Jan/100
Firm fined for not complying with FSA principles and rules
The FSA has fined a Derbyshire-based financial advice firm and its two partners a total of £49,000.
The failings at Sett Valley Insurance Services were identified during an FSA visit focussing on the fair treatment of customers, as part of its assessment programme for small firms.
The subsequent FSA investigation identified a number of problems with the firm’s sales and advice processes, including a failure to record sufficient information about customers’ personal and financial circumstances to ensure the suitability of any advice they gave, and a failure to communicate with them in a way that was clear, fair and not misleading. The firm’s systems and controls were also inadequate and did not meet the FSA’s requirements.
Jan/100
Mortgage Fraud in legal firms
Investigations carried out by the Solicitors Regulation Authority as part of a crackdown on solicitors involved in mortgage fraud have totalled 106 in a short period of time.
As a result of the audit 22 law firms have now been closed down, and a further 24 cases have been referred to the police for investigation. Another 30 cases have been referred by the SRA to the Solicitors Disciplinary Tribunal, which has the power to strike off solicitors, with other investigations continuing.
The level of fraud is colossal, and it is estimated that this investigation alone has saved lenders between £15m and £20m.
The regulator handled over 400 cases of suspected mortgage and property fraud last year, an increase on the 356 reports in 2008 and just 85 reports in 2005.
The SRA has now issued advice and warnings to all solicitors’ firms, alerting them to the warning signs of suspicious transactions.
It has also reminded firms that they need to ensure they do not become embroiled in fraud and to report any suspicions they may have.
“We are committed to working closely with the SRA during 2010, and beyond, to target corrupt solicitors who we believe are a significant enabler of property fraud.” Robert Wishart, detective superintendent of the City of London Police, national lead force for fraud investigation.
Steve Wilmott, head of the fraud and confidential intelligence bureau at the SRA, says: “Last year the SRA stepped up its work to prevent, deter and tackle mortgage fraud.
“Mortgage fraud is a serious issue for home owners and lenders.
“We are working closely with major lenders and the police to share intelligence and take prompt action.
“Working in collaboration will help us to better understand the threats and give us the opportunity to take preventative and enforcement action to protect the financial community”.
Jan/100
The darker side of right-to-buy
Right to buy was introduced almost 30 years ago, hailed as a social revolution that would transform council estates. The reality shows a less rosier picture of fractured communities, exploitative landlordism and a severe lack of affordable housing. Most of the housing exists as the remains of the “homes for heroes” scheme initiated during the twenties by Prime Minister Lloyd George. Yet it is another historical piece of government policy that has influenced the shape of Britain’s streets. In December 1979 the Conservative government published the housing bill that allowed council tenants’ right to buy their homes. The idea was that those who bought their homes would take pride in their property, looking after them more because they had a personal investment in it. Ken Collins like many others bought his house, through right to buy and has expanded his home into a valuable asset. Ken not only benefited financially, he believes that residents who bought their homes became more responsible for them which in turn improved the quality of the entire neighbourhood.
In the long-term the financial benefit to right-to-buy owners is apparent, however the long lasting social effects are clear to be seen in what were previously council estates like Dagenham. Critics of the right to buy scheme argue that right to buy has pushed ‘social housing’ out of affordable areas and replaced it with private sector leasing. Landlords rent these properties out on short term leases to large families, often vulnerable in desperate situation which has an overall negative effect on social cohesion. Furthermore there is evidence to suggest a more under hand practice lurking in London’s council estates. Those reluctant to give up their council tenancies unofficially sub-let properties for cash-in-hand, selling their front door keys, further eroding communities making them increasingly unstable.
