Why is it that some shops seem to know less about our rights than most consumers? I was in a bookshop last weekend when someone in the next queue complained about an e-book reader she'd bought a few months earlier. The shop assistant told her to contact the manufacturer - and this was after she'd checked with the manager.
The Office of Fair Trading has recently published information for retailers so they get it right and don't end up fobbing off consumers. In my view this can't come a moment too soon. OK so our consumer laws may not be the simplest in the world, but they're not rocket science.
And if you're a retailer, trader or supplier, it's down to you to get it right. A couple of years ago when I was still working as a freelance reporter for the BBC I did a report into the issue of shops giving people duff information about their rights and and pushing them to the manufacturer to get faulty goods replaced or repaired.
I interviewed several experts who thought that - while retailers may not be deliberately setting out to mislead - the fact that they didn't seem to think it was important that their shop staff knew the law and gave consumers the right information said something about their priorities.
The fact is that your contract is with the retailer or trader, so if you have a legitimate complaint, it's down to them to put it right. That's what the Sale of Goods Act is there for.
I hope that the OFT carries out some mystery shopping once the online advice hub has been up and running for a while and comes down hard on those retailers that are dodging their obligations.
Saturday, 11 September 2010
Friday, 13 August 2010
Could the PPI debacle finally be resolved? Not quite...
So, the Financial Services Authority has got tough with banks, brokers and insurance companies over payment protection insurance - and not a moment too soon. There's no doubt that the financial services industry can sometimes take the flak for things that aren't actually its fault. But with PPI mis-selling, I think they deserve everything that's being thrown at them.
OK, so not every single financial insitution was trying to fleece its customers by selling them a payment protection insurance policy they couldn't claim on, weren't told the price of or didn't even know they were being sold in the first place. But there were enough companies active in this market (and I don't mean that as a compliment) for this to be an issue for the whole industry.
What would have been nice - and would possibly have given consumers some hope that banks, brokers and insurers aren't out to squeeze them for every last penny, is if companies could have a) sold these policies properly in the first place and not behaved like they were operating in the Wild West or, if that was mission impossible, b) compensated people who had a genuine case straight away without fobbing them off and without dragging their heels.
As it is they've plainly been turning down legitimate complaints, otherwise why would the Financial Ombudsman Service find in favour of the consumer in over 80% of PPI cases? What's particularly galling is that only 30% of people whose complaints were rejected by their bank or insurer actually pursued it further by going to the ombudsman service. Presumably they thought that, as the bank/broker/insurer thought they had no cause for complaint, they genuinely didn't have - rather than that the financial company might be trying to pull a fast one.
Either that or they may have missed the deadline that means that once you've received your 'final letter' from a financial company rejecting your complaint you only have six months to go to the Financial Ombudsman Service.
The FSA's latest move is a welcome one. It means that companies will have to improve the way they deal with consumers who complain. More than that they'll have to look at how they've sold PPI policies in the first place. But, because it can't - yet - force companies to open old cases where people have complained of mis-selling and had their complaint rejected, hundreds of thousands of others will have been turned down for compensation when they shouldn't have been.
OK, so not every single financial insitution was trying to fleece its customers by selling them a payment protection insurance policy they couldn't claim on, weren't told the price of or didn't even know they were being sold in the first place. But there were enough companies active in this market (and I don't mean that as a compliment) for this to be an issue for the whole industry.
What would have been nice - and would possibly have given consumers some hope that banks, brokers and insurers aren't out to squeeze them for every last penny, is if companies could have a) sold these policies properly in the first place and not behaved like they were operating in the Wild West or, if that was mission impossible, b) compensated people who had a genuine case straight away without fobbing them off and without dragging their heels.
As it is they've plainly been turning down legitimate complaints, otherwise why would the Financial Ombudsman Service find in favour of the consumer in over 80% of PPI cases? What's particularly galling is that only 30% of people whose complaints were rejected by their bank or insurer actually pursued it further by going to the ombudsman service. Presumably they thought that, as the bank/broker/insurer thought they had no cause for complaint, they genuinely didn't have - rather than that the financial company might be trying to pull a fast one.
Either that or they may have missed the deadline that means that once you've received your 'final letter' from a financial company rejecting your complaint you only have six months to go to the Financial Ombudsman Service.
The FSA's latest move is a welcome one. It means that companies will have to improve the way they deal with consumers who complain. More than that they'll have to look at how they've sold PPI policies in the first place. But, because it can't - yet - force companies to open old cases where people have complained of mis-selling and had their complaint rejected, hundreds of thousands of others will have been turned down for compensation when they shouldn't have been.
