Poor Banking Relationships
In the past month we have seen a
bank set interest rates according to
status i.e. low risk customers get
low interest rate, high risk
customers get highest interest
rates. The rates can vary from 8% -
16% (yes, double). The issue here is
that the banks passed your loan
request using their scoring system
and still chose to penalise you!
Would they really give you a loan if
they thought you would not pay?
Also, would you go back to a shop
that overcharged you?
They (the banks)
have also decided against using the local
post office for their customers to use for
withdrawals and deposits: the reason... the
Post Office is too low key, as such the
perception of banks would suffer (it would
be pretty hard to have a lower perception I
would have thought). Some banks are looking
at 'basic accounts': being bank accounts for
the less well off and designed not to be
overdrawn (I suppose on the front of the
cheque a message would say, "this customer
may, or may not, have the cash to cover this
transaction. The bank takes no
responsibility...", maybe not!) Basic
accounts will start appearing soon.
Another trial
underway is the telephone call centre
preference system. It works like this: You,
as an average customer, telephone your bank
and you wait for a call centre person to
answer your call. While you wait, a customer
that is an above average customer rings the
call centre and is immediately put in front
of you in the queue! This works by the
computer recognising the inward bound
telephone number. Quite simply, the above
average customer is more important as they
have bigger bank balances, or use more of
the banks own products.
Choosing a bank
that suits your needs is now of great
importance. A bank that suits you personally
can be a nightmare for your small business,
and vice versa. You should ask more of your
bank than somewhere to deposit your money
and to be relegated behind more 'important'
customers. Ask your bank for an interest
quote for a loan and measure that against
the stated figures: if your bank see you as
a risk go somewhere else - a bank is no
longer for life.
On Monday, 31
July 2000, Barclays bank closed down its
on-line banking service as visitors who
logged into the site could see other users
account details! Well, it's not information
technology that they are spending the
£3,261m pre tax profit on! (yes, over THREE
BILLION UK POUNDS). Did they really need to
close all those branches!
Other Bank
Profits
HSBC: £5,949m
R B of Scotland: £3,686m - Long live the
shareholder...
TOPIC 2
Debt Questions or Just Have Your Say
The following questions have been sent to us
by readers and visitors of Credit to Cash.
All are 'true life' situations and show that
great care is required when debt is
involved. We always hold back names where
requested, or when we believe it is best to
not publish a name i.e. when the sender
forgets to ask us to withhold the name :)
Q. ARE DEBT MANAGEMENT
COWBOYS LICENSED?
I wonder if you
can answer a question for me my daughter has
recently gone to one of these private debt
management companies you hear about claiming
all sorts of things reductions etc .do they
need a consumer credit licence to practice
or as in this case can any cowboy full of
promises that left her in a far worse state.
I would be most grateful for your help in
this matter.
A.
Debt management
is one of the fastest growing industries in
the world today. The ability to communicate
over the Internet has increased the
catchment area and made the regulation of
these companies/individuals difficult. It is
an absolute must that all those involved in
debt adjustment/negotiation are licensed by
the Office of Fair Trading (OFT): it is not
unreasonable to ask to see their licence.
This week alone
I have received 20 e-mails about debt help.
The reply e-mail address is to a free
internet service provider (ISP): like
FreeServe, and the web site is also provided
by a free ISP. This type of service will
undoubtedly charge up front fees and are
unlikely to provide any real help: I suspect
they are unlicensed.
Any debt help
you receive should not have up front fees
just for talking to someone. As to the
original question, I would ask for a copy
of the companys OFT licence, and whether
they have one or not report their activity
to the OFT (a licence does not mean you can
be negligent). Write to all creditors asking
them to give you some time to organise more
help and choose a debt adviser that is known
(see our 'link' below).
Q. CREDIT
RECORD AND
ELECTORAL LIST
Please can you
give me some advice on restoring my credit.
I have no CCJ's or defaults but my wife had
a breakdown and never sent off the election
forms. Please can you tell me if and how I
can get around this problem.
A. The
registration of both your names on the
electoral list is important where credit is
involved: but only the named borrower is
relevant in each case. In some cases, you
will lose points where automated scoring is
used, and in high volume credit companies
the time it takes to manually administer the
loan proposal is not cost effective: i.e.
coming back to you with a query as to your
non-listing on the register would be
unlikely.