It is unsurprising that council tenants choose a less savoury route when we consider the problems taking the official route. This is particularly noticeable in situations were the tenant becomes a leaseholder on buying their ex-council flat. Some councils charge the leaseholders for building improvements, this can lead to demands for vast sums and leave people with no option to sell up rather than remain in their homes. The problem is that the right to buy scheme ignores the fact that many of the council tenants are low income families and rather than handing them an opportunity to secure a home for their future it places them in impossible financial situations leading to debt or worse with no home. Ironically, it is the council that offers an opportunity for those leaseholders struggling to pay back their mortgage a way out, they offer to buy the property back for council housing, some skeptics go so far as to say that the service charges are a way of emptying housing that is desperately needed in popular areas.
The biggest fear is that the reluctance from government to decrease right to buy is taking away the right to rent from people who can not afford to buy. A balance needs to be maintained between those who wish to rent and those who want to become homeowners and the only way forward is to build more affordable housing.
Jan/100
Mis sold Mortgages
Mortgage mis-selling case could impact on repossession
The Financial Ombudsman Service (FOS) has found that a previous homeowner, whose property has been repossessed by their lender, was actually mis-sold their mortgage in the first place.
The petitioner had already lost her home at the time of the FOS ruling but was awarded compensation once it was established that the mortgage had been mis-sold.
According to the Guardian newspaper, on 25th March 2009, the ruling could set a precedent that would prevent repossession where it can be shown that a mortgage has been mis-sold.
The case hinged on rules covering ‘suitable advice’. Nevertheless, some lawyers who have considered the case are hopeful that in future the ‘suitable advice’ clause could be used to actually prevent repossessions occurring in these circumstances.
The scandal of mortgage mis-selling in the UK was addressed in a Citizen’s Advice Bureau report published in 2007, entitled ‘Set up to Fail’.
The report was based on 1,200 case studies from 360 Citizens Advice Bureau across the United Kingdom.
It found that many lenders and brokers were not ensuring that borrowers understood the risks of entering into a mortgage or were aware and agreed with what the policy entailed. The research also revealed that in some cases, it seemed that the lenders did not check whether the borrower could even afford the mortgage repayments from the outset.
Jan/101
What is debt management?
A debt management plan is a structured repayment plan set up by a designated third party, assisting a debtor with repayment of his or her debt. The aim of debt management is to help clear the debts at a reduced level over a fixed period of time to help the debtor make a fresh start with their finances. The client and all their debtors must agree to the arrangement and the client has to be able to meet the requirements.
Deciding to use the services of a debt management company may be hard. It can be difficult for some people to even admit that they need help and many people will wait for their financial life to spiral completely out of control before seeking assistance. Seeking the help of a debt management company early can help you get back in control and assist you towards a debt free future.
A debt management company can help the average consumer take control of their debt problems quickly. They can reduce or eliminate current levels of debt whilst helping the consumer to understand the factors that led to the debt and how to avoid these factors in the years to come. A good debt management scheme can help a consumer create a realistic budget plan to carry them forward in the future once the current debt has been eliminated. Making a monthly budget and keeping to it may well be the most essential financial decision anyone can make, but very few people will take the time to make a budget. Debt management schemes can teach this important skill and also provide their clients with expertise to remain debt free.
How does debt management work?
Firstly a debt advisor will offer advice on ways that you could save money by looking at the way you budget. They can then help you to carry out an assessment of your financial situation and debts by asking you a series of questions. By asking these questions they get a more accurate picture of your finances. It is essential that you are truly honest when they are going through your finances with you to enable the debt advisor to give you the specific help you need. This information is used to calculate how much you can comfortably afford to pay each month out of your disposable income.
Once this amount has been agreed, your creditors will then be approached and asked to cease all charges and negotiate a different repayment schedule with them, which will be easier to manage every month. In most cases creditors are happy to agree to the plans, because they know from experience, that such plans are realistic and sustainable.
You then make a single monthly payment, all of which is distributed to your creditors on your behalf. It is important that the payment is made into your debt management plan every month. Throughout the duration of your plan, you will be able to speak with an experienced debt advisor whom you should contact if you experience any problems whilst the arrangement is in place.
