How would you feel if you'd saved £400 for Christmas but only received £60? Probably you'd be pretty angry, but that's what's happened to the 150,000 or so people who saved with the Christmas savings club Farepak.
It went bust over three years ago taking millions of pounds with it. I covered the Farepak story at the time when I was was a freelance reporter for BBC Breakfast and I spoke to someone who'd saved hundreds of pounds with Farepak and - as an agent - had encouraged her work colleagues to do the same. She was furious, not only because she'd lost out, but because she genuinely believed that she was helping her colleagues by encouraging them to save.
At the time, credit was easy but the people who saved with Christmas clubs like Farepak liked the idea of locking money away throughout the year. The reward for this prudence was knowing they'd have extra cash to spend at Christmas.
It's taken three years of work by the liquidators (whose fees come directly out of the money available to creditors) to come up with the settlement of 15 pence in the pound. Pretty poor, in my opinion. The only positive bit of news is the fact that it's brought the wait for compensation to an end.
The situation has improved in that Christmas clubs that are members of the Christmas Prepayment Association now have to pay customers' money into a trust account, so the cash is kept separate from the companies' own money. This is big step in the right direction. But when over 150,000 people are still down by 85% on money they saved in what they thought was a safe scheme, I don't think anyone can say enough has been done.
Thursday, 29 April 2010
Monday, 15 March 2010
Credit card companies bought into line...kind of.
Credit card companies have been coming under increasing pressure to clean up their act over the last year or so, and finally it seems that change is on the way. OK, so it won't happen overnight (as the card companies have until the end of the year to make the changes) but it should mean a better deal for many card customers.
There are five major changes, one of which will force card companies to give customers 60 days' notice that they're going to raise their rates as well as the right to reject the rate rise. Under current rules, we're only given 30 days' warning. It could mean that millions of people are better off. Last year credit card companies raised the rates on over 6 million cards and it's not clear that consumers knew they had the right to freeze their account and pay off the debt at the old rate. It seems very few people did this and - as most of us don't have money to chuck around - the assumption has to be that some weren't aware they could do this.
But this isn't the only change; one that I think is more interesting will mean that credit card companies have to use our payments to clear the most expensive debts first, a complete reversal of the present situation for the vast majority of credit cards. I did a report about this for TV a few years ago and most of the people I spoke to couldn't believe that card companies chose to maximise their profits by paying off the cheapest debt first.
It meant that if you transferred your balance to another card (say, one charging 0% interest), but then bought something using the same card when it charged 18% for purchases, your payments would be used to clear the 0% balance first and only then to pay off the purchases at 18%. Of course, this wasn't a problem if you cleared your credit card balance in full or if you didn't use a balancen transfer card for purchases. But the card providers' trade body the UK Cards Association says the changes will benefit around 25% of cardholders or around seven million people.
I'm all for making a profit (even the banks and credit card companies would be allowed to make money, if I ruled the world!). But I don't think that tricks and catches are the way to go about it. This clampdown on card companies can't come a moment too soon.
There are five major changes, one of which will force card companies to give customers 60 days' notice that they're going to raise their rates as well as the right to reject the rate rise. Under current rules, we're only given 30 days' warning. It could mean that millions of people are better off. Last year credit card companies raised the rates on over 6 million cards and it's not clear that consumers knew they had the right to freeze their account and pay off the debt at the old rate. It seems very few people did this and - as most of us don't have money to chuck around - the assumption has to be that some weren't aware they could do this.
But this isn't the only change; one that I think is more interesting will mean that credit card companies have to use our payments to clear the most expensive debts first, a complete reversal of the present situation for the vast majority of credit cards. I did a report about this for TV a few years ago and most of the people I spoke to couldn't believe that card companies chose to maximise their profits by paying off the cheapest debt first.
