The FCA are going to tell insurers that add-ons for things like mobiles, holidays and home emergencies aren’t currently competitive, so therefore, not at all working in the best interest of consumers.
This means that the regulator is all set to announce new rules after they investigated competition rules around insurance companies. For us, as well as cheaper offers (you’d hope), this means these add-ons will now be explicitly explained to us and up-front, rather than tucked away behind vagueness.
These new rules may seem like small fry, but if you consider that some motor insurers generate around a third of their profits from add-ons, this will change the way they do business for fear of big fines. Of course, last year, Swinton was fined by the FCA to the tune of £7.4m fine, with a further £11m paid out to customers who had been mis-sold add-ons.
Unveiling the initial review, the FCA said: “People are being made to feel they have to have these products when they don’t really need them. Our concern is that the products are generally poor value, and, by and large, people don’t pay too much attention to the terms and conditions. We are saying there could be anti-competitive behaviour.”
Although you might think the only people who use cheques anymore are nonagenarians and milkmen, good news is on the horizon for those getting paid by the antiquated paper form. It’s going to get faster.
Currently, cheque payments take at least three working days to clear when paid into an account but the government has now unveiled detailed plans to modernise cheque payments, “reinforcing their relevance in 21st century Britain.” The changes will make a “real difference” to cheque users, reducing the time it takes for a cheque to clear to “as little as two days.” How underwhelming.
The government is proposing legislating for “cheque imaging” which will speed up cheque clearing times and give customers greater convenience and choice in how they deposit cheques. The reforms will enable banks to clear a certified, digital image of a cheque instead of a traditional paper cheque. A Treasury statement said that this will “secure the future of the cheque as a reliable method of payment in the UK, using proven technology which has been in operation in the United States for 10 years.”
In addition to reducing the clearing time by a day, the new technology will allow banks to offer the option of paying in cheques via smartphone or tablet. Additionally, banks may be able to offer later last times of deposit to customers if they no longer require couriers to collect paper cheques daily from branches.
And no matter what you think, cheques are apparently “crucial” to the “British payments landscape”. Treasury figures show that nearly £840 billion of cheques were processed in 2012 – accounting for 10% of all payments made by individuals. Small businesses, such as sole traders and other micro businesses make over a fifth of their outgoing payments in cheques and nearly a third of smaller charities receive over 75% of their income by cheque.
John Allan, National Chairman, Federation of Small Businesses, said:
“Many of our members, and their customers, still rely on cheques so will be pleased with the investment and innovation to ensure their continued use. Speeding up cheque payments into business accounts will help boost a firms’ cash-flow as many find the current process frustratingly slow. Using smart phones is an interesting idea which should allow firms in areas, particularly where bank branches are closing, to be able to accept cheques as a method of payment.”
M&S, when it’s not designing unattractive middle aged lady clothes and selling prawn sandwiches, is now hoping to compete with the banking big guns with a new free current account.
Up until now, M&S Bank, which is owned by HSBC, has only offered premium access accounts which offer a variety of cosy middle class perks, like coffee vouchers, travel insurance and access to a nice savings account with a 6% rate.
Free current account customers will have to buy their own coffee, but the deal isn’t half bad. You get an automatic £100 M&S gift card for switching, and account holders can earn M&S loyalty points when they use their debit card in store. There’s also a £500 overdraft, the first £100 of which is interest free.
M&S bank chief Colin Kearsley said: ‘Our premium current accounts, developed specifically for the regular M&S shopper, have proven popular with this audience and following the launch of the current account switch service, which has made switching faster and easier, we want to offer the same transparent banking and great service to a broader audience with the launch of the M&S current account.’
Initially, the account will be offered to M&S Bank’s existing customers, but will be available to us plebs very soon. So even if you’re not a regular M&S junkie with a thing about ready meals and wide fitting shoes, you can get a decent deal with the high quality M&S cache.
Well, it beats an account at Costcutters.
Things are changing in the world of crowdfunding and now, loan-based crowdfunding platforms will have to have capital in the vaults to put against the risk of the business, should it fail. And this is according to the Financial Conduct Authority (FCA).
Basically, if you’re going to act like a financial service, then you’re going to be regulated so that consumers can be protected. The FCA have released a 95 page document which details all this and you can read that here.
Investment-based crowdfunding already has regulations in place, but the regulator have updated their rules so that loan-based funding is covered too. Previously, the FCA thought loan-based crowdfunding had a “lower risk than investment-based activities”, but they’ve changed their mind on that.
