HSBC reveals extent of charge costs

HSBC reveals extent of charge costs

In another twist to the ongoing dispute between consumer groups and British banks over allegedly “unfair” charges such as overdraft fines, a leading high street bank has revealed for the first time the financial damage it has sustained over the issue.

The figures, released yesterday by HSBC, show that more than £100 million has been paid back, reflecting the scale of customer rebellion against the charges.

HSBC chief executive Michael Geoghegan said that “the size of the refunds that we have made demonstrate our commitment to treating our customers in a fair and transparent manner.”

Last week, the Office of Fair Trading (OFT) officially launched legal action against eight UK banks.

Mr Geoghegan also welcomed this news, which he said would “achieve legal clarity and a resolution for our customers and our business”.

The banks were granted a temporary reprieve as the Financial Services Authority (FSA) agreed to waive all charges until the conclusion of the case, which will come later in the year.

HSBC has recently announced an 11 per cent rise in profits so far in 2007 compared with the same period in the year before, totalling around £7 billion.

Tags: scale, overdraft, Financial Services Authority, consumer groups, uk banks, uk banks.mr geoghegan, costsIn, fair

Many people permanently in the red with overdrafts

A recent report has highlighted that by the 20th of each month many Brits find themselves running out of cash and having to rely on their overdrafts to see them through the rest of the month until payday.

In some cases, once payday comes around, Brits are able to slide back into the black for several weeks. However, there are also many Brits that will go straight back into the red, even after their salary has been paid in, because their accounts are permanently overdrawn.

Around two million consumers in the UK are always in the red, unable to pull themselves out of their overdraft debt and therefore having to rely heavily on their overdraft facility. In the past year, according to research, around ten million people in the UK have used their overdraft on at least one occasion. Rising interest rates and repayments may have contributed to this figure, with more and more people having to dip into their overdrafts in order to stay afloat due to rising repayments.

One industry professional stated: ‘It’s no surprise so many people are permanently in the red – with interest rates having risen five times in the past year consumers are not doubt feeling the squeeze. People often dipping into their overdraft need to watch the Effective Annual Rate as some can be punitive and they may find they are better off spending on a 0% credit card in the future.’

Those aged 55 years and over were found to be the best at staying out of the red, with an impressive 64% in this age group managing to stay in the black. This compared to 40% of 18-24 year olds. In the 45-54 age group 5% were permanently in the red.

Tom Smith
31st July 2007

Tags: current, credit, bank, personal, red, savings, debt, card, purchases

Consumer group warns on insurance for music downloads

A consumer group has issued a warning relating to insurance cover for music downloads. Downloading music has become a hugely popular way for younger generations in their teens, twenties, and thirties to enjoy listening to their favourite music.

However, Which? has carried out a survey into insurance cover for music downloads and is urging consumers to be aware of exclusions relating to these policies.

According to the result of the survey carried out by Which? music downloads will not be covered by insurance if they are lost as a result of a computer virus – these music collections are often worth hundreds of pounds in total, and therefore can cause considerable financial loss to consumers. Many insurance firms also did not cover music downloads if they were lost as a result of hard drive failure.

As part of the survey 46 insurance firms were reviewed by the consumer group, and out of these only 22 actually offered insurance cover for music and digital downloads. The cover is offered when the downloads are lost as the result of fire, weather conditions, or theft. However, out of the insurance companies surveyed none of the policies offered provided protection against loss of music through virus or computer failure.

One spokesperson from Which? stated: ‘Downloading music online is widely accepted now as being the easiest and most convenient way to buy music. Music lovers know it, the music companies know it – but it seems insurance companies are determined to stay behind the times.” Consumers that do take out this type of cover for their music and digital downloads should ensure that they know what is excluded from the policy, and therefore consider whether the cover is actually worth the cost.