It meant that if you transferred your balance to another card (say, one charging 0% interest), but then bought something using the same card when it charged 18% for purchases, your payments would be used to clear the 0% balance first and only then to pay off the purchases at 18%. Of course, this wasn't a problem if you cleared your credit card balance in full or if you didn't use a balancen transfer card for purchases. But the card providers' trade body the UK Cards Association says the changes will benefit around 25% of cardholders or around seven million people.
I'm all for making a profit (even the banks and credit card companies would be allowed to make money, if I ruled the world!). But I don't think that tricks and catches are the way to go about it. This clampdown on card companies can't come a moment too soon.
Monday, 22 February 2010
How state pensions discriminate against women.
Here's the thing. You work all your life, but in low paid part-time jobs. Or you give up work to care for a relative who's too proud to claim sickness benefits (or who doesn't realise what they're entitled to). And what happens when you reach pension age? You only receive a fraction of the state pension, that's what.
The government's own figures show that barely half of all women manage to qualify for a full basic state pension in their own right (worth £95.25 a week). To be fair, that percentage will increase in April when some fairly major reforms of the state pension system are introduced.
But the point is that most people assume that the state pension will be there for them when they retire, which is pretty much the case for men as only a small minority miss out. But it's very different for women. Tens of thousands of women don't earn anything towards their pension because they have part-time jobs that pay less than £95 a week. Worse than that, the planned state pension refoms due to come into effect on April 6th won't do anything to help them.
It's true that it will be easier for women who care for family members who are ill to be credited with National Insurance contributions after the new rules are introduced on April 6th. At the moment, they can only be credited towards their National Insurance record if they care for someone for more than 35 hours a week and they receive Carer's Allowance and the person they care for claims one of several disability benefits. Quite a tall order, so it's not surprising that many carers (mainly women) lose out.
It's obviously a good thing that state pensions are improving so that fewer women (and men) will lose out in the future. But it's still the case that - even after the major shake up of pensions in April - one in four women will not be entitled to a full basic state pension. The state pension reforms are much needed and long overdue, but I'm not convinced they go far enough.
The government's own figures show that barely half of all women manage to qualify for a full basic state pension in their own right (worth £95.25 a week). To be fair, that percentage will increase in April when some fairly major reforms of the state pension system are introduced.
But the point is that most people assume that the state pension will be there for them when they retire, which is pretty much the case for men as only a small minority miss out. But it's very different for women. Tens of thousands of women don't earn anything towards their pension because they have part-time jobs that pay less than £95 a week. Worse than that, the planned state pension refoms due to come into effect on April 6th won't do anything to help them.
It's true that it will be easier for women who care for family members who are ill to be credited with National Insurance contributions after the new rules are introduced on April 6th. At the moment, they can only be credited towards their National Insurance record if they care for someone for more than 35 hours a week and they receive Carer's Allowance and the person they care for claims one of several disability benefits. Quite a tall order, so it's not surprising that many carers (mainly women) lose out.
It's obviously a good thing that state pensions are improving so that fewer women (and men) will lose out in the future. But it's still the case that - even after the major shake up of pensions in April - one in four women will not be entitled to a full basic state pension. The state pension reforms are much needed and long overdue, but I'm not convinced they go far enough.
Monday, 8 February 2010
Did you know you could lose your home if you can't pay your credit card bill?
OK, so in reality very few people's homes are repossessed because they can't pay their credit card bills or other personal debt (such as bank loans etc), but the fact is that some do. According to the Ministry of Justice, fewer than 350 properties were sold in the last six months of 2008 because credit card companies and banks wanted their money back.
There may well be times where it's not a case of 'can't pay' but 'won't pay' - when only the threat of drastic action will do the trick, but I bet the vast majority of people who had to sell their home had no idea what they were letting themselves in for when they signed up to their credit card or personal loan.
We're used to the disclaimer that 'your home may be at risk if you don't keep up repayments' when we take out a mortgage or other secured loan. In fact, we're probably so used to it that the words barely register anymore. But losing your home over a credit card debt?
