Financial Conduct Authority concerned over personal debt

The deadline for PPI claims is August 2019 and the FCA is overseeing an awareness campaign to ensure pay-outs are claimed.

Image copyright
Getty Images

Image caption

Andrew Bailey is the chief executive of the FCA

Mr Bailey said there had been a big increase in consumer borrowing, such as loans, overdrafts, credit card debt and car finance.

This echoes concerns raised by the Bank of England. Its Financial Policy Committee said there had been an acceleration in debt last year.

Consumer credit lending is still less than 10% of all lending by UK banks to household borrowers. It is also far smaller than mortgage lending, which amounts to 70% of loans to households.

But UK lenders stand to lose much more on their consumer credit loans if there is an economic downturn and their borrowers default on their credit card and other personal loans.

A Lords committee also recently called for stronger controls such as a cap on rent to own products.

The FCA is already conducting is own inquiry into overdrafts, door-to-door lending and other forms of guaranteed loans.

This includes considering whether a compulsory limit should be placed on overdraft charges. Consumer groups have consistently argued there should be one in place.

Post-Brexit

The FCAs mission statement also signals it is aiming to remain flexible in its response to Brexit.

The UKs decision to leave the European Union creates uncertainty for both the UKs financial industry and the FCA, Mr Bailey said.

Both we and the government are keen to ensure that the financial services industry remains resilient and well placed to meet users needs and thus make the most of opportunities in a post-Brexit world.

Leaving the EU inevitably creates a higher risk of disruption to our business plan priorities.

Mr Bailey was asked on the BBCs Today programme whether he would be happy regulating firms in the City if the UK had no say in making the European rules that firms in London may have to adhere to.

We cant just be a rule taker, that frankly doesnt work for any country, he replied.

Personal Finance Advice

Personal finance is one of the more popular topics on the Internet. Unfortunately, financial education is lacking at all levels of American society. This contributes to people getting into poor situations that are not necessary. Here are some tips that can help you get into great financial shape.

Minimize The Interest You Pay

Every dollar of interest that you pay to the bank is a dollar that will not go toward building your net worth. That being said, there are instances in which using leverage from debt can allow you to get ahead. For example, it might make sense to take out a mortgage on a rental property so that you can start to build a positive cash flow while letting others pay off your loan. Also, a student loan could help you get training for a job that could really pay off in the long run.

It might also make sense to take out a new loan to consolidate multiple other loans that youve taken out for whatever reason. These could be debts from personal loans or credit cards. Making one payment, rather than several, might free up some cash and allow you to pay off the debt more quickly. Of course, its a good idea to compare the loans that are available so that you pay no more interest than absolutely necessary.

Start To Save

The price of easy money

Personal loans normally come with a processing fee of 1-2 per cent, which means for a loan of Rs 3 lakh, a processing fee of Rs 3,000-6,000 needs to be paid. Pre-closure charges are generally low on personal loans (ICICI Bank charges 5 per cent or nil for loans over Rs 10 lakh; HDFC Bank charges 4 per cent or nil for a loan amounting to more than Rs 10 lakh).

Some banks like Axis and SBI do not penalise customers for prepayment of personal loans once they clear their first EMI. In the case of credit card loans, the processing fee is 1 per cent while 3 per cent of the outstanding principal amount is charged as foreclosure fee.

Financial Services Companies in New Zealand

If you are looking for the best financial Service providers in New Zealand, the given information below will easily inform you on how to get financial services from these popular financial companies New Zealand;

1)Bridgecorp Holdings Ltd

  • This is a financial company that is operating in New Zealand and was originally on the list of the stock exchange market.
  • It is a property development group that has branches in Australia.
  • Bridgecorp moved the headquarters in Sydney, Australia after the few times of rejection to the NZX.

2)Brierley Investmens Limited

  • This financial company was established in New Zealand in 1961 by the veteran Sir Ron Brierley.
  • In 1985 was listed in the stock exchange in Australia and become one of the best and most successful companies in the 80s.
  • In the 90s the company had poor investments and very high foreign exchange.
  • It is one of the best financial companies in New Zealand that is offering this type of services.