Tuesday, 3 August 2010
The complexity of savings accounts
A few days ago I wrote an article about finding a fixed rate savings account with a competitive rate of interest. Not rocket science, you'd have thought - but it's certainly not that straightforward either.
For a start, some price comparison websites are fond of listing 'best sellers' or 'sponsored products' above the best buys and they don't always compare like with like (some websites exclude deals that come with short term bonus rates while others don't etc). The upshot is that you have to take the time to look at two or three different price comparison sites to be sure of getting the best deal.
Next you have to look at the catches - are you tied into taking out a bank account or investment product with the bank or building society in question? For example, Santander has one year bond paying 4.5%, which is head and shoulders above the rest. Look a little closer and you'll see that you have to invest the same amount as you put into the bond into a 'qualifying investment product'.
It might be the case that Santander's investment is the right one for you, but you shouldn't take out an investment product on the basis of a good rate on a linked savings account - not unless you've checked out the investment product thoroughly.
But it's not just the conditions and catches that you have to watch out for - there's the issue of safety as well. After the shock of the credit crisis most of us a bit a wary about chasing the highest rate without knowing how our savings are protected but finding out how you might be compensated should the bank fail isn't exactly straightforward either. I was trying to cut the explanation down to a couple of short sentences, but it was a struggle.
There is one set of rules for banks based or operating in the UK, another for those headquartered in the EEA, which means that banks based in the EEA can top up so that they offer the same level of protection as banks based in the UK if they want to but they don't have to.
And what about banks in the UK that are owned by the same parent company? Well, in some cases they may share a banking licence with the parent company in others they may not and the amount of your savings that are protected by the Financial Services Compensation Scheme are linked to the way the bank is licensed, not its brand name(your savings are covered up to a limit of £50,000 per banking licence).
I appreciate that banks and building societies will want to compete with each other for market share and that the savings safety scheme was put together when the banking landscape was far simpler. But the fact is that many people feel - understandably - bewildered about making what should be a relatively straightforward decision.
Financial services companies often bemoan the fact that people in the UK aren't very engaged with their finances - particularly long term savings. Perhaps it would be easier if the process of picking a savings account wasn't so complicated.
For a start, some price comparison websites are fond of listing 'best sellers' or 'sponsored products' above the best buys and they don't always compare like with like (some websites exclude deals that come with short term bonus rates while others don't etc). The upshot is that you have to take the time to look at two or three different price comparison sites to be sure of getting the best deal.
Next you have to look at the catches - are you tied into taking out a bank account or investment product with the bank or building society in question? For example, Santander has one year bond paying 4.5%, which is head and shoulders above the rest. Look a little closer and you'll see that you have to invest the same amount as you put into the bond into a 'qualifying investment product'.
It might be the case that Santander's investment is the right one for you, but you shouldn't take out an investment product on the basis of a good rate on a linked savings account - not unless you've checked out the investment product thoroughly.
But it's not just the conditions and catches that you have to watch out for - there's the issue of safety as well. After the shock of the credit crisis most of us a bit a wary about chasing the highest rate without knowing how our savings are protected but finding out how you might be compensated should the bank fail isn't exactly straightforward either. I was trying to cut the explanation down to a couple of short sentences, but it was a struggle.
There is one set of rules for banks based or operating in the UK, another for those headquartered in the EEA, which means that banks based in the EEA can top up so that they offer the same level of protection as banks based in the UK if they want to but they don't have to.
And what about banks in the UK that are owned by the same parent company? Well, in some cases they may share a banking licence with the parent company in others they may not and the amount of your savings that are protected by the Financial Services Compensation Scheme are linked to the way the bank is licensed, not its brand name(your savings are covered up to a limit of £50,000 per banking licence).
I appreciate that banks and building societies will want to compete with each other for market share and that the savings safety scheme was put together when the banking landscape was far simpler. But the fact is that many people feel - understandably - bewildered about making what should be a relatively straightforward decision.
Financial services companies often bemoan the fact that people in the UK aren't very engaged with their finances - particularly long term savings. Perhaps it would be easier if the process of picking a savings account wasn't so complicated.
Friday, 23 July 2010
Mortgage errors
The news that 18,000 people were charged the wrong amount on their mortgage may not seem like that big a deal - at first sight. They weren't mis-sold a financial product or lured into taking out a loan they could not afford and - given the millions of mortgages in existence - the figures seem relatively small.
