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The Harrington Brooks Blog

News, comment and views from the team at Harrington Brooks.

IVAs At Highest Ever Level

Posted by Charlotte Campbell on

The amount of individual voluntary arrangements registered has increased by over 20% in the past year, with 14,571 registered in the April-June quarter of 2014. This has lead to a 5.1% increase in the number of people who became insolvent compared to last year, despite the number of bankruptcies and and debt relief orders decreasing.

The number of company liquidations, administrations, receiverships and and company voluntary arrangements also decreased over the last 12 months.

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Visit harringtonbrooks.co.uk/iva for more information on what entering into an IVA involves, and how it compares with other financial solutions. You can also view the full Insolvency Service statement and report.

Coronation Street Bailiffs Storyline “Disgusting”

Posted by Charlotte Campbell on

Bailiffs hit the cobbles in Coronation Street this week, as the Windass/Armstrong clan watch their possessions seized after failing to pay their debts. The scenes were not easy watching, and certainly tougher for those viewers struggling with arrears. But how much of the drama could become reality, and what happens if you find yourself facing repossessions?

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The soap’s portrayal of debt collection has left many viewers angered.

Defenders of soaps argue they are purely dramatic and created for entertainment. But it is a shame that an institution such as Coronation Street could not deal with a topic which affects thousands of its viewers with the same sensitivity it has dealt with other social issues, such as the recent Hayley Cropper euthanasia story line.

 

Whilst creative license is always presumed in Soapland, glaring inaccuracies like the ability of 12 year old Faye to give bailiffs access to the property when it was otherwise vacant, only fuel the myths and scaremongering used by less scrupulous creditors.

Living with debt can be a daily struggle, and adding to a culture of fear can only spread denial and inaction, particularly if it leads viewers to wrongly believe the only possible result of debt issues is bankruptcy. In reality, there are a number of options available to those struggling with repayments, including a debt management plan or IVA.

Viewers vented their frustrations online, commenting that the episode was “disgusting”, “nonsense” and “very poor”.

What can be done if repossession becomes your reality?

Know your rights and the process that creditors follow to gain payment, so you can act accordingly if a bailiff or debt collector behaves in an inappropriate manner. If you are concerned about legal action, our solicitors at Castle Keep Law are friendly, professional experts who can guide you as to what to do in your circumstances.

Addressing your debts is the main course of action to take when faced with bailiffs and repossession. Our financial advisers will talk through your debts and income, and help you decide on the best financial solution to your problems.

MP Mike Kane Visits Harrington Brooks HQ

Posted by Charlotte Campbell on

MP for Wythenshawe and Sale East, Mike Kane, visited our Manchester office today, to gain an insight into our industry and to speak with our staff, as well as with representatives from our charity of the year Forever Manchester.

Mike Kane Visit5

A Q&A session with some of our 600 staff

As we are the 3rd largest employer within his constituency (behind Manchester Airport and Wythenshawe Hospital), employing over 600 people, a tour of the office gave the Labour MP an insight into the working environment for a large portion of the local community.

Staff members from each department were invited to an informal question and answer session, in which we discussed charity work within the community, the changes in the law to the payday loan industry, and how difficulty in claiming NHS care home fees was affecting constituents.

(from left) Jed Murray and Nic Massey of Forever Manchester, Mike Kane, Jodi Hamilton of Harrington Brooks

(from left) Jed Murray and Nic Massey of Forever Manchester, Mike Kane, Jodi Hamilton of Harrington Brooks

Mr Kane has campaigned alongside Stella Creasy for change to the payday lending sector, for which he said the next step would be to limit the amount of payday loans to be taken out at any single time by a person, in a similar regulation style to America (where only one payday loan can be taken out at any one time).

Caroline Wayman Becomes New Chief Ombudsman

Posted by Charlotte Campbell on

Financial_Ombudsman_Service_logoPrinciple ombudsman and legal director of the Financial Ombudsman Service, Caroline Wayman, has been named as the new chief ombudsman, following Natalie Ceeney’s decision to step down from the position.

 

Wayman has been with the FOS for 14 years, after training as a barrister and working in the insurance sector. She said of her appointment:

“I’m delighted and proud to be given the opportunity to build on the very best of what the ombudsman has always been about – and lead the service into our next crucial phase.”

Chairman of the FOS Sir Nicholas Montagu congratulated Wayman on her new role, commenting:

“Caroline defines everything that is best about the ombudsman – and she will bring freshness, bold thinking and vigorous action to our plans for the future. As chief ombudsman she will ensure the service stays relevant and attuned to the needs of our customers, consumers and businesses.”

What is the Financial Ombudsman Service?

The FOS exists to be an impartial decision maker in complaints that cannot be resolved between consumers and financial institutions. It was set up by parliament, and is free to consumers.

