Understanding interest rates and charges.

An ePetition was recently launched by Martin Lewis’ Money Saving Experts Website to bring financial education into schools. The petition caused a lot of debate amongst lots of people, as some believe that debt occurs because of lack of knowledge, while others believe it is due to unforeseen events such as illness, redundancy or an addition to the family.

Whatever your reason for debt, it is always important for you to have an understanding about the charges that are applied to your credit cards and loans.

If you have taken out a loan you will know that you signed an agreement prior to it outlining the amount you are borrowing, the interest percentage that will be charged and the total amount that you will pay back as well as detailing your repayment amount and period. This agreement is known as a Consumer Credit Agreement and is required under the Consumer Credit Act. Once you have signed this agreement, you are acknowledging and accepting the terms including interest and charges that may be applied if you fail to comply with the agreement.

If you have taken out a credit card you will once again know that you must sign and agree to a Consumer Credit Agreement, the same as with a loan. With a credit card, the card provider can increase or reduce the interest rate over the time that you have your account. The new interest rate will apply to all of the money you owe on your card, except for any amounts you may have at special promotional rates.

If your card provider decides to increase your interest rate, it must give you at least 30 days’ notice. When card providers tell you about an increase in your interest rate, they will explain in clear language how it is changing, what it will cost and the options available to you.

You can decide not to accept the new interest rate. If you do this within 60 days, your card provider will close the account and you will need to pay back the money you owe at the current interest rate. If your card provider also offers other lending products, such as personal loans, it may let you transfer the balance on your credit card or store card to one of these, at your current interest rate (or a lower rate).

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OFT Close 35 Debt Management Companies.

The Office of Fair Trading have released a statement announcing that 35 debt management companies have surrendered their consumer credit license and have ceased trading.

The announcement follows on from the warning they issued in September, see our earlier blog, where they ordered 129 debt management companies to start complying with them or risk losing their license.

As well as the 35 who have lost their license, a further 15 could face losing their license after further investigation.

All 129 companies were asked to submit evidence to show that they are complying with the OFT. Out of those, 79 companies submitted their evidence of which the OFT are now reviewing. Seven debt management companies did not respond to the warning and are now being investigated.

The report broken down shows:

*35 debt management companies have surrendered their consumer credit license

*15 face losing their license

*8 companies have had their licenses revoked by the OFT

*7 didn’t respond and are being investigated

*Further 79 and still being reviewed.

Payplan can proudly announce that the OFT had no concerns about us.

If you have any concerns about your debt management company then contact the Office of Fair Trading. You can read their full statement here.

Don’t forget you can also follow me on Facebook and Twitter.

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The UK Tax System is to be simplified to attract foreign investment and decrease the burden on businesses

Tax System to be simplified

The Chancellor of the Exchequer, George Osborne is preparing an Office for Tax Simplification to reduce the 11,000 page tax code; due to Britain having one of the most complex tax codes in the world.

It is hoped that the tax code will become more readable and more people will understand the tax laws they are being asked to comply with.

Initially two reviews will be conducted:

The tax system for small business will be simplified
Restructuring of tax reliefs, allowances and exemptions

Tax credits will not be adjusted as they are considered to be part of the benefits system.

It is being simplified in order to make the system more competitive for the growth of small businesses, in hope of stimulating economic growth.

The Chancellor has said:

The previous Government took a complex tax system and made it even worse. A decade of meddling and intervening has made the tax affairs of millions of families and businesses across the UK extremely complicated. We need to sort out this mess.

Two years ago I promised to create the Office of Tax Simplification. Today, we’re delivering on that promise. With its independent, expert advice it will be a permanent force for a simpler tax system.

Simpler, more competitive taxes will help us show the world that Britain is open for business.

Payplan

If you are worried about your finances contact Payplan today on 0800 280 2816, for free and helpful debt advice

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Lenders can turn new arrears rules to their advantage

The regulator’s latest changes to the way lenders should treat customers in arrears – particularly the requirement for lenders to consider all options before starting action to repossess a property – are to be welcomed.

In my experience, mortgage arrears need to be dealt with in the context of the overall financial situation of borrowers.

In trials in which we are working with a small number of lenders to talk to clients in arrears, we have found that by engaging with borrowers about their whole debt situation we’re nearly always better able to effect a solution that stabilises and makes their repayments on unsecured debt more manageable.

This leaves a greater proportion of income available to put towards improving the arrears situation.

So without having to run the risk of giving advice, lenders adopting a more holistic approach to arrears can turn the FSA‘s rules to their advantage and put more borrowers back on the straight and narrow.

They can also fulfil their obligations with regard to Treating Customers Fairly.

So lenders should see the new rules, rather than being a burden, as a chance to tackle underlying unsecured debt liabilities at source and free up disposable income for the repayment of arrears.

John Fairhurst
Managing Director