Shockingly Bad Value

The OFT have issued a scathing report about the business practices of various cash for gold companies, that buy people's gold jewelry at below market price and smelt it down.

CashMyGold, Cash4Gold and Postal Gold have all agreed to change their business practices as the OFT was concerned that people were being "locked into" accepting offers for their gold.

The firms state that customers can reject their cash offer. However, failure to contact the firm in the short time frame offered was taken as consent.

People who are desperate enough to use these firms are being given a very poor deal, as the prices that they can obtain from even pawn brokers are higher than offered by the cash for gold firms.

Which? found that these firms offered an average of 6% of the retail price of the gold, compared with an average of 25% offered by pawnbrokers and high street jewellers.

As Which? noted, this is "shockingly bad value"; it quite correctly warned people not to use them.

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Ninja Mortgages

According to The Guardian there is evidence of an abundance of, what Americans call, Ninja mortgages (No Income, No Job or Assets) having been sold in the UK.

These mortgages and debts are, when looked at in the cold light of day, unaffordable by many of the people who are sold them. However, that doesn't seem to have stopped brokers and banks foisting them on the unwary.

The reason for this wanton disregard for financial probity is simple, commission. Brokers are paid a nice fat commission for selling these products, and therefore have a vested interest in selling as many as possible.

Which? claim that the rot set in during the 1980's with endowment mortgages.

Since then, the financial services industry in Britain has been happily destroying its reputation and most probably the economy.

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Credit Card Charges

Which? has discovered a game easier than shooting pigs in a barrel, that of criticising the charges made by credit card companies on their hapless customers.

Which? state that since the Office of Fair Trading (OFT) ordered a cut in default fees to £12 last year, "ingenious methods" had been used to recoup the income.

Needless to say the banking industry has denied that is is acting unfairly, and claims that different fees were inevitable after the OFT ruling.

True enough, if they want to maintain their very high levels of profits.

Which? highlighted a number of money making charges levied by the card companies, including:

-Low usage fees
-Raised interest rates for withdrawing cash
-Annual fees for having a card
-Fees for using cards abroad
-Shorter interest free periods

Martyn Hocking, editor of Which? Money, said:

"Credit card providers seem to be resorting to a raft of ingenious methods to recoup lost revenue following the OFT crackdown on penalty fees."

Sandra Quinn, of the UK payments association Apacs, retorted:

"We always said that charges would change as a result of the OFT ruling.

We have been much more upfront about how charges are applied - every statement now has a summary box listing charges and key information about charging."

The latter part about being "more upfront" is particularly amusing, as it implies that credit card companies tried to hide their fees before!

Why would they do that then?

The credit card industry is also in trouble in respect of its many and varied methods for calculating the annual rate of interest (APR). Which? claim that there are at least 12 different methods in use for calculating an APR.

Following a complaint from Which? in April, the OFT said it would investigate the issue.

As I have noted before, banks are not charities. They are in business to make money, when one avenue for making money is closed they will find another. They treat their customers in this way because they know that they can get away with it, and know that many of their customers are so deeply in debt that they think that they need a credit card just to keep their heads above water.

In order to avoid these charges:

1 Pay off your credit card in full each month

2 Dump those cards that have an annual fee or low usage fee

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Fighting Fund Set Up

Who would be a banker in today's Britain?

Gone are the days when the bank manger was a respected gentleman, in the Captain Mainwaring mould. Now the image of banks and their staff is that of a tacky used car salesman, trying to dishonestly screw the hapless customer out of every penny they own.

Another nail has been knocked into the coffin of the banks' credibility, by the launch of a £100,000 fighting fund to encourage people to launch legal challenges against what they say are illegal bank charges.

The money has been pledged by MoneySavingExpert.com and the Consumer Action Group, as well as private individuals.

The theory being that the funds will be used for claims that could set a legal precedent, in the fight against excess overdraft charges. The move comes after two county courts ruled against two customers of Lloyds TSB.

In the first, a district judge at Birmingham County Court dismissed a claim Kevin Berwick brought against Lloyds TSB on the grounds that charges were a legitimate part of the current account service and found that he had failed to lodge sufficient evidence.

The second ruling, made against a claim for £3,000 brought by Julian Rudd, came on 11 May. A judge at Lancaster County Court also found Mr Rudd, a builder, had failed to state an adequate claim.

Claims from customers have risen by 40%, according to the Financial Ombudsman. Hardly surprising, given the amount of media coverage now given to the issue of bank charges.

Which? claims that the penalty charges earn British banks £4.75BN a year.

The fund will be held in a trust by the Govan Law Centre, and will be activated when the right case presented itself.

