Category Archives: Overdrafts

Thought chip and pin was safe? Think again!

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.

Individual Voluntary Agreements

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.

Rip-off charges

There has been a lot of controversy in recent months over the amount banks are charging us for going over or credit card limits. A test case is in the high court at the moment and the outcome of that case will be the deciding factor, with regards to whether or not the fees our illegal or not.

Research out today has sown that customers who have been charged fees paid an average of £742 over he past six years. This amount covers charges for what banks term ‘breaches’ and include unauthorised overdrafts, bounced cheques and direct debits that are not paid on anything from phone bills to personal loan repayments

Banks have expressed anger at the research, considering it comes at such a sensitive time, just as the banking industry is going to the High Court to decide the fate of these charges. Angela Knight, Chief executive of the British Bankers Association has claimed the figures are dangerous and misleading.

The worst bank for charges is Abbey where customers have paid an average of £1,376 in charges over the past six years. Lloyds TSB came in second with customers there paying an average of £800 over the same period.

Even more shocking is evidence that some customers, roughly one in twenty, have been charged at least £2,500 over the last six years.

Roughly four in ten bank customers have incurred a penalty fee since 2001. If you are facing financial difficulty then you could consider taking out a loan to help avoid getting too deep in debt, as well as the bank fees you might end up with a bad credit rating.