Your debt management plan will be reviewed at regular intervals to ensure that it still meets your circumstances. If your financial situation changes, the debt management company have the flexibility to be able to renegotiate payments on your behalf.
When it comes to reducing and eliminating current debt, a reputable debt management firm can be a very effective way to reduce debt and eliminate all the stresses it causes. While creditors are often reluctant to work directly with consumers to renegotiate the terms of their debt, they are often very willing to work with a legitimate debt management company who know the lingo of the credit card company or the bank. Speaking the same language, they will know how to negotiate the best possible terms on the repayment of a consumer’s debt. Whenever you find yourself in debt over your head, chances are a debt management service can be a big help.
Jan/100
Plans to help people solve their debt problems as quickly and fairly as possible
Debt Management Schemes are designed to assist those who are in debt and are unable to meet their commitments. In these situations finances are assessed and a monthly repayment deal is negotiated with all their creditors which all sides agree to and the debtor is able to maintain.
The consultation explores whether there would be benefits for debtors through:
- more consistent operators’ charges
- interest and other charges being frozen once a payment plan has been agreed
- the opportunity to pay off debts over time without requirements to sell homes or other assets
- protection from enforcement procedures from creditors (unless the creditor receives court permission
- better advice on the full range of options available to deal with debt problems
- changes, if introduced, to existing schemes would also be aimed at assuring creditors that they:
receive maximum returns
will not need to spend time and money on chasing debts
will have clients’ financial details regularly provided to them in a consistent format
will be confident that they are receiving the maximum possible monthly instalment.
Taking tough, swift action against firms who fail to operate within the rules and who provide sub-standard services to consumers with problem debt remains a high priority. Later this year, the Office of Fair Trading plans to launch a review of its Debt Management Guidance to obtain a clearer picture of compliance levels within the debt management sector and take appropriate follow-up action.
Other measures to help consumers and homeowners in financial difficulty include:
- Changes in eligibility criteria for Income Support Mortgage Interest for homeowners getting Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit. Where they have a mortgage, those benefits may include an additional element called Support for Mortgage Interest, which assists the homeowner with the interest on their mortgage.
- The Homeowner Mortgage Support Scheme enables eligible borrowers to reduce their monthly mortgage interest payments to affordable levels for up to two years, helping them get back on track with their finances if they suffer a temporary loss of income.
Significant funds invested to strengthen the provision of debt advice, including:
- £130 million in England and Wales between 2006 and 2011 for free face-to-face debt advice
- an additional £10 million last November to support longer opening hours at over 330 Citizens Advice Bureaux
- £5.85 million for the National Debtline to increase frontline staff levels by 50
This is in addition to the investment in legal advice available through the Legal Services Commission to help those in need in the current economic climate.
The new self-help debt advice toolkit being developed by the Money Advice Trust and funded by BIS will enable those who can to negotiate debt repayments with creditors themselves with more targeted advice agency support. This will allow debt advice agencies to prioritise their resources better and advice more clients who need in depth help.
Jan/100
Advantages of debt management plans
Advantages of debt management plans
- Allows you to bring income and expenditure back into line without taking on more borrowing;
- You can follow this option by yourself or with the help of a no fee charging debt advice agency.
Disadvantages of debt management plans
- There is no guarantee that your creditors will accept the reduced payments and/or freeze future interest payments;
- The time taken to repay your debt will increase. The time will further increase if you pay your debts through a fee-charging debt management company;
- Your credit reference file will show details of the Debt Management Plan. This will affect your ability to get credit in the future.
Debt management plans can be a good option if:
- Your financial problems are caused by a temporary reduction in income and the situation will improve in the near future.
Debt management plans can be unhelpful if:
- Your ability to pay your debts will not improve within 12 months.
Debt management plans can be disastrous if:
- The fees taken by commercial debt management companies and the refusal of banks and credit card companies to freeze interest means that your debt steadily increases.
