Past Articles for February, 2007

The IPA, which is now responsible for regulating the Debt Resolution Forum, suggests a “lite” qualification would not undermine fully licensed insolvency practitioners and would benefit those working in the UK’s debt management industry.

In the interests of both practitioners and consumers there ought to be a greater degree of specialism to reflect the continually growing demand, the IPA maintains, according to a report from Accountancy Age.

Chief executive of the IPA Nick Sabin remarked: “A number of practitioners could think it would devalue the brand, but the growth in personal indebtedness means it has become an industrial process and I can’t see this reducing in the near future.”

A recent report from north-west local news provider Preston Today claimed demand for Individual Voluntary Arrangements (IVAs) is increasing dramatically.

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James Alexander was responding to his company’s own estimation that each household in the UK has added around £475 per year to the overall profits of the five largest banks.

In light of the wake of dramatic increases in the number of people approaching Citizens Advice about debt-related issues, Zopa’s figure of £475 per households represents a 14 per cent rise on 2005.

“Given that this is just the profit contribution, I shudder to think what the total cost is to the average household for all of their banking,” Mr Alexander commented.

“Consumers are right to question whether or not it is appropriate that the average UK household is contributing £475 per annum to the bottom line of the UK’s five largest banks,” he continued.

Figures released earlier this week demonstrated that there had been a 15 per cent increase in the number of people asking Citizens’ Advice for debt advice during January of this year than in the same month of 2006.

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The banks customers, including those with credit card debt, could generate an income of £1.79 million from the scheme.

Nick White, director of financial services at price comparison and switching website uSwitch commented on what he said has been a “turbulent week” for banks, noting that industry analysts are beginning to predict the end of free banking.

Research firm Defaqto claimed free banking for those with credit card debt and other consumers could disappear over the next two years as banks hit out against regulatory pressures.

“Lloyds TSB’s latest move sends alarm bells ringing and indicates that consumers may also lose the luxury of fee-free credit cards in the very near future,” Mr White added.

The bank claims the fee will apply to just one per cent of their credit card customers that ‘display low usage’, but its has not outlined the criteria that are used to define this term.

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Reflecting on the debt management problems affecting hundreds of people in the Oldham area where he is based, Robert Cooksey of IVA firm Bridgestones suggested credit is being handed out too readily by lenders.

In addition, Mr Cooksey went on to assert that such money problems are not confined to those on lower incomes, increasingly professionals with higher paid jobs are turning to IVAs, reports the Oldham Advertiser.

“Rising interest rates haven’t helped, but it still appears too easy for people to obtain credit,” he told the paper.

“Oldham is suffering in the same way as a lot of towns where some of the manufacturing base has been lost.”

It was revealed recently that the committee in charge of setting interest rates for the Bank of England was splint on whether to increase the cost of borrowing earlier this month.

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In the wake of a series of interest rate rises, increasing numbers of management professionals are struggling with mortgage arrears due to higher levels of monthly charges, a survey from emedia has revealed.

And this is seen to reflect on the rest of the population, who could well be facing even tougher debt management situations, the online research company suggests.

David Clark, managing director at emedia, noted: “If higher earners face a struggle to keep their home, where might that leave households on lower incomes?”

“If the better-off recognise that they’re putting insufficient [funds] into their savings, it’s a fair assumption that lower-income families are finding it even harder to save,” he added.

In light of recent increases in the cost of borrowing, announced by the Bank of England, Brits are increasingly turning to secured lending, a recent MoneyExpert study claimed.

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Speaking in the wake of Citizen’s Advice figures indicating that the number of people looking for debt advice has risen 15 per cent in 12 months across England and Wales, Mr Ketchell claimed banks tend to be willing to help when his organisation gets involved.

“Generally most creditors, when they realise someone is in a situation where they cannot meet their repayments, are quite accommodating,” Mr Ketchell said.

However, the CCCS spokesman did go on to point out that there are instances of miscommunication among banks or creditors, which can cause problems for those searching for a debt solution.

First set up in Leeds in 1993, the CCCS acts as a charity and now has debt advice centres around the UK.

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Only independent regulation will stop indebted Brits being at the mercy of the “bully boy tactics” it claims are employed by some of the country’s bailiffs and this idea should have formed the central theme of the recently drafted tribunals, court and enforcement bill, Citizens Advice suggests.

Thousands of people in the UK ask Citizens Advice about debt each month and these debt solution seekers have “already waited far too long for reform” to protect them, the charity asserts.

Peter Tutton, Citizens Advice debt policy officer, said: “If the government is serious about protecting the most vulnerable, independent regulation should be a central provision of this bill.”

“As it stands, the bill just extends the existing system – a system with a dismal track record of failing to protect vulnerable debtors.”

Brits in debt could soon face further financial pressures as it was revealed this week that two of the nine members of the interest rate-setting committee at the Bank of England voted to increase the cost of borrowing in February.

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The so-called tribunals, court and enforcement bill will mean stricter controls over enforcement agents and bailiffs, to ensure the protection of those vulnerable to what the department calls “unscrupulous” debt enforcement agents.

“Tens of thousands of people get into debt each year,” said constitutional affairs minister Baroness Catherine Ashton.

“Not only do they suffer financial and other hardship, but they can often be at the mercy of unscrupulous bailiffs who misunderstand or misrepresent their powers,” she added.

The bill also proposes the creation of a new insolvency arrangement for those people struggling to find a debt solution despite owing “relatively little”.

Responsibilility for upholding justice and human rights in the UK falls to the Department for Constitutional Affairs, which also seeks to “modernise” the law in an effort to “enhance democratic freedoms”.

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In fact, the Bank of England’s monetary policy committee was divided 7-2 in favour of maintaining rates at current levels, but the varying opinions within the group are seen to suggest an increase could happen as 2007 progresses.

And with millions of Brits facing credit card debt repayment increases in the event of a further hike, the bank has advised that it will wait to assess the “full effects of the past tightening”.

Minutes from the committee’s meeting earlier this month stated: “Was difficult to judge whether, and if so by how much, policy might need to be further tightened to keep inflation on track to meet the target.”

Recent research from MoneyExpert suggested that people assessing their debt management options are increasingly looking towards secured lending in light of recent interest rate rises.

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Defaqto anticipates a “backlash” from banks in response to consumer and regulator pressure to cut charges as Individual Voluntary Arrangements (IVAs) continue to soar in popularity.

“I will be very surprised if free banking is universally available in two years time,” said David Black, head of banking at Defaqto.

“The first major provider to introduce charges for all customers is going to take a lot of flak but it is likely that the majority of the main providers will then follow the lead,” he continued.

Defaqto also noted that Financial Ombudsman Service is currently estimated to be dealing with in excess of 1,000 bank charges issues each day in the UK.

A recent report from Citizens Advice revealed that in January of this year it had 15 per cent more requests for debt advice than was the case in the same period during 2006.

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