 

FCA: Insurance Price Comparison Sites Confusing and Unclear

Posted by Charlotte Campbell on

A review into price comparison websites by the Financial Conduct Authority (FCA) has found that consumers are not given the appropriate information to help them make informed decisions about the products they are buying and had failed to implement Guidance published in 2011.Office work

The review also found that a number of sites did not make it clear to consumers what service they provided, leading many to incorrectly assume that the prices and policies presented to them had taken into account their suitability for the product as well as their individual needs.

The FCA found that focus was mainly on price, while other important considerations such as excess costs for a claim are not factored in.

A number of price comparison sites were also found to have broken FCA regulation by failing to make clear the potential conflict of interest through ownership by an insurance provider.

The FCA’s director of supervision, Clive Adamson, commented:

“Our review found that they were not meeting our requirements in delivering fair and consistent outcomes for consumers. We also found, through our consumer research, that consumers had a number of misconceptions about the services they provided.”

Head of Ask Insurance, Amanda Smith, agrees:

“It is easy for consumers to get drawn in by the low quotes and cuddly collectables given by online comparison sites. Especially, in the current climate, when families are working within limited budgets.

The idea behind them is based on the old fashioned insurance broker, who would take the customers information search a panel of providers with a view to find the most suitable product for the clients circumstances within their price range.

With the uprising of comparison sites consumers thinking they can do this for themselves often come unstuck when they try to make a claim. It is at this point they discover, to their cost, that the policy doesn’t provide the cover they thought. Or the policy has been loaded with large excesses, or a deferred waiting period. Sadly, at this point it is too late and what the consumer may have saved does not equal what they have now lost.

Having the right cover is always important especially when considering Life Assurance. Many people think they can get cheaper cover from comparison sites, discovering you have unknowingly chosen the wrong cover, at the point you’ve lost a loved one can be traumatic.

A professional qualified adviser can provide details of the most suitable policy based on price whilst making them aware of any exclusions and/or limitations.”

Three Quarters of Renters Have Never Switched Energy Supplier

Posted by Charlotte Campbell on

Ofgem’s 2014 Consumer Engagement survey has revealed a massive lack of awareness among tenants regarding their rights to switch suppliers, despite the considerable savings that can be made with different tariffs.

1 in 5 tenants didn’t know that they could change supplier, despite an Ofgem ruling that if you are directly responsible for paying your electric and/or gas bill (i.e. bills are not included in your rental payments) your landlord or letting agent cannot prevent you from switching without good reason.
Action and awareness are higher among homeowners, with 47% having switched gas supplier and 45% changing electricity supplier.

CEO of Ofgem, Dermot Nolan, has commented:

“The number of British households renting stands at 9 million and counting, yet research has shown that this group is not shopping around for their energy, and missing out on savings of up to £200.”

Summer is typically the best time to switch energy supplier, as prices are cheaper while it is warmer. If possible, try and look for a deal without an exit fee, that way you can switch again in the event of a price hike. You should always inform your landlord if you switch supplier.

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Switching could save you up to £200

If you’re struggling to pay your bills each month, or price hikes have left you in arrears, call one of our advisers today. We know that money troubles can happen to anyone, and we’ll give you the advice and assistance you need to get you back in control, with your finances on track.

At Harrington Brooks, we offer a free switching service for our customers, alongside our partners Uswitch. Switching could save you hundreds of pounds, which makes a big difference when you are living on a budget.

Backlog in benefits department over Employment and Support Allowance (ESA) leaves thousands awaiting support

Posted by Jack Boardman on

Over 700,000 people are waiting for ESA due to a benefits backlog. The announcement came at the end of June, 2014, with the Minister for Disabled People blaming the delays on Atos, who are contracted to carry out the fitness to work tests.

The Department for Work and Pensions said:

“Incapacity Benefit reassessment has resulted in over 700,000 people looking for, or making steps to return to work – it is crucial that we continue this important process to ensure that people are not written off and we get a fair deal for the taxpayer.”

"Unless ministers make changes to how assessments are carried out then sick and disabled people face another three years of delays, anxiety and unfair treatment."

“Unless ministers make changes to how assessments are carried out then sick and disabled people face another three years of delays, anxiety and unfair treatment.”

The Employment and Support Allowance (ESA) is a benefit that offers financial support if you’re unable to work, and also personalised help so that you can work. Those on Income Support or Incapacity Benefit may be transferred to the ESA. It is available if you’re employed, self-employed or unemployed. Claimants must go through a work capability assessment in order for the allowance to be assessed. The backlog stood at 712,000 people, with 394,000 of these new claimants, and 234,000 existing recipients of the benefit. 84,000 people are on Incapacity Benefit, waiting to be transferred to ESA.