These new regulations will set ”prudential requirements” and companies will now need “financial resources” to underpin their business, should things go belly-up.
The FCA created a model for calculating how much capital each business will need, which is staggered for each individual company.
“Other protections that we are introducing – such as the minimum capital standards and the requirement for firms to have arrangements in place to continue to administer loans in the event that the platform fails – should provide adequate protection at this time,” the regulator said. “We do not consider that it is contradictory for these firms to be subject to some regulatory requirements but not others.”
“We do not consider it appropriate to mandate specific disclosures or the form and content of those disclosures since business models vary across the market,” the FCA added. “Instead, the rules require firms to consider the nature and risks of the investment, and the information needs of their customers, and then to disclose relevant, accurate information to them. The high-level approach puts the onus on firms to provide appropriate, useful information, and not to over-burden consumers with too much detail.”
These new rules will come into play on 1st April.
As interest rates celebrate five years at their historic low, savers are commiserating five years of complete pants deposit rates. One way to combat microscopic returns could be to invest in peer to peer lending- an industry reporting massive growth in the last year. However, despite the better returns, and improved protection, new figures suggest over eight in ten (84%) consumers would not invest their money with a peer-to-peer lender.
Official figures show the UK’s peer-to-peer lending sector increased by 121% during 2013, yet new figures from uSwitch.com show that only 2% of savers are currently using a peer-to-peer lending platform.
Mostly, consumers are put off by the lack of regulation and statutory protection- almost six in ten consumers (59%) are reluctant to use a peer-to-peer lender because the industry is not covered by the Financial Services Compensation Scheme, and four in ten (39%) say that it is because it is not regulated by the FCA. A further half (49%) are sceptical about using peer-to-peer lenders simply because they don’t know enough about them.
However, regulatory changes are coming to the peer to peer market in April, but this still won’t satisfy some customers. A quarter of those surveyed (25%) don’t want to lend money if they don’t know where it’s going, and one in ten (9%) don’t want to use an online platform.
Jafar Hassan, personal finance expert at uSwitch.com, said: “While the take up of peer-to-peer lending has been low so far, regulation should provide additional peace of mind. But to encourage more widespread adoption, peer-to-peer lenders need to convince consumers that their money is safe, and they can’t simply rely on regulation to do this.
It seems the risk/reward balance needs to tip more in order for more people to get on board with peer to peer. But given savings rates are so pitiful, what are people doing with their money? Some are investing in cash ISAs, although rates this year have so far proven lower than those available last year, and tax relief on nothing is not worth a fat lot. Interestingly, however, 43% of those surveyed are using current accounts to earn interest, such as the Santander 123 cashback account or the Nationwide 5% account. Ten per cent of people have given up on all kinds of formal banking and have stashed their cash in a piggy bank at home.
So what do you do with your spare cash?
The Financial Conduct Authority are very please with themselves, saying that all the major banks on British high streets have made great improvements when it comes to the hard-sell, either replacing or substantially changing the financial incentive schemes which were the cause of mis-selling huge numbers of products.
A number of fines doled out to banks have been influential in changing their cultures – in December, Lloyds were hit with a £28million penalty by FCA after the bank were found to be pushing staff to hard, which resulted in the selling of unsuitable products to customers.
In the latest review, the FCA says that they have found significant improvements at many finance firms and they’re going to keep at them, to ensure that the work they’ve done doesn’t come unstuck and so that further improvements can be made.
Martin Wheatley, chief executive of the FCA said: “Eighteen months ago we gave the industry a wake-up call and it recognised that a poor incentive culture had helped push bad sales practice, which led to mis-selling. We’ve seen some good progress but it is going to take time to see whether the changes firms have made to incentive schemes and their controls stick, and whether good beginnings are part of genuine cultural change.”
“Consumers can be assured that this remains an area that we will be watching closely to ensure poor practice doesn’t return.”
The FCA has identified the areas where banks can better manage incentive schemes, such as checking for increased trends in individual’s sales patterns, or by doing more to correct poor sales behaviour in face-to-face conversations. Importantly, banks are advised that staff should be told that sales bonuses can also be affected negatively by mis-selling, so it isn’t worth staff members simply trying to flog as much as possible without proper conduct.
The watchdog have also warned banks that they shouldn’t replace bonus schemes with other performance management measures which put the same amount and type of pressure on staff. And, it seems to be working with a number of firms changing the way they sell. Barclays, for example, have stopped sales incentives altogether.