Debt advice charities have become increasingly concerned about the rise in the number of companies trying to get the courts to approve 'orders for sale', which gives them the power to force someone to sell their home. Although the numbers are relatively low, the concern has to be that there will be more as property prices recover.
It's certainly been the case that there's been a rush of companies trying to stake their claim to money they're owed. Ten years ago there were fewer than 20,000 applications to the courts to have unsecured debt turned into a debt that was secured against the value of your property. By 2008 (the last year the government has accurate figures for), that figure had increased by around 1000% to 165,000.
Now, I'm a firm believer in the fact that if you borrow money, you should expect to pay it back. But I also realise that changes in someone's life - redundancy, illness, divorce etc., can make this pretty difficult. What I also believe is that companies should be straight with us. So, if they're going to charge us 16% (the average credit card interest rate), compared to 8% or so for a secured loan, they should be prepared to take on the extra risk that goes with it. Or, if they're really offering a credit that's secured against our home, we should pay secured loan rates.
The government is planning to raise the bar so that credit card companies and banks won't be able to force the sale of a home if you owe less than £5,000-£10,000. That would be a welcome step, but it also needs to force card companies and banks to spell out the worst that could happen if a customer gets into arrears. Preferably on their marketing bumph and in the same sized font as the eye-catching slogan.
There may well be times where it's not a case of 'can't pay' but 'won't pay' - when only the threat of drastic action will do the trick, but I bet the vast majority of people who had to sell their home had no idea what they were letting themselves in for when they signed up to their credit card or personal loan.
We're used to the disclaimer that 'your home may be at risk if you don't keep up repayments' when we take out a mortgage or other secured loan. In fact, we're probably so used to it that the words barely register anymore. But losing your home over a credit card debt?
Debt advice charities have become increasingly concerned about the rise in the number of companies trying to get the courts to approve 'orders for sale', which gives them the power to force someone to sell their home. Although the numbers are relatively low, the concern has to be that there will be more as property prices recover.
It's certainly been the case that there's been a rush of companies trying to stake their claim to money they're owed. Ten years ago there were fewer than 20,000 applications to the courts to have unsecured debt turned into a debt that was secured against the value of your property. By 2008 (the last year the government has accurate figures for), that figure had increased by around 1000% to 165,000.
Now, I'm a firm believer in the fact that if you borrow money, you should expect to pay it back. But I also realise that changes in someone's life - redundancy, illness, divorce etc., can make this pretty difficult. What I also believe is that companies should be straight with us. So, if they're going to charge us 16% (the average credit card interest rate), compared to 8% or so for a secured loan, they should be prepared to take on the extra risk that goes with it. Or, if they're really offering a credit that's secured against our home, we should pay secured loan rates.
The government is planning to raise the bar so that credit card companies and banks won't be able to force the sale of a home if you owe less than £5,000-£10,000. That would be a welcome step, but it also needs to force card companies and banks to spell out the worst that could happen if a customer gets into arrears. Preferably on their marketing bumph and in the same sized font as the eye-catching slogan.
Tuesday, 26 January 2010
The FSA acts....at last
So, the Financial Services Authority has finally decided to act and is proposing new rules to stop mortgage lenders from piling charges and interest on borrowers who get into arrears. It's good that the FSA is acting, but shouldn't it have put these rules into place when repossession wasn't such a real threat to thousands of borrowers?
A few years ago I filmed a story for TV about a woman aged 62 who had been diagnosed with bipolar disorder. She owned her property and had paid her mortgage every month without fail. But after she went on a spending spree during one of her 'highs' she was left with debts of around £25,000.
She was advised by a broker to take out a second mortgage with a sub prime lender, which she would have to pay until she was 85 (the broker helpfully filled in her application form for her and stated that she was a self-employed cleaner, rather than the retired civil servant she actually was).
Not surprisingly she couldn't make the mortgage payments, but she did make an arrangement to pay £200 of the £300 she owed every month by standing order. And what did the lender do? They charged her a £50 arrears fee every single month (plus interest plus other random assorted fees).