3)Hanover Finance

  • This is a finance company that is not a bank.
  • Its focus and aim are on the property development and prevent the high risk of failure.
  • It is lead by Mark Hotchin and is one of the largest companies in New Zealand providing services like financial support, accounting services and finance interests.

4)Angel Investment

  • This is another financial company located in New Zealand that has leading services in the field of finance.
  • It operates by connecting and associating those investors who want to invest in the company.
  • Harmoney Limited also provides personal loans and the focus of the company is directed towards expanding the loan business in the future.
  • It was established in 2014 and was the first licensed company operating in this field.
  • It also provides financial legislation and is governed by board of directors.

5)Sovereign Assurance Company Limited

  • The Sovereign Assurance Company is located in New Zealand and is a financial company that provides health and life insurance, investments and works with loans.
  • It is part of the ASB Group and was established in 1989 as was operating as investment and insurance provider.
  • Its expansion was in 1996 when the company was acquired by the ASB Group and integrated in the financial sector of the country.

6)Pioneer Finance

  • It is one of the largest companies in New Zealand and was established in 1922.
  • It offers services like financial support, accounting services and loan services.
  • It was considered as the best and largest financial institution in the country.
  • The company offers services to the government of New Zealand as well and it has a specialty in the personal loans.
  • In 2000 had almost 35,000 investors and was considered to be $NZ 2 billion worth.
  • The financial company owns 13 other companies which operate as branches in the other parts of the country.

7)Veda NZ Limited

  • This is one of the largest financial companies in New Zealand and previously was called Baycorp Advantage.
  • It is like an agency that operates with credit reference and supplies the companies and the individuals with the needed information.
  • It was owned and managed by the Privacy Act.
  • The company contains a group of providers which shares the information with the members.
  • The company had the biggest debt collection in New Zealand that was sold for $97 billion in 2007.
  • It is definitely among the best financial companies in the country.

8)Kiwibank Limited

  • This is a financial company that is owned completely like a subsidiary and is part of the New Zealand Post limited enterprise.
  • It provides services like banking, accounting, withdrawals, loans, finance support and credit services.
  • The bank was established in 1987 by the government in New Zealand and was separated as a stand- alone company.
  • In 1989 was sold to the government to ANZ.

9)DFC New Zealand Limited

  • The company existed from 1964 until 1991 and was part of the financial industry in New Zealand.
  • It was a joint among the government and the Reserve Bank in New Zealand and operated in the applied technology sector and the business capital funds

10)Electronic funds transfer at point of sale

  • This is also known as EFTPOS and is a type of electronic system that is based on the transfer of funds: credit card, debit card or payment card funds.
  • The technology of the system originally is from USA.
  • The cards that are used in the payment methods in the system need to have a bank card number according to the numbering standard and each card has to be specifically identified.

Bank orders loans review as consumer debt rises

An increase in personal loans and rising levels of debt on credit cards have led the Bank of England to announce a review into whether the UK’s biggest banks have let their lending criteria become too loose.

Britons are taking out unsecured loans at the fastest rate in more than 11 years and the Bank’s financial policy committee, which oversees financial stability, is concerned that a surge in the indebtedness of households could fuel another debt bubble, noting that consumer credit was “growing particularly rapidly”. In January, a member of the FPC described the rise in unsecured borrowing as a “flashing light”.

Debt charities have warned that calls for help are increasing. StepChange said it had received a record 600,000 calls asking for help with…

Americans are dying with an average of $62K of debt

You’re probably going to die with some debt to your name. Most people do. In fact, 73 percent of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.

The data is based on Experian’s FileOne database, which includes 220 million consumers. (There are about 242 million adults in the US, according to 2015 estimates from the Census Bureau.) To determine the average debt people have when they die, Experian looked at consumers who died from October to December of 2016,

It found that 73 percent of consumers had debt when they died. Sixty-eight percent of those with debt had credit card balances. The next most common debt category was for mortgages (37 percent), followed by auto loans (25 percent), personal loans (12 percent) and student loans (6 percent).