However, while the public are still receiving cold calls and emails from branches, there’s still loads to be done. Could this possibly be the end of the hard-sell, or are the banks just playing nicely until the FCA leave them alone?
If you think you weren’t being exploited enough by advertisers, think again.
Moneysupermarket.com are hoping to develop a new revenue stream worth millions, by selling consumer data from approximately a third of the UK.
Advertisers will have access to a wealth of personal data, if these plans go ahead. Moneysupermarket revealed that their financial growth over the next 12 months would be driven by the exploitation of the company’s data and users.
“The data asset in Moneysupermarket is a real foundation for growth,” said Peter Plumb, chief executive. “I don’t think there’s any other business out there that has the breadth and depth of quote data that we have.”
The company, whose revenue passed £225 million in 2013, expect that they can rake in around £10 million from this, but stress that it wants to offer trend data rather than sell off individual customer data.
Now throw your internet into the sea. We’re all for sale basically.
With Royal Mail shares still riding high- investors who got in on the privatisation and still hold shares are now sitting on a profit of around £600- the company is now looking to deliver (arf arf) on its promise of a healthy return to shareholders. By raising the price of stamps.
From 31 March, the price of a first-class stamp is to increase by 2p to 62p while a second-class stamp will go up 3p to 53p, Royal Mail has announced. On the same date, a large letter first-class stamp up to 100g will rise by 3p to 93p and a large letter second-class stamp will increase by 4p to 73p.
While consumers may be dismayed at the increase, we can all breathe a sigh of relief that the increases were not as painful as those inflicted two years ago, when the cost of a first-class stamp jumped from 46p to 60p, leading to predictions the price of a first class stamp could reach as high as £1 before long.
Nevertheless, despite the increases, Royal Mail insisted its prices were “amongst the best value for money in Europe”. But then they would say that, claiming the average across Germany, France, Spain and Italy (because there aren’t any other, cheaper, countries in Europe at ALL) for first-class letters is 67p and 60p for second class. The company also reminded us how good we have it by informing us that it could have increased second-class stamps by 7p, instead of the 3p it chose to in order to fund its “high quality, six-day-a-week, one-price-goes-anywhere universal service.”
Unsurprisingly, the Federation of Small Businesses is unimpressed, suggesting businesses might want to pass the cost on to their customers, but chief executive of the Greetings Card Association Sharon Little was not fazed, claiming the ‘minimal’ price increases would not affect her members. This is despite her claims that more greeting cards are sent in the UK than any other nation. This latest price increase will cost an average 64p extra per person per year just on greetings card postage.
Looks like those of us who aren’t Royal Mail shareholders will have to turn to jib jab to annoy our friends and relatives for free instead of forking out to send them a lovely card.
Either way, this new currency is becoming quite the thing for web-crusties who look at it like it is our saviour from the banks, despite having to shut down recently, thanks to a massive loss. In Britain, it is all set to grow as HMRC rules that they’re not at all interested in charging VAT on Bitcoin transactions.
The Tax People held talks with UK Bitcoin traders last week and decided that they would not charge the 20 per cent VAT tax on trades, and, on top of that, wouldn’t be charging the tax on entrepreneurs’ Bitcoin margins either.
Suddenly, shark-eyed business sorts are thinking of getting on-board with the Hippie Money now that Britain will be one of the most tax-friendly places for this cryptocurrency. And they’re right to keep an eye on it. At the moment, there’s around $6.9bn worth of Bitcoins in circulation.
As Bitcoins are not traceable, this could be an excellent area for criminals and tax-dodgers to get involved in. Your dealer might start dealing solely in Bitcoins. Vodafone and Chris Moyles might start getting on it too.
Jonathan Harrison, someone looking to bring Bitcoin ATMs to the UK, thinks this is good news, saying: “If they had added VAT that would have destroyed us, there would have been no point in starting this business at all. It’s great that the UK authorities are seeing Bitcoin as an innovative technology that can help the economy.”
Is this the money of the future? We all know how well the babyboomer hippies did when it came to making money, don’t we?
It turns out that one in five of us missed an important bill payment last year, and one in 10 have received a court summons as a result. This cheering news comes from research commissioned by Moneysupermarket.com for their far-too-jauntily named ‘Bill Barometer’, which showed that we’ve missed a total of 15 million bill payments.