The reason it ended up getting extensive coverage owed more to the way the Yorkshire and Clydesdale banks handled the aftermath than to the error itself. It seems that the original mistake went back to 2008 when the banks' computer systems made a mistake on some tracker and discount rate mortgages on both repayment an interest-only mortgages, but it took Yorkshire and Clydesdale banks until earlier this year to spot it.
The banks say that around half of the 18,000 borrowers who are affected are being asked for an extra £25 a month - although some are having to pay much more. What's interesting...to me at least...is that they've decided not to automatically write off the shortfall, which they say on a £25 a month extra payment works out at £2 a month - so not exactly a fortune.
This isn't exactly a common problem but the last time this happened, my mortgage spy (SavvyWoman's mortgage expert Ray Boulger) tells me that the lender in question wiped off the shortfall.
Why won't Yorkshire and Clydesdale banks do the same? They say they are treating complaints on an individual basis and that they are offering compensation for those who are having problems making the higher payments. But not - it seems - for those who don't complain.
Having found out that Yorkshire and Clydesdale are happy to compensate some of its customers, I'm sure others will be tempted to complain as well. If they do complain and are not happy with the banks' response they can take their case to the Financial Ombudsman Service.
While the FOS will look at each case individually, it is more sympathetic to complaints where it was the lender's fault (which Yorkshire and Clydesdale have not denied) and where the customer couldn't have realised that a mistake had been made. This is a bit trickier, but customers shouldn't be expected to be mortgage experts (that's the bank's job) and even if your mortgage payment fell quite dramatically, at the time the error happened tracker mortgage rates were plummeting.
In these tough times I can see that it might seem hard to justify offering to pay the shortfall for customers before they'd even thought of complaining. But in terms of goodwill and loyalty, it would have been a relatively small investment. Now it's quite possible that the banks will lose a lot more money. Every case that goes to the Financial Ombudsman Service is free for consumers but costs the banks £500.
And if even 50% of the customers who aren't happy decide to switch mortgage lenders when their deal comes to an end, they could lose thousands of borrowers. It's always said that it's not the mistake, it's how you deal with it that matters. Maybe it's a lesson that the Yorkshire and Clydesdale banks could learn.
The reason it ended up getting extensive coverage owed more to the way the Yorkshire and Clydesdale banks handled the aftermath than to the error itself. It seems that the original mistake went back to 2008 when the banks' computer systems made a mistake on some tracker and discount rate mortgages on both repayment an interest-only mortgages, but it took Yorkshire and Clydesdale banks until earlier this year to spot it.
The banks say that around half of the 18,000 borrowers who are affected are being asked for an extra £25 a month - although some are having to pay much more. What's interesting...to me at least...is that they've decided not to automatically write off the shortfall, which they say on a £25 a month extra payment works out at £2 a month - so not exactly a fortune.
This isn't exactly a common problem but the last time this happened, my mortgage spy (SavvyWoman's mortgage expert Ray Boulger) tells me that the lender in question wiped off the shortfall.
Why won't Yorkshire and Clydesdale banks do the same? They say they are treating complaints on an individual basis and that they are offering compensation for those who are having problems making the higher payments. But not - it seems - for those who don't complain.
Having found out that Yorkshire and Clydesdale are happy to compensate some of its customers, I'm sure others will be tempted to complain as well. If they do complain and are not happy with the banks' response they can take their case to the Financial Ombudsman Service.
While the FOS will look at each case individually, it is more sympathetic to complaints where it was the lender's fault (which Yorkshire and Clydesdale have not denied) and where the customer couldn't have realised that a mistake had been made. This is a bit trickier, but customers shouldn't be expected to be mortgage experts (that's the bank's job) and even if your mortgage payment fell quite dramatically, at the time the error happened tracker mortgage rates were plummeting.
In these tough times I can see that it might seem hard to justify offering to pay the shortfall for customers before they'd even thought of complaining. But in terms of goodwill and loyalty, it would have been a relatively small investment. Now it's quite possible that the banks will lose a lot more money. Every case that goes to the Financial Ombudsman Service is free for consumers but costs the banks £500.
And if even 50% of the customers who aren't happy decide to switch mortgage lenders when their deal comes to an end, they could lose thousands of borrowers. It's always said that it's not the mistake, it's how you deal with it that matters. Maybe it's a lesson that the Yorkshire and Clydesdale banks could learn.
Tuesday, 13 July 2010
Families with disabled children struggle financially
On Saturday I was interviewed on BBC Breakfast about some research carried out by a charity called Contact a Family. It surveyed over 1,100 families with one or more disabled children and found that 23% had gone without heating, 34% were behind with credit card or loan repayments and one in seven went without food.
