT is
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4 8JX

Mark the outside of your envelope Credit Licence or Regulations 2008 and the letter will find its way to the right section. You will probably get a letter back saying the OFT does not deal with individual cases, but that the complaint has been logged on their records. And that latter is what you want.
The more the better.
See also Interest Rate Action 1 of 3 – Complain which deals with the complaints procedure of the creditor company and Interest Rate Action 3 of 3 – Complain Which deals with the Financial Services Authority.

Joseph Harris
Debt Control Man