And when you examine our monthly outgoings compared to our piffling and paltry wages, you’ll see why we’re ‘accidentally’ losing that gas bill down the back of the sofa. The average household spends £1360 on essential bills like rent, mortgages and utilities.
So what are we neglecting to pay? Well, we’re most frequently failing to pay credit cards, loan repayments, and often childcare costs. And even more worryingly, one in five people say that their outgoings would only have to rise by £50 a month to make them completely unmanageable.
‘Many households are precariously juggling their bill payments, choosing which to pay and which to ignore.’ Says Claire Francis from Moneysupermarket. ‘It’s a balancing act that can’t continue long-term without significant implications. Given interest rates are likely to start rising next year, leading to increases in the cost of borrowing, it is a real concern that many people won’t be able to cope.’
Excuse me, Mr Osborne – before the Bank of England puts up interest rates – please can we have some more?
The RBS, after announcing an £8.2bn mega loss, has decided to turn into a nice, cosy, manageable British bank, ‘with the needs of its customers at its core.’
While you may be excused for approaching this new way of thinking with the same skepticism you might apply to the Big Bad Wolf dressed up as granny, the question is – what will RBS’ proposed changes mean for us?
For borrowers, RBS propose to cut 0% balance transfer deals on credit cards to stop the current practice of people borrowing from elsewhere and then moving their debts around from bank to bank. Instead they’re offering a range of credit card deals with initial interest free periods, including a platinum card which is interest free for the first 28 months.
Hmm, ok. Except, according to financial expert Andrew Hagger: ‘People are quite happy to shop around for these deals, they don’t necessarily take a credit card from the bank their current account is with, so if they want a 0% deal they will look elsewhere.”
They’re also going to stop offering online customers different interest rates, giving savers a less confusing range of products. But unfortunately the rates aren’t very competitive.
The problem is, other banks are also scrapping 0% balance transfer deals and simplifying their range of savings accounts, too. Got anything else up your sleeve, RBS? Well, their final promise is to improve customer service, but we’ll believe THAT when we see it.
So why would you trust RBS? Perhaps they need to offer something more exciting. Like free biscuits? Offer me some free biscuits, and we’ll talk.
If you put any trust in Bitcoin as a valuable commodity, rather than made up money generated by spods and sold on eBay, you may find yourself out of pocket. In the real world, this is like Barclays going bust, or something. It’s big, anyway.
It’s not the first time Mt.Gox has been hacked – it happened way back in 2011 when 400,000 Bitcoins were lost. But back then they were only worth $9m and the company was able to reimburse its customers. Now, it’s well and truly in Bits, with an estimated 1 million customers having lost the lot. And because it’s not a bank, and the whole thing is ephemeral internet money, customers have nothing to fall back on. No insurance, no account protection – nothing.
So does this mean the end of Bitcoin? Will this most unpredictable of currencies go on to fight another day, or will we all start trading Monopoly money, pebbles or groats instead? Well, there are still plenty of Bitcoin companies out there, who vow to thrive after what they call ‘this tragic violation’ of Mt.Gox. So it depends whether the Bitcoin community still has confidence in these unregulated sites.
Most of us though, will probably remain unaffected. Because we still have no idea what Bitcoin is.
Few of us actually like paying our taxes, but most of us have little choice in the matter when it is deducted from our salaries before we even get paid. However, it might ease the bitter pill to discover that many of us are actually better off because we pay taxes.
Confused? The answer lies in the net benefits to taxpayers, and accountants Smith and Williamson have concluded that the cut-off point at which you receive less than you contribute is actually higher than you might have thought, and falls on gross household incomes of around £35,000 to £38,000. Anyone earning less than this is, theoretically at least, quids in.
The point at which a household switches from being an overall ‘taker’ to a ‘giver’ is where disposable income, passes a threshold of about £27,000 net. At that point a household is receiving benefits (not just cash benefits, but includes societal benefits such as average usage of school and the NHS) and paying taxes to the extent that the two cancel each other out. If a household earns more than this tipping point, it is a ‘giver’ and pays more in taxes than it receives. If the household earns less, they get more than they pay out, a ‘taker’.
Although Smith and Williamson stress that numerous factors are involved, and dependent on individual circumstances, take the following example of a household with a gross income of £39,000. Just over the break-even, the household would enjoy benefits quantified at just under £12,000, but would be required to contribute almost £13,000 in various taxes, making it a net ‘giver’ by around £1,000.