Atos, who are responsible for the work capability assessment, consider themselves “vilified” for doing as instructed by Parliament. Atos’s contract has been ended early with a new contractor to be appointed in 2015.
Citizens Advice commented:

“Employment Support Allowance is now the biggest single issue that Citizens Advice clients need help with and more than 1.5 million people have come to us about problems with ESA since it was introduced.
“Unless ministers make changes to how assessments are carried out then sick and disabled people face another three years of delays, anxiety and unfair treatment.”


The Cost of ESA

According to the BBC, internal government memos have revealed that claimants face an average waiting time of 9 months after assessments, and that positive outcomes of the benefit are few, with less claimants getting jobs.

Nearly 2 million people currently claim ESA, entitled to just over £100 per week. By 2018/19 the costs of the benefit are expected to rise by approximately £13 billion, calling it “one of the largest fiscal risks currently facing the government.”

On the costs, Mr Penning, Minister for Disabled People, said:

“It needs to evolve, it needs to change as we go forward and we need to make sure we get the right decisions – as in any other benefit – the right money goes to the right people and that’s what the taxpayer would expect us to do.”

Harrington Brooks takes a holistic approach to helping our clients repay their debts. An important part of our service is ensuring all clients are in full receipt of all State Benefits and Tax Credits to which they are entitled. If you are a Harrington Brooks customer and have had a change in circumstances since your last review, which you think may impact your benefit or tax credit entitlement, then please Call Customer Support on 0330 102 0004 or use the form below to request a call back.

HB Asks: What effects will the FCA’s cap on payday loans have?

Posted by Jack Boardman on

As the FCA announces a series of proposed measures aimed at restricting the costs to consumers of payday loans; Harrington Brooks ponders that while the FCA’s intention is to protect the consumer; the law of unforeseen consequences may paint a different picture.

View Proposals for a price cap on high-cost short-term credit on FCA website.

If, according to the FCA stats released at the same time as yesterdays news about the proposed cap on payday lending, the average loan has a principal of around £260 lent over an initial duration of 30 days – where will borrowers get the additional £160 from?

And if the typical customer has no savings, 57%, a lower than average income level of £16,500 verses £26,500 per year and 64% have outstanding debt from other types of lenders, 36% have borrowed from family, 18% from friends – then where do they turn?

If it is the case that 55% said they used their loans for everyday expenditure (housing, basic living costs and bills) then what will they do? What alternatives are there?

The FCA have a very hard task facing them, and one which is bound to raise criticisms, but at least, it seems, they went in to making these changes with a raft of evidence and research behind them.

. The FCA have a very hard task facing them, and one which is bound to raise criticisms, but at least, it seems, they went in to making these changes with a raft of evidence and research behind them.

In the findings, 20% said they used their pay day loan for discretionary spending such as holidays, social activities, weddings and gifts – then should they just do without? Are these necessities? Who decides?

The FCA have a very hard task facing them, and one which is bound to raise criticisms, but at least, it seems, they went in to making these changes with a raft of evidence and research behind them. The FCA carried out unprecedented levels of research which involved:

  • building models of 8 firms and 16 million loans to analyse the impact on firms and consumers post-cap
  • analysing credit records for 4.6m people to understand the alternatives people turn to when they don’t get payday loans and whether they are better or worse off
  • a survey of 2000 consumers that use payday firms to understand the impact on people who don’t get past the approval process and those who do get loans
  • liaising with overseas regulators that also use a cap and reviewing existing research
  • discussions with industry and consumer groups

Improvements Since Regulation

It’s easy to see where the FCA have made obvious improvements. Since it took over regulation of consumer credit the FCA has strongly encouraged firms and credit reference agencies to improve the way they share information about consumers, so firms can be sure that the information they use in their affordability assessments is up-to-date and accurate. Effective real-time data sharing should enable firms to address the issue of consumers taking out multiple high-cost short-term loans from different providers at the same time that they are unable to afford.

The FCA expects to see evidence of a significant increase in firms participating in real-time data sharing by November, and better coverage by real-time databases. If we do not see the level of progress we require, we will consult on the introduction of data-sharing requirements.

Impact on Debt Resolution Sector

And finally, what effect will this have on Harrington Brooks and the debt management sector?

Well, 47% of Harrington Brooks customers have payday loans, typically 3 and with different lenders, so it’s likely that we’ll see a change in the formation of customers debt, however the FCA did also include in their report about financial distress. Since applying for a loan, 50% reported experiencing financial distress and 44% missed at least one bill payment suggesting that these people do need help to manage not just pay day loan debts, but a range of others too.

Payday Rates Slashed by FCA: New Regulations Means Protection for Consumers from Payday Lenders

Posted by Jack Boardman on

The Financial Conduct Authority has proposed a cap on payday lending with a consumer-centric focus, meaning the amount that high-cost short-term credit lenders can charge will be significantly lower.