Most of these figures showed a deterioration from the last time the research was carried out in 2008. They reveal a struggle that many families with disabled children face to arrange child care (which is far harder to access if you have a disabled and often much more expensive), combine caring for a disabled child with work and to do more than survive financially.
No one would pretend that the benefits system is straightfoward, whatever type of state help you want to claim. But disability living allowance (DLA), which is the main benefit disabled children are entitled to, is particularly complex. There are two different components of the benefit (care and mobility components) which can be paid at several different levels. And assessing whether a child needs extra care because they are disabled or because they are a child is not always clear cut.
Add to that the fact that most parents find out about benefits they're entitled to through other parents whose children have the same disability and you can see how hit and miss the system is.
There are no government figures on the number of families with disabled children who claim disability benefits, but charities estimate that as many as 40% of parents don't get the help they're entitled to.
In this period of austerity the government is looking to reduce spending on welfare, not increase it. But if families with disabled children are getting further into debt or going without food and heating, something needs to be done. How about better signposting of benefits so that families are told about the help they may be entitled to when they receive a diagnosis for their child?
And what about encouraging employers to be more flexible? At the moment you only have the right to ask for flexible working once you've been in a job for six months. For families with disabled children who want to get back into work, that six-month 'hurdle' can be an impossible one to clear. Some companies may genuinely struggle to give these employees the flexibility they need. But I bet some could think of more creative ways of working than 9-5. What do you think?
Most of these figures showed a deterioration from the last time the research was carried out in 2008. They reveal a struggle that many families with disabled children face to arrange child care (which is far harder to access if you have a disabled and often much more expensive), combine caring for a disabled child with work and to do more than survive financially.
No one would pretend that the benefits system is straightfoward, whatever type of state help you want to claim. But disability living allowance (DLA), which is the main benefit disabled children are entitled to, is particularly complex. There are two different components of the benefit (care and mobility components) which can be paid at several different levels. And assessing whether a child needs extra care because they are disabled or because they are a child is not always clear cut.
Add to that the fact that most parents find out about benefits they're entitled to through other parents whose children have the same disability and you can see how hit and miss the system is.
There are no government figures on the number of families with disabled children who claim disability benefits, but charities estimate that as many as 40% of parents don't get the help they're entitled to.
In this period of austerity the government is looking to reduce spending on welfare, not increase it. But if families with disabled children are getting further into debt or going without food and heating, something needs to be done. How about better signposting of benefits so that families are told about the help they may be entitled to when they receive a diagnosis for their child?
And what about encouraging employers to be more flexible? At the moment you only have the right to ask for flexible working once you've been in a job for six months. For families with disabled children who want to get back into work, that six-month 'hurdle' can be an impossible one to clear. Some companies may genuinely struggle to give these employees the flexibility they need. But I bet some could think of more creative ways of working than 9-5. What do you think?
Tuesday, 6 July 2010
Public Sector Pensions
The government has asked John Hutton to carry out a review of public sector pensions. There's no doubt that the cost of providing a final salary pension for workers in the public sector is rising and, at a time when the UK's finances are in a mess, it's right that public sector pensions, along with other spending, should be looked at.
But it's important that any changes made don't penalise one section of the public sector workforce disproportionately. We don't yet know what the Hutton review will suggest, there is a real danger that cutbacks to public sector pensions across the board could have the effect of penalising women.
We all know that women retire on far less than men. Figures from the Prudential show that 35% women will retire 'in poverty' (as defined by the Joseph Rowntree foundation) this year. If women give up work to have children, retirement saving becomes a luxury.
The one time when women do save for their retirement is when they work in the public sector. 60% of those who join public sector pensions are women; in the private sector the figure is 40%. But we're not talking a 'gold plated' retirement as the average public sector pension is around £7,000 a year and women - generally - receive far less. In local government, the average pension is around £4,400, but for women it's £2,600. Around half of women in the NHS retire on a public sector pension of £3,500 - that's less than £70 a week on top of the state pension.
In a way these figures show the big success of public sector pensions - the fact that they've encouraged people on lower incomes to save for their retirement, which doesn't happen to the same extent in the private sector.
What we do need is long term affordability and sustainability of public sector pensions (and there are some imaginative ways that could reduce the costs while protecting the pensions of those on the lowest incomes). What we don't need are changes that will hit the lowest paid workers - who are mainly women - hard. Reducing their pension benefits could just tip them into means-tested benefits, which hardly seems fair and - ultimately - is unlikely to give the government the savings it's looking for.