Marc Gander, the co-founder of the Consumer Action Group, said:

"Those who do go to court usually win by default. Yet for the rare few where the bank does put up a defence, the big lesson to learn is that even where [the banks] don't show up in court, it is still worth doing proper preparation."

We shall see.

It should be remembered, as I have stated many times before, that banks are not charities. In the event that penalty charges are reduced, or capped, they will find other ways to levy charges on their customers. The most likely avenue being an end to free banking.

What will the campaigners say to that?

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OFT Backs Down

Proving once again that the financial regulatory bodies in Britain are "pussies", when it comes to standing up to vested interests, the Office of fair Trading (OFT) has baoked down on imposing limits on bank charges.

The OFT tried its best to save face by shrouding its decision in the thin, and flimsy, veneer of initiating an in depth review.

Stating:

"The banking industry is not straightforward and that a more detailed examination is needed".

However, the reality is that the OFT has faced sustained and intense lobbying from the banks and they have a greater sway with the OFT than the consumer.

Some banks have threatened to end free accounts, were there to be a regulatory move against excessive and unjustifiable bank charges.

Needless to say, consumer groups see the OFT decisions for what it is (a total climbdown).

Which? said:

"We agree it's crucial the OFT investigates retail bank pricing. But today's announcement still leaves people in the dark about unfair bank charges.

Before the end of the year consumers could be charged up to £3.5BN by their banks in unauthorised overdraft charges. So we are telling consumers not to be put off claiming back their charges while the OFT is looking into this - claim them back now."

In 2006 Which? calculated that bank customers pay £4.7BN each year on default charges. No wonder the banks like to make these charges.

John Fingleton, OFT chief executive, said:

"The UK retail banking market performs well in many dimensions, especially relative to international norms. However, the issue of bank current account charges is a matter of real concern to the banks' customers, and raises wider questions about competition and transparency of pricing."

However, just because the OFT are "pussies" doesn't mean that the consumer has to be one. Consumers should challenge every single unreasonable charge levelled on them by banks, as a matter of course, in many cases these challenges result in refunds being made.

If nothing else, at least it annoys the hell out of the banks and might make them think twice about "drinking the well dry" (ie overcharging consumers).

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Banks' Underhand Methods

Banks were accused by Which? of using underhand methods to dissuade customers from seeking refunds, after they have been charged "unfairly" for exceeding their overdrafts.

Which? said that banks have threatened to close accounts, pass details on to debt collectors and charge for statements when customers challenge their overdraft fees.

Which? claims that it has heard of charges of up to £5 per page for duplicate statements. The law permits a maximum charge of £10.

One bank tried to charge £30 an hour labour charges to send duplicates, with a total bill of £360.

Doug Taylor, the personal finance campaigner at Which?, said:

"Banks are employing increasingly underhand methods to avoid their responsibility to treat their customers fairly and refund the charges."

Angela Knight, the chief executive designate of the British Bankers' Association, said:

"Which? is clearly trying to exploit its position as a consumer body by sensationalising what could be a useful piece of research.

The banking industry handles over seven billion transactions a year and occasionally something will go wrong that's human nature.

But the way in which Which? has approached this is also personally insulting to the front-line bank staff who do an excellent job serving their customers."

As I have said before, banks are on this earth to make money they are not a charity. Try to stop them making money in one way, and they will find another way to charge you.

Customers would be well advised to help themselves lessen the banks' avenues for charging, by keeping their bank statements for at leastr 6 years.

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Misleading Insurance Adverts

Those of you who have tried to claim on an insurance policy, only to be disappointed and have your claim rejected by the invocation of the small print, may raise a faint smile at the news that the Financial services Authority (FSA) have rebuked the industry for making misleading claims in their adverts.

The FSA reviewed the press advertisements of 57 insurance firms, and has subsequently warned companies in the home, travel and car insurance markets to stop using saving claims in their advertising that mislead consumers.

The FSA has also threatened regulatory action, after it found that 57% of motor insurance advertisements with savings claims were either unclear or misleading.

The FSA also noted that 25% of home insurance advertisements were misleading.

Vernon Everitt, FSA retail themes director, said:

"Most people rely on some form of insurance to protect them and advertising is a major influence on what they choose to buy. So it must be clear, fair and not misleading, leaving people with a balanced picture of what's on offer.

This work demonstrates that firms in the home, travel and car insurance markets must shape up and ensure that the claims they make don't mislead."

However, Which? Claims that the FSA has not done enough.

Emma Bandey, personal finance campaigner at Which?, said:

"Why is the FSA consistently reluctant to name and shame firms?"

Which? needs to understand the reality of the financial services industry in Britain; it is here to make large sums of money for itself, not to provide a value for money service to its customers.

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