Tom Smith
31st July 2007

Tags: pc, music, failure, sites, Insurance, downloading, online, free, virus

House price growth slows down due to interest rate hikes

According to recent reports there has been a slow down in the growth of house prices in most areas of the UK following further interest rate rises in the first half of the year. Exceptions to the rule are Scotland, Wales, and the West Midlands in England. However, in most regions house price growth has slowed down by around 50%, and it is thought that this is due to lower demand for properties as a result of rising interest rates.

The data comes from the monthly report from the Royal Institute of Chartered Surveyors, and this report is the second one in a row that indicates a slow down in the rate of house price growth in most parts of the UK. According to the figures just 10.6% more members from the RICS reported a rise in house price growth rather than a fall last month, and this compared to 22.5% in the previous month.

The report also indicated that the number of enquiries from new buyers had fallen at the fastest pace since February of last year, reflecting the lower demand for properties. According to the RICS the five interest rate rises over the past year – and in particular the last two interest rate rises – have taken their toll when it comes to buyer demand, with many people having to reconsider property purchase because of the higher interest rates and sky high repayments.

One spokesman from RICS stated: ‘House prices have finally started to cool significantly for the first time since the recent mini boom in the housing market got under way in 2006. Interest rates hikes have begun to affect the psychology of the market with potential new buyers starting to think twice before buying a home. The July rate increase may not mark the peak of the current interest rate cycle and earlier rate rises have yet to fully filter through. A softer landing for the housing market is in store as we move into the autumn.’

Tom Smith
31st July 2007

Tags: interest, rate, fixed, repayments, Mortgages, increase, england, rises

Government wants longer term fixed rate mortgages to be available

The government, under new prime minister Gordon Brown, has announced that it wants more longer term fixed rate mortgages to be made available in light of the five recent interest rate hikes that have left homeowners struggling to keep up with rising repayments and have made the prospect of purchasing a home even more difficult for first time buyers on a limited budget.

Alistair Darling, the new Chancellor of the Exchequer, has stated that longer term fixed rate mortgages are more important than ever in light of the current state of the economy, as these will enable property purchasers and homeowners to benefit from stable repayments that will make financial management easier and reduced the risk of crippling repayments stemming from further interest rate rises.

Earlier in the week Alistair Darling stated: ‘When you look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that. We need to reduce the volatility.’ He also spoke of the profits that some brokers and lenders are making by offering shorter time fixed rates that have to be renewed every few years, netting them thousands of pounds in profit: ‘Brokers want you to come back every two years, rather than every ten or 20. The Financial Services Authority has identified this as a problem.’

In light of the announcement made by government officials the Nationwide Building Society has just announced the launch of a 25 year fixed rate mortgage. However, there are concerns over how many people will want to take on a fixed rate over such a long period in case interest rates start to fall.

Tom Smith
31st July 2007

Tags: nationwide, Loans, building, increase, time, interest

Halifax sets up dormant accounts service

Halifax announced today that it will be reuniting customers with money held in lost or forgotten-about bank accounts.

It is estimated that a total of £44 million is being held in so-called ‘dormant’ accounts.

Around 20,000 of its customers will be written to, with the savings bank estimating that these customers hold around £40 million of the total.

Halifax have also set up a website, halifaxlocateaccounts.co.uk, where customers can fill in and submit an online enquiry form to find out about dormant accounts that might be retrieved.

Mike Regnier, head of savings at Halifax, said that “the response to our campaign to reunite customers with their funds has been very encouraging, and we believe these next steps in the process will help more customers track down their money”.

An advertising campaign is scheduled to run in the press next week, to raise public awareness of the scheme by acting as a ‘memory-jogger’ for customers.

The bank is currently the only one in the UK to carry a dormant accounts reunification service.

Tags: head of savings, forgotten-about bank accounts.It, Awareness, Banking, dormant accounts reunification, dormant accounts

BCC warns Bank of England against rate rise

The British Chambers of Commerce (BCC) has claimed that “economic damage” will be done in the UK if interest rates go up again.