But it's important that any changes made don't penalise one section of the public sector workforce disproportionately. We don't yet know what the Hutton review will suggest, there is a real danger that cutbacks to public sector pensions across the board could have the effect of penalising women.
We all know that women retire on far less than men. Figures from the Prudential show that 35% women will retire 'in poverty' (as defined by the Joseph Rowntree foundation) this year. If women give up work to have children, retirement saving becomes a luxury.
The one time when women do save for their retirement is when they work in the public sector. 60% of those who join public sector pensions are women; in the private sector the figure is 40%. But we're not talking a 'gold plated' retirement as the average public sector pension is around £7,000 a year and women - generally - receive far less. In local government, the average pension is around £4,400, but for women it's £2,600. Around half of women in the NHS retire on a public sector pension of £3,500 - that's less than £70 a week on top of the state pension.
In a way these figures show the big success of public sector pensions - the fact that they've encouraged people on lower incomes to save for their retirement, which doesn't happen to the same extent in the private sector.
What we do need is long term affordability and sustainability of public sector pensions (and there are some imaginative ways that could reduce the costs while protecting the pensions of those on the lowest incomes). What we don't need are changes that will hit the lowest paid workers - who are mainly women - hard. Reducing their pension benefits could just tip them into means-tested benefits, which hardly seems fair and - ultimately - is unlikely to give the government the savings it's looking for.
Tuesday, 11 May 2010
Who's cashing in on ISA rates?
A few weeks ago I wrote an article for SavvyWoman about switching cash ISAs and - knowing how fond banks and building societies are of changing rates - last weekend I checked that the rates were up to date.
What was interesting, no, let me rephrase that, somewhat shocking, was how low some cash ISA rates were. Did you know that some ISA providers will take your money and give you a tax-free return of 0.10%. Yup, a tenth of one percent.
That means even if you paid in the current tax year's maximum amount of £5,100 you'd still only earn just over a fiver in interest after a year. That's enough for a fish and chip supper or a bottle of nail varnish, but it's not much to show for saving several thousand pounds for 12 months.
OK so let's name some names - Santander, which - rightly - got lots of publicity for its market-leading cash ISA earlier this year also has an 'easy ISA' paying 0.1%. Oh, but if you've got £27,000 or more you'll get 0.3%. That's OK then.
The Dunfermline building society has a Soccersaver Cash ISA for Celtic fans, but scores an own goal with its 0.1% interest rate.
Meanwhile Barclays has announced that it will keep its market leading cash ISA (paying a healthy 3.1%) open to new customers until June 1st. That's the good news. The bad news is that this ISA won't accept transfers in from existing ISAs, it will only take new money. If you want to transfer your ISA to Barclays, you can transfer it to an account paying 0.1%. Hmmm. I'll get back to you on that one.
I appreciate that banks and building societies have to make a profit and that the Bank of England rates are low. But the grand game of snakes and ladders that cash ISA savers seem to have unwittingly signed up for isn't the answer. Someone's laughing all the way to the bank, but it's not the majority of cash ISA savers.
What was interesting, no, let me rephrase that, somewhat shocking, was how low some cash ISA rates were. Did you know that some ISA providers will take your money and give you a tax-free return of 0.10%. Yup, a tenth of one percent.
That means even if you paid in the current tax year's maximum amount of £5,100 you'd still only earn just over a fiver in interest after a year. That's enough for a fish and chip supper or a bottle of nail varnish, but it's not much to show for saving several thousand pounds for 12 months.
OK so let's name some names - Santander, which - rightly - got lots of publicity for its market-leading cash ISA earlier this year also has an 'easy ISA' paying 0.1%. Oh, but if you've got £27,000 or more you'll get 0.3%. That's OK then.
The Dunfermline building society has a Soccersaver Cash ISA for Celtic fans, but scores an own goal with its 0.1% interest rate.
Meanwhile Barclays has announced that it will keep its market leading cash ISA (paying a healthy 3.1%) open to new customers until June 1st. That's the good news. The bad news is that this ISA won't accept transfers in from existing ISAs, it will only take new money. If you want to transfer your ISA to Barclays, you can transfer it to an account paying 0.1%. Hmmm. I'll get back to you on that one.
I appreciate that banks and building societies have to make a profit and that the Bank of England rates are low. But the grand game of snakes and ladders that cash ISA savers seem to have unwittingly signed up for isn't the answer. Someone's laughing all the way to the bank, but it's not the majority of cash ISA savers.
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