I won't even begin to tell you the extraordinary way the sub prime lender tried to justify the fact that a 62-year-old 'self-employed cleaner' had mortgage that would last for 22 years. What became clear was that the lender was charging her £50 a month for no reason at all. The company didn't have to do anything to chase up the payment - it arrived on the same day every month.
As if that wasn't enough, once the arrears (largely made up of charges, interest and fees) reached around £750, they wrote to her threatening her with repossession.
If the FSA's planned rule change means people won't be treated like this in the future, it can only be a good thing. But I bet there are many others who've had similar experiences and for whom help is coming too late....
A few years ago I filmed a story for TV about a woman aged 62 who had been diagnosed with bipolar disorder. She owned her property and had paid her mortgage every month without fail. But after she went on a spending spree during one of her 'highs' she was left with debts of around £25,000.
She was advised by a broker to take out a second mortgage with a sub prime lender, which she would have to pay until she was 85 (the broker helpfully filled in her application form for her and stated that she was a self-employed cleaner, rather than the retired civil servant she actually was).
Not surprisingly she couldn't make the mortgage payments, but she did make an arrangement to pay £200 of the £300 she owed every month by standing order. And what did the lender do? They charged her a £50 arrears fee every single month (plus interest plus other random assorted fees).
I won't even begin to tell you the extraordinary way the sub prime lender tried to justify the fact that a 62-year-old 'self-employed cleaner' had mortgage that would last for 22 years. What became clear was that the lender was charging her £50 a month for no reason at all. The company didn't have to do anything to chase up the payment - it arrived on the same day every month.
As if that wasn't enough, once the arrears (largely made up of charges, interest and fees) reached around £750, they wrote to her threatening her with repossession.
If the FSA's planned rule change means people won't be treated like this in the future, it can only be a good thing. But I bet there are many others who've had similar experiences and for whom help is coming too late....
Wednesday, 20 January 2010
When is cash not cash....?
So, the Financial Services Authority has flexed its muscles for the first time in 2010 and this time it's Standard Life that has caught its attention. Not some two bit company we've never heard of, but Standard Life, which has been around for absolutely donkeys' years.
In case you missed the original story, around a year ago it emerged that a so-called 'cash fund', aimed at investors who had put money into a Standard Life pension, but who didn't want to risk it by investing in shares, was itself investing in an ...erm... interesting range of products (including mortgage-backed securities) and consequently, had fallen in value.
I'm not an expert in the kinds of financial instruments that Standard Life's pension cash fund invested in, but it appears that some of them were pretty risky. And - whatever the risks - they were not made clear to investors.
What's so frustrating about the whole affair is that Standard Life initially said it didn't believe it needed to compensate any of those who'd lost money - although it did have a change of heart (which seemed to coincide with a flurry of articles focusing on people who'd lost money).
The industry tightened up the rules last year up so that firms can no longer describe funds that invest in riskier financial products as 'cash' and Standard Life says it has learned important lessons from its mistake. But this sorry incident will do little to reassure consumers - most of whom have little trust in financial companies in the first place - that they really are in tune with their customers' needs and that, when things do go wrong, they will be quick to own up to their mistakes and put things right as speedily as possible.
In case you missed the original story, around a year ago it emerged that a so-called 'cash fund', aimed at investors who had put money into a Standard Life pension, but who didn't want to risk it by investing in shares, was itself investing in an ...erm... interesting range of products (including mortgage-backed securities) and consequently, had fallen in value.
I'm not an expert in the kinds of financial instruments that Standard Life's pension cash fund invested in, but it appears that some of them were pretty risky. And - whatever the risks - they were not made clear to investors.
What's so frustrating about the whole affair is that Standard Life initially said it didn't believe it needed to compensate any of those who'd lost money - although it did have a change of heart (which seemed to coincide with a flurry of articles focusing on people who'd lost money).