The Bank of England’s monetary policy committee (MPC) will meet later this week to decide whether to put rates up or not.

According to the BCC’s chief economic adviser David Kern, the MPC should wait for previous rate rises to avert potential damage – and there have been five in the past twelve months – to take full effect before putting another increase on: “There are already signs that the housing market may have started to soften”, he said.

Mr Kern’s position is backed up by the latest monthly house price figures from mortgage lenders Nationwide, which show a seasonally adjusted gain in inflation of just 0.1 per cent for July, dragging down the overall inflation rate for 2007 to 9.9 per cent, well down on previous double digit showings.

A Reuters poll has also previously shown a comfortable majority of city analysts agreeing that rates are scheduled to go up to six per cent by the end of the year.

Tags: digit, price, inflation rate, bank of england, interest

Credit card fraud on the rise, according to Experian

Identity fraud, with thieves taking credit card numbers from victims, is on the increase, financial information provider Experian said today.

Recent research from the company shows a 69 per cent year on year rise in identity fraud between 2004 and 2006.

Experian spokesperson Peter Brooker said that a new generation of fraudsters was taking the theft of credit card numbers as a mere starting point.

“One of things we are seeing is that there is an awful lot of current and previous address fraud”, he said. This occurs when “the fraudsters are actually, not just taking over people’s accounts or using various methods to get hold of people’s credit card numbers, but are actually taking their entire identity”.

Research from KPMG, out today, shows that overall rates of fraud are rising dramatically, valued at a total of £594 million in 107 cases coming to court already this year.

This beats the overall totals for the years 2000-04, combined, with KPMG terming the figures a “step change” in fraud rates.

Tags: Credit card, previous address fraud, people's accounts, spokesperson, theft, overall rates, new generation, identity theft

Overdraft claimants’ cases put on hold

Bank customers’ hopes of reclaiming what they see as unfair and excessive charges for going overdrawn took a serious hit today.

Industry watchdog, the Financial Services Authority (FSA), announced that banks would be allowed to only give money back when their investigation was finished, which is anticipated to be towards the end of this year.

Previously, it was agreed that high street banks and the Office of Fair Trading would allow courts to decide on whether the fees were illegal or not.

The British Bankers’ Association (BBA) welcomed the news in a statement “Banks believe the fees customers pay for unarranged overdrafts are fair and clear. However, this is clearly an issue where customers, as well as the banks, would welcome legal clarity.”

The OFT strongly disagrees with this position, saying that banks are contravening unfairness laws and that it is “seeking to establish this legal principle in court”.

Banks have paid out an estimated £200 million this year to customers claiming repayment of the controversial charges, which have affected some of the most vulnerable, debt-ridden customers in the UK.

The backlash against the charges has been immense, with almost two million downloadable claims forms being accessed online by irate customers.

Tags: financial, Financial Services Authority, hit today.Industry watchdog, two million, debt-ridden customers

Chip and pin revolution boosts online fraud

One surprising outcome of the chip and pin revolution is that online fraud has risen, the trade association Apacs said today.

The massive increase in UK consumers shopping online has proved fertile ground for thieves, as the rise of chip and pin has left them looking for “other areas to exploit”.

The association has also found that one in eight have failed to log out while shopping – leaving their financial details accessible by others. One in four do not perform background checks on the websites where they conduct their transactions, leaving questions of security unanswered.

Apacs spokesperson Mark Bowerman said: “Certainly as you close down one avenue for the fraudsters, we know that they’re not going to pack up shop and get legitimate jobs, they’re going to look for other areas to exploit.

“Certainly the fact that this type of fraud has gone up would indicate that they’re doing that.”

Apacs figures from March this year show that online banking fraud cost £33.5 million in 2006, up from £23.2 million the previous year. Set against this was an overall decline in fraud from £439.4 million to £428 million.

Tags: fertile ground, United Kingdom, financial details, MasterCard, outcome, background, trade, surprising outcome

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