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Archive for March, 2008

Chancellor’s mortgage lender is Northern Rock

Friday, March 28th, 2008

It has been revealed that the Chancellor Alistair Darling has a mortgage with the beleaguered lender Northern Rock, however he does not have any savings with the bank.

The Chancellor admitted that he had a home loan with Northern Rock while making a statement to the House of Commons about greater protection for depositors to the bank.

The Chancellor has promised to introduce new legislation in 2008 in which investments and deposits of customers would be guaranteed in the event of a banking collapse.

While the Chancellor has not yet specified an exact figure it is predicted that savings up to the value of £100,000 would be covered. The current rules mean that the FSA’s compensation scheme covers 100% of deposits of up to £35,000. However Alistair Darling has called for a more comprehensive change.

The new legislation is designed to reassure depositors when there is a problem with the Bank the save with. The aim is also to help strengthen the UK’s position as a leading financial centre.

The current structure has come under heavy criticism in recent weeks following the run on Northern Rock. The confusion and lack of communication between the Financial Services Authority, the Bank of England and the Treasury which are all currently partly responsible for the present system has been blame for causing the first run on a bank in more than a century.

The banking industry is strongly against the new proposals however stating that a £100,000 guarantee is just too high. The credit crunch is having a nasty effect on both those with savings and those holding or seeking loans.

Posted in Banking, Borrowing, Consumer Credit, Consumer debt, Financial news, Homeowner Loans, Homeowners, mortgages, Personal loans, Property, UK Finance | No Comments »

Thought chip and pin was safe? Think again!

Friday, March 28th, 2008

Since their introduction building societies and banks have been claiming that chip and pin technology is foolproof. However a new flaw at the heart of the design to prevent fraudsters from stealing your money has been exposed.

Many cash withdrawals are being carried out using cards that do not have a security chip and the shocking thing is that it is the banks themselves that are allowing this to happen.

This is how it works. Currently there are roughly 140m cards in circulation in the UK and every day an average of 7m withdrawals are made from UK cash machines. Now it is only to be expected that some of these cards will be slightly faulty therefore if banks were to reject cards with a slight fault they would then be inundated with complaints from angry customers who could not withdraw their own money.

This has left the door open to fraudsters who can use cloned bank cards that do not come with a chip to get their hands on other peoples’ cash. This leaves bank claims that the system is foolproof as completely false.

The banking industry trade association for payments has admitted that an undisclosed number of the UK’s 60,500 cash machines will allow cloned cards to withdraw money provided the cloned card is used with the correct pin number.

Because bank customers are not protected from fraud in the way that credit card holders are, account holders could find themselves fleeced of their entire balance with no redress. Not only are people finding themselves without the money to meet their home loan repayments or rent, they are going into unauthorised overdrafts and forced to borrow money to cover the shortfall.

Posted in Bank charges, Borrowing, Card fraud, Consumer Credit, Consumer debt, Financial news, Fraud, Missed payments, mortgages, Overdrafts, Personal debt, UK Finance, Unsecured loans | No Comments »

Individual Voluntary Agreements

Monday, March 17th, 2008

If you find you are having difficulty in repaying your debt one option that is always open to you is to seek an individual voluntary agreement (IVA) from a specialist lender.

Under the terms of an IVA, if you own greater than £15,000 you can try and reach an agreement with your lender in which you only pay back a percentage of the loan or all of it, but the interest charges are frozen.

In the first 3 months of 2007, 11,300 Britons entered into such agreements with their lenders. That is a 50% rise one the same period in 2006 and goes to show how difficult many households are now finding it to deal with debts held in personal loans and credit cards.

However the problem is that now many lenders are taking an increasingly tough line on accepting IVAs. It used to be the case that many lenders would accept repayment on 25% of the loan or debt, however now that figure has gone up drastically and it is becoming increasingly difficult for many borrowers with severe debt problems to even repay their IVAs.

For example HSBC will now only accept an IVA if the borrower agrees to pay back a minimum of 40% of the loan while the student loan company will not allow their debt to be subject to any form of IVA or bankruptcy.

Northern Rock should use its own example when considering individuals in debt crisis. The crisis-hit bank rejects IVAs as standard practice. This is now becoming common practice from many lenders.

Posted in Bad Credit, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Debt management, Financial products, Homeowner Loans, Insolvency, interest rates, IVAs, Missed payments, Overdrafts, Personal debt, Personal loans, Secured loans, Spending, UK Finance, Unsecured loans | No Comments »

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