These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.

That’s a lot of debt, and it doesn’t just disappear when someone dies.

For the most part, your debt dies with you, but that doesn’t mean it won’t affect the people you leave behind.

“Debt belongs to the deceased person or that person’s estate,” said Darra L. Rayndon, an estate planning attorney with Clark Hill PLC in Scottsdale, Arizona. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors lose out (they may get some, but not all, of what they’re owed). Family members do not then become responsible for the debt.

That’s the general rule, but things are not always that straightforward. The type of debt, one’s geographical location and the value of the deceased’s estate significantly affects the complexity of the situation. (For example, federal student loan debt is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.)

There are lots of ways things can get messy. Say your only asset is a home other people live in. That asset must be used to satisfy debts, whether it’s the mortgage on that home or a lot of credit card debt, meaning the people who live there may have to take over the mortgage, or your family may need to sell the home in order to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else’s shoulders.

“It’s one thing if the beneficiaries are relatives that don’t need your money, but if your beneficiaries are a surviving spouse, minor children — people like that who depend on you for their welfare, then life insurance is a great way to provide additional money in the estate to pay debts,” Rayndon said.

One way to make sure debt doesn’t make a mess of your estate is to stay out of it. You can keep tabs on your debt by reviewing a free snapshot of your credit report on Credit.com, in addition to sticking to a budget that helps you live below your means. You may also want to consider getting life insurance and meeting with an estate planning attorney to make sure everything’s covered in the event of your death. If you’re worried about leaving behind debt after death, here’s more on how protect your loved ones.

Poor planning can leave your loved ones with some significant stress. For example, if you don’t have a will or designate beneficiaries for your assets, the law in your state of residence decides who gets what. “If you don’t write a will, your state of residence will write one for you should you pass away,” said James M. Matthews, a certified financial planner and managing director of Blueprint, a financial planning firm in Charlotte, North Carolina. “Odds are the state laws and your wishes are different.”

It can also get expensive to have these matters determined by the courts, and administrative costs get paid before creditors and beneficiaries. If you’d like to provide for your loved ones after you die, you won’t want court costs and outstanding debts to eat away at your estate.

Remember, estate planning can involve more than just drafting a will. Here are seven documents you’ll need to fill out before you die.

Christine DiGangi is a deputy managing editor at Credit.com.

Any opinions expressed in this column are solely those of the author.

More on Credit.com: How to Pay Off Your Credit Cards Trapped in Payday Loan Debt? Here’s How to Escape My Credit Is the Worst. How Can I Fix it?

Credit card rates high, but personal loan rates also too high

She points out that instead of falling in line with the cash rate, the average credit card interest rate has dropped only slightly since mid-2011 from 17.41 per cent to 17.35 per cent.

If rates had moved in line with the cash rate, Australian credit card holders would have paid $3.49 billion less in interest since mid-2011.

Choice is citing figures from comparison site, Mozo, which shows thatalthough the Reserve Bank has cut rates by 3.25 percentage points since June 2011, credit card holders have seen little relief in the form of cuts to credit card purchase rates.

Personal loan rates

But whilemost of the attention is given to mortgage and to credit card interest rates, the rates charged on personal loans is slipping under the radar, leaving the banks to maintain high rates withlittle scrutiny.

The gap between the average unsecured fixed-rate personal loans and the official cash rate has reached its highest point on record.

Since 2000, the gap has almost doubled, analysis of Reserve Bank figures by comparison site Finder shows.

Between 2000 and 2009, the gap was between 6 and 7 percentage points.

It climbed to about 10 percentage points during the global financial crisis in 2008.

The cash rate set, which is set by the Reserve Bank, sits at 1.5 per cent, while the average unsecured fixed personal loan rate is 13.9 per cent – a difference of 12.4 percentage points – the highest on record.