Using your own
bank/building society should not prove any
problem as these lenders are (at the moment)
more inclined to provide a personal service
than, say, a lender that you are using for
the first time.
I would:
a) Telephone
your council to find out the quickest way to
get your name on the electoral list,
b) Telephone
lenders in advance of any loan application
and ask them to suggest the best way to deal
with your problem: they will probably all be
different - some may refuse outright. My own
lender experience has been to request
Council Charge documents, and to see if you
have a credit record established at your
address. If the borrower is also the
mortgage holder the need for electoral
information is of secondary importance.
Q. HOW DO
I GET DEBT
INTEREST FROZEN?
I am currently
in the process of negotiating with my
creditors, in an attempt to resolve a
financial "sticky patch" I am currently in.
Some of my creditors have agreed to freeze
the interest on the outstanding amounts, but
others have not. The ones that agreed to do
so, I just asked them to. Is the normal
policy when attempting to get interest
charges frozen, just to ask, or is there
some standard format in having interest
frozen.
A.
First, creditors do not have to freeze
interest. A bank will have an overdraft rate
of interest (and a horrendous unauthorised
overdraft rate), a money lender will have
protection under the Consumer Credit Act to
charge default interest, and businesses can
charge 'late payment interest' after 30 days
from invoice date.
The interest
that continues to be charged on debts that
are 'substantially' overdue, old or
impossible to pay off fall under the grey
area of what is 'fair and reasonable'. If
you have a £700 debt and monthly interest of
£5.01 and you are paying £5 per month you
will, obviously, not discharge the debt. And
more importantly, as it is the debt will
take about 12 years to clear without further
interest being added.
The term of 3
years to settle just about any consumer debt
seems fair and reasonable - unless your
situation changes. Lenders that set up
repayment terms of 20+ years are more
numerous than you would expect. It is fair
and reasonable to offer all creditors a
repayment plan that will end on the third
anniversary - again unless the situation
changes. I would like to see the freezing of
interest as a mandatory action and there is
some agreement from a number of
lenders/creditors.
Another way of
dealing with the interest is to offer, say,
£5 per month until you 'sort things out',
and then recommence paying interest and a
larger monthly payment when you can. But if
you do not approach the lender they cannot
refuse in the first instance.
WARNING
Specific advice is needed for individual
situations as solutions to problems can ONLY
be effective when the full story is known
and documents are seen. Our notes are not to
be acted upon.
COMPANY
REPORTS
First class
reports, county court
judgments, turnover, cash flow, directors
and lots more information to help you make
the right decisions. Don't trust to luck
with credit: invest in knowledge.
Company Reports
TOPIC 3
Credit Management and Accounts Audit
Exemption
As from the 26th
July 2000 all companies with a turnover of
up to 1 million UK pounds can choose to be
exempt from a compulsory accounts audit -
previously set at 350,000 UK pounds. This
means that annual accounting costs will be
less, as will the amount of information
available at Companies House for credit
reference reports.
The lack of
detailed accounts will only add to the
problem of credit checking your customers as
the unaudited accounts will only cover the
most basic details and will probably be
compiled by the business owner or their
bookkeeper (and why not).
The unaudited
accounts, known as abbreviated accounts,
contain an abbreviated Balance Sheet and
notes: notes explain in more detail the make
up of the figures contained in the Balance
Sheet.
LINKS
Company Reports
Abbreviated Accounts for Small Companies
BITS & PIECES
E-Commerce VAT
Explained
Customs and Excise has set up a web page
with all you need to know as a supplier or
customer using UK vat legislation, or as
they say, "This guidance is designed for UK
small and medium sized enterprises (SMEs)
trading or intending to trade on the
Internet."
LINKS
hmce.gov.uk
Electronic
Signatures
Electronic
signatures are now a part of UK law. From
the 25 July 2000 all contracts, agreements,
letters etc. that required a signed
authority can now be completed by e-mail
instantly, and not in the days that we
previously encountered by post.
What is an electronic signature? "An
electronic signature is something associated
with an electronic document that performs
similar functions to a manual signature. It
can be used to give the recipient
confirmation that the communication comes
from whom it purports to come from
("authenticity"). Another important use of
electronic signatures is establishing that
the communication has not been tampered with
("integrity")."
LINKS
Explanatory
notes can be viewed at
UK Legislation