From January, 2015, the regulation will mean that consumers will never pay back more than twice what they have borrowed. A cap will be placed on interest and fees at 0.8% of the amount borrowed per day, the total cost limited to 100% of the loan, and defaults or arrears fees capped at £15.

Securing protection for consumers: New regulations on payday lenders aim to protect consumers from spiralling debt and unaffordable loans.

Securing protection for consumers: New regulations on payday lenders aim to protect consumers from spiralling debt and unaffordable loans.


Price caps for payday lenders

The changes are in keeping with the government’s campaign on tackling the downward spiral of debt in the UK. High-cost short-term creditors, in particular pay day loans, have become considerably more prominent in recent years, and are seen by consumers as a quick and easy solution to financial management; the reality being that, by taking out such a loan, consumers face a lowered credit rating, with fees and potential interest rates of 4,000%, resulting in a spiral of catching up on further debt.

The FCA took over the regulation of approximately 50,000 consumer credit firms from the Office of Fair Trading (OFT) in April, 2014. The FCA’s objectives from the beginning have been to secure protection for consumers, promoting effective competition in the interests of consumers, and ultimately enhancing the integrity of the UK financial system.


Encouraging a consumer-centric approach

It is anticipated that the new regulations will half the market supply. Recent research conducted by Harrington Brooks revealed that 45% of our customer base have pay day loans, and each of the customers have an average of 3 loans, mostly with different lenders.

From December, 2014, payday lenders will need to make changes in keeping with the consumer-centric regulations, with the FCA ensuring companies are “treating consumers fairly and following the new rules; particular attention will be paid to whether or not firms are trying to avoid the price cap. Firms that do not meet the required standard will not be allowed to carry on offering payday loans.”

CEO of Harrington Brooks, Matthew Cheetham, stated,

“I welcome the capping of the interest on payday loans. Just under half of Harrington Brooks customers have a payday loan as one of their creditors, so anything which reduces the cost to them is welcomed”.


“Confident we have found the right balance”

The proposal comes as the result of extensive research, on the FCA’s part, in understanding the market and the consumers that use it. The new caps on loans have been designed to protect consumers against spiralling debt and unaffordable loans, and also to allow payday lenders to continue lending to borrowers who may benefit from it.

According to the proposal, this research involved:

  • building models of 8 firms and 16 million loans to analyse the impact on firms and consumers post-cap
  • analysing credit records for 4.6m people to understand the alternatives people turn to when they don’t get payday loans and whether they are better or worse off
  • a survey of 2000 consumers that use payday firms to understand the impact on people who don’t get past the approval process and those who do get loans
  • liaising with overseas regulators that also use a cap and reviewing existing research
  • discussions with industry and consumer groups

The finalised rules are to be published in November, 2014 so that affected companies have time to make changes in keeping regulations.

Martin Wheatley, CEO of he FCA, said:

“For the many people that struggle to repay their payday loans every year this is a giant leap forward. From January next year, if you borrow £100 for 30 days and pay back on time, you will not pay more than £24 in fees and charges and someone taking the same loan for 14 days will pay no more than £11.20. That’s a significant saving.
“For those who struggle with their repayments, we are ensuring that someone borrowing £100 will never pay back more than £200 in any circumstance.

“There have been many strong and competing views to take into account, but I am confident we have found the right balance.

“Alongside our other new rules for payday firms – affordability tests and limits on rollovers and continuous payment authorities – the cap will help drive up standards in a sector that badly needs to improve how it treats its customers.”

Government’s NEA Scheme Helps 2,000 Aspiring Entrepreneurs A Month Get Off Benefits

Posted by Jack Boardman on

The government published recent figures revealing 46,000 businesses have been set up so far through the New Enterprise Allowance (NEA).

Key findings highlight that 93,880 starts have been made with people beginning work with a business mentor. The aforementioned 46,000 have progressed to receiving the weekly allowance since the scheme was implemented in April, 2011.

NEA: Supporting budding entrepreneurs on JSA and benefits.

NEA: Supporting budding entrepreneurs on JSA and benefits.

Of those receiving NEA, 8,590 are registered disabled, with 18,630 working with business mentors. 32,030 people are claiming the weekly allowance, aged 25-49, with 3,370 aged 18-24 and 10,610 over the age of 50.

What do you know about the NEA, and could it apply to you?

The NEA was set up in April 2011 by the government to support small businesses and enterprise. It offers financial support to people claiming Jobseeker’s Allowance, benefits, lone parents and people on sickness benefits wishing to start up their own business.

Participants on the NEA scheme receive expert support and guidance from an assigned business mentor who offers help along the journey of developing individuals’ ideas into a business plan. If approved, the participant becomes eligible for the weekly allowance over a period of 26 weeks up to a total of £1,274. Participants can also access a loan through the Department for Business, Innovation & Skills start-up loan scheme.