The industry tightened up the rules last year up so that firms can no longer describe funds that invest in riskier financial products as 'cash' and Standard Life says it has learned important lessons from its mistake. But this sorry incident will do little to reassure consumers - most of whom have little trust in financial companies in the first place - that they really are in tune with their customers' needs and that, when things do go wrong, they will be quick to own up to their mistakes and put things right as speedily as possible.
Tuesday, 12 January 2010
Can you have a good divorce?
There's so much in the papers about how couples rush to divorce in January that you may feel like you can't bear to read another article about breaking up. But I promise I won't overwhelm you with statistics about how many marriages break up at this time of year - I'm interested in how couples break up, not how many do so.
It's been a long time coming, but it seems that less confrontational methods of divorce are becoming more popular. For years it felt like the only option available if you wanted to get divorced was to hire a lawyer to 'fight your corner'. The reality may have been different, but the choices were certainly more limited than they are today.
These days, some couples are splitting up without using a lawyer at all and an increasing number of those who are using legal help are choosing 'friendlier' divorce methods, such as collaborative law or mediation. In 2003 only 12 lawyers in England and Wales were trained in collaborative family law. By last February the figure had reached 1200. Yes, it's still a minority who use collaborative law or mediation, but many of those find it's a more positive experience than the traditional lawyer-led negotiations.
The main benefit is that couples each get a real say in what happens (even if the eventual agreement involves a lot of compromise). Although many divorces don't get as far as the courts, a number of couples are effectively forced to agree to settlements because they're told that it's what a court would be likely to do.
Collaborative family law, which involves round-table meetings with you and your ex and your respective lawyers, is not necessarily a cut-price option. But it can mean both parties are less emotionally scarred by the process and - when it comes to sorting out the money - that finance doesn't become such a battle ground. The downside is that if the process breaks down, you each have to hire new lawyers, which can raise the cost considerably. But for an increasing number of couples, it's a risk worth taking.
Do you agree?
I am hosting a free divorce advice surgery on Thursday January 28th from 4pm to 8pm in Covent Garden, central London. David Allison, who's a trained mediator and collaborative family lawyer with Family Law in Partnership and Karen Ritchie, from independent financial advisers
Financial Planning for Women will be giving free advice on a one-to-one basis. It will cover a range of financial issues. Places are limited and available on a first come, first served basis. Email sarah@savvywoman.co.uk if you'd like to find out more.
It's been a long time coming, but it seems that less confrontational methods of divorce are becoming more popular. For years it felt like the only option available if you wanted to get divorced was to hire a lawyer to 'fight your corner'. The reality may have been different, but the choices were certainly more limited than they are today.
These days, some couples are splitting up without using a lawyer at all and an increasing number of those who are using legal help are choosing 'friendlier' divorce methods, such as collaborative law or mediation. In 2003 only 12 lawyers in England and Wales were trained in collaborative family law. By last February the figure had reached 1200. Yes, it's still a minority who use collaborative law or mediation, but many of those find it's a more positive experience than the traditional lawyer-led negotiations.
The main benefit is that couples each get a real say in what happens (even if the eventual agreement involves a lot of compromise). Although many divorces don't get as far as the courts, a number of couples are effectively forced to agree to settlements because they're told that it's what a court would be likely to do.
Collaborative family law, which involves round-table meetings with you and your ex and your respective lawyers, is not necessarily a cut-price option. But it can mean both parties are less emotionally scarred by the process and - when it comes to sorting out the money - that finance doesn't become such a battle ground. The downside is that if the process breaks down, you each have to hire new lawyers, which can raise the cost considerably. But for an increasing number of couples, it's a risk worth taking.
Do you agree?
I am hosting a free divorce advice surgery on Thursday January 28th from 4pm to 8pm in Covent Garden, central London. David Allison, who's a trained mediator and collaborative family lawyer with Family Law in Partnership and Karen Ritchie, from independent financial advisers
Financial Planning for Women will be giving free advice on a one-to-one basis. It will cover a range of financial issues. Places are limited and available on a first come, first served basis. Email sarah@savvywoman.co.uk if you'd like to find out more.
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