While the credit card interest rate gap has increased by 77 per cent since the start of 2000, the gap for fixed-rate personal loans has increased by 92 per cent.

Less scrutiny

The personal loan interest rates tracked by Finder are for fixed-rate loans where the loan is unsecured, as is the case with credit card debt.

Borrowers expect to pay higher interest on unsecured loans that are riskier for lenders compared withlending with security over the borrowers home.

But its the level of interest rates of credit cards and personal loans that concern Choice and others.

Kirsty Lamont, a director of Mozo, says that during the last period of rate hikes between late 2009 to late 2010 when the cash rate increased 1.75 percentage points, the big four banks each passed through the full increase on their credit cards, with two hiking by even more.

ANZ and CommBank jacked-up interest rates across their card portfolios by an average of 1.75 percentage points, while Westpac and NAB whacked cardholders with average rate rises of 1.95 and 2.17 percentage points respectively, she says.

Diane Tate, the executive director of retail policy at the AustralianBankersAssociation, says banks dont get their funds at the Reserve Bank cash rate.

She says they borrow from domestic and from offshore markets, where interest rates are higher and are dependent on global financial conditions.

Tate says after the global financial crisis, the average cost of funds for banks changed significantly.

This resulted in an increase in the spread to the cash rate for a broad range of lending products, not only in Australia but also overseas, she says.

Bells and whistles

Banks prefer to compete more on the bells and whistles oftheir credit cards, such as rewards programs, than on interest rates.

Lower-rate cards are available, but they are not offered by the big banks, though Westpacs sub-10 per cent card when it is launched,may change that.

There are deals such as balance transfer offers, which are also offered by the big banks, where no interest is charged ondebt that is transferred from another card for a period of time.

And about one-third of credit card holders pay off the whole debt by the due date and pay no interest at all.

Martin North, principal of Digital Finance Analytics, says the economics for banks of cards business and personal loans is a mix of loss rates, transaction costs and rewards programs.

However, he says, it is also about competitive positioning and market share and other pressures such as scrutiny by politicians and the media.

North says there is not as much competition on personal loans as with other types of debt and themarket for personal loans is relatively small.

With pressure on mortgage margins, banks have quietly ratcheted-up the interest rates on personal loans, cards and small business loans, he says.

Competition

Bessie Hassan, money expert at Finder, says an unsecured personal loan can be effective tool to consolidate debts so that your repayments are in one place.

Rolling credit card debt into a personal loan can be a good way of getting the debt under control as long as the personal loan has a reasonable interest rate.

Unlike with credit cards, where the minimum payment has to be made each month, and the debt does not have to paid off, personal loans have a set repayment schedule so that it is paid off over time.

Variable-rate personal loans are generally more flexible than fixed-interest-rate loans, Hassan says.

With a variable loan youre normally allowed to repay early without penalty and you can make extra repayments, but these features are rarely offered with a fixed-rate loan, she says.

Consumers should shop around as there are credit cards and personal loans with interest rates under 10 per cent, Hassan says.

The Co-operative Bank adopts risk-based pricing for its personal loans, bringing sharp interest rate benefits to …

In what is likely to be the start of a growing trend at banks, the Co-operative Bank has re-priced its personal loans on a risk-based basis.

Banks have had fixed carded rates for this type of lending for a long time with the only distinction being whether the loan was unsecured, or secured on other customer property.

But the emergence of positive credit scores in New Zealand, and the coming of peer-to-peer personal lending which started with risk-based pricing, banks are finding they need to respond with similar plans.

A single carded rate takes little account of the customers credit profile. Rivals that reward good credit histories find they can attract such customers with lower rates which leaves those that dont offer such benefits with a pool of clients with worse credit histories.

For this reason alone, the personal loan market will move this way. Personal loan borrowers are about to find out the real value of good credit.

The new Co-operative Bank loan pricing signals how this may work.

Their ‘risk-based’ approach considers factors such as a consumer’s credit bureau score, adverse credit history (if any), employment status and income.