Jan/100
Sale and rent back to right-to-buy home owners
Right-to-buy owners who have come into difficult financial diffculty are being tempted into “sale and rent back”. The scheme offers a way out for many homeowners who found themselves struggling to pay for a mortgage that should have neve been sold to them in the first place. A “sale and rent back” is whereby a homeowner sells their property to a private company at a discount price and in return are allowed to remain in their home as a tenant.
The overall appeal is obvious but But Denise Rooney of Chas Housing Aid Centre, Kirklees, says many schemes fail to deliver: “We have cases where people are allowed to remain in the home for a much shorter time than they were led to believe or the company they sold their home to goes bust, the debt is sold on and they are evicted.” This can result in famikies being left with no where to go or turn to, as they are deemed “intentionally homeless”. The statistcs are backed up by housing charity Shelter who note more than 600 households were classified as intentionally homeless due to mortgage arrears in 2008.
The “sale and rent back” scheme offers a hand to those in desperatefinancial times, but the human cost seems to outweigh the financial benefit.
Jan/101
Right-to-buy trap for homeowners
A recent survey concluded that people who buy their council homes under right-to-buy schemes are more likely than other homeowners to get into mortgage arrears and therefore risk losing their homes. The survey carried out by Consumer Focus between March and May found that nearly one in 10 who had bought their council home got into difficulty in the previous three months.
The findings came as no surprise to property experts such as Val Blood, of North Yorkshire Housing Advice Resource Project, who stated “During the property boom, council tenants were encouraged to take out mortgages they simply couldn’t afford,” she says. “Companies leafleted whole estates and especially targeted tenants in rent arrears with the promise of paying off what they owed and allowing them to buy their home as well. But if you can’t pay your rent, how can you pay a mortgage? Within a year many were facing repossession and often ended up homeless.”. A possible attriburte to this consequence was the fact that people who had taken out a mortgage on a council home were 50% more likely to have other debts secured against it. The positives of right-to-buy were projected way above the negatives and lured many people into taking a mortgage out and a risk they could not afford. Brian Coulson, housing lawyer at Bury Law Centre added, “There has been a lot of hard sell on TV and cold-calling from lenders encouraging right-to-buy homeowners to ‘release the equity in your home’. When you’re struggling to make ends meet, these offers are hard to resist.”
One such unfortunate right-to-buy homeowner, Glen Mason knows only too well the devastating effects of the right-to-buy scheme. “I thought buying the flat would make my retirement easier,” he says. The increasing outgoing payments to store cards and credit card debts soon mounted and Glen was unable to keep up his mortage payment. It came at the worst of times, when the recession hit Glen lost his job and left him in the most despertae of circumstances
Barclaycard and some of his other lenders successfully applied for charging orders, securing the money they were owed against Mason’s home. Last month a judge granted Mason’s mortgage company a possession order, and gave him 28 days to vacate his home. He stated, “What makes me angry is knowing that if I had still been renting from the council, housing benefit would have covered my rent when I lost my job and I would still have a home.”
Jan/100
Debt collectors 1st Credit restrained by OFT
Debt collection firm 1st Credit Ltd has been made by the Office of Fair Trading to clean up its act. Following an investigation by the OFT it concluded that 1st Credit “failed to meet satisfactory standards”. The OFT laid down guidelines which 1st Credit must comply, these include to;
refrain from issuing statutory demands warning of bankruptcy where it is unlikely that proceedings will be initiated;
not discuss legal action with consumers unless it is likely that such action will be taken;
ensure that sensitive cases involving vulnerable individuals, for example those with mental health or medical problems, are dealt with appropriately;
ensure that all matters of concern raised with them by the free advice sector and other third parties are dealt with appropriately.
This is a positive step for those indivuduals who feel bullied by companies such as 1st credt, who often use Statutory demands to scare debtors into paying off debts which in the long run may place them in a worse financial position.
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