The calculations showed that, actually, most of us are takers rather than givers. The top 40% of households by earnings are carrying the lower-earning 60%. This is supported by Institute for Fiscal Studies (IFS) figures that suggest 300,000 very high earners, out of about 30 million income tax payers, paid 30% of all income tax. It said that over a period the income tax burden had been pushed increasingly on to this narrow band of top earners- in 1980 the top 1pc of earners paid 11% of all income tax.
At the same time, the number of taxpayers is falling, in part owing to rising personal allowances taking the lowest earners out of tax- between the tax years 2011-12 and 2013-14, the number of income tax payers has dropped by 900,000 to 29.9 million. HMRC has also commented that receipts from higher earners are less predictable, partly because wealthy people can easily emigrate to a more tax-favourable jurisdiction.
So are you a giver or a taker? And which would you rather be- a household with less cash, but getting more out of the deal, or one with more cash, part of which you have to share with 60% of the population…
A case that has been rumbling for some time has now received judgement in the Court of Appeal. Previously, victims of financial loss as a result of mis-selling or inappropriate advice could take their case to the Financial Ombudsman and then also sue the financial firm allegedly responsible for the loss in civil court. The new judgment, on the back of opposing previous judgments, makes it clear that accepting Ombudsman compensation precludes complainants from later suing on the same matter.
While this might initially sound like a triumph of common sense, consumer groups are decrying this as a blow for consumer rights, given that some victims would use their Ombudsman payout, a process which is free, more streamlined and enables faster payouts, to enable them to fund a civil case. It is conceivable that those who have suffered financial loss at the hands of a shoddy adviser might not have oodles of cash with which to fight a court case.
Currently, the financial ombudsman can award maximum compensation of £150,000 to a customer who has suffered a loss due to issues such as negligence, poor financial advice or mis-selling.
The new ruling concerns the case of Barry Clark, 70, and his wife Julie, 68, of Portsmouth, who were clients of In Focus Asset Management and Tax Solutions. The firm advised them to invest the proceeds of the sale of a family business in a geared traded endowment plan. The product was unsuitable for their needs and ended up costing them losses of £500,000- so the couple complained to the ombudsman.
The ombudsman upheld the complaint and awarded the maximum compensation, which was £100,000 at the time. Mr and Mrs Clark then used the money to issue proceedings in the county court for additional losses.
In her judgment, handed down today, Lady Justice Arden acknowledged the way people were combining the two routes to compensation, but felt it was potentially harmful to consumers. She said: “If the Clarks succeed, a complainant may be able to use an award as a fighting fund for legal proceedings. On the face of it this result would be for consumers’ interests, but that is not necessarily so.
“If they lose court proceedings, it may lead to them losing all that they have gained through the FOS [Financial Ombudsman Scheme]. It may also lead to the development of a claims industry in this field that increases the costs of obtaining financial advice: there are already 210 ombudsmen and many more might be needed if a larger group of complainants can apply.” In 2013, the ombudsman received over 500,000 complaints, half of which were upheld, although this does include endless PPI compensation claims.
While many people would want to avoid the UK turning into as litigious a state as some others around the world, is it right that the Clarks are down £400,000 (and more now, after losing the case at appeal) with no means of further redress? Doesn’t this ruling mean that it will be only those who have pots of spare cash to fund a legal challenge who will be able to get their full compensation?
Would you believe it – the Bank of England says it has ‘no power’ over the massive property bubble at the higher end of the housing market, bringing a return to outrageous prices in London.
Speaking on the Andrew Marr show, Mark Carney, the guv’nor, played down the idea that there actually WAS any bubble, and mumbled something positive about recovery and the Help to Buy scheme.
Carney explained that as massively rich people were buying properties in London with cash, there was little it could do but ‘watch’ as prices soared.
‘It’s driven in many cases by foreign buyers’ he said. ‘We as the central bank can’t influence that. We change underwriting standards – it doesn’t matter, there’s not a mortgage. We change interest rates – it doesn’t matter, there’s not a mortgage, etc. But we watch and we watch the knock-on effect.’
This comes as the most expensive property in London went on the market last week in Mayfair, a 21 bedroom mansion priced at £90m.
So soon we’ll all be living in ditches, priced out of the market, while the oligarchs fiddle around in their home cinemas and underground swimming pools. But you know, everyone’s hands are tied – sorry!
Still, while all that lovely foreign money rolls right in, the Tories would be delighted to give all you ‘hardworking families’ a 95% mortgage on a terraced hovel in Rotherham. Will that do?