Archive for the ‘Credit Checks’ Category

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New Debt Management Guidance for Debt Management Firms

Thursday, March 22nd, 2012 10:57

Businesses who offer debt management advice or credit repair services to consumers have received revised guidelines from the OFT on the standards they are expected to provide.

The new guideance expands on previous verison and provides examples of what would be considered ‘unfair or improper practices’ which if a business were to engage in could end up with being considered unfit to hold a consumer credit licence and/or operate in the market.

Examples of unfair practices include:

  • Sending unsolicited marketing text messages, email or voicemails.
  • Providing inappropriate financial incentives to staff giving debt advice, which may encourage them to promote unsuitable debt management products for personal gain.
  • Making false or misleading claims regarding the status of the business, for example operating websites which look like the website of a charity or a government body.

Businesses will be expected to refer consumers to not-for-profit advice organisations for additional help, in certain circumstances, and are also expected to implement measures and systems to fully recognise and deal with more vulnerable clients, such as those with mental capacity issues.

The guidance itself has an overall theme of transparency, with businesses now expected to provide consumers with all the necessary information to enable them to make an informed decision in relation to finding the right debt management solution for their individual circumstances.

The guidance builds on enforcement action taken following a compliance review of the sector in 2010, which identified widespread concerns, including problems with advertising and marketing practices and the quality of advice given.

Following the compliance review, the OFT issued 129 warnings to debt management businesses. Since then, 87 businesses have exited the market, either voluntarily or as a result of enforcement action, and a further 67 warning letters have been issued.

David Fisher, Director of the OFT’s Consumer Credit Group, said:

“This new guidance clearly sets out the standards we expect from debt management businesses. All too often it may be particularly vulnerable consumers who fall victim to poor quality debt advice and we will continue to take action against businesses that fail to follow our guidance.”

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Drop in Rent as Tenants Rush to Beat Stamp Duty Holiday

Friday, March 16th, 2012 12:20

The end of the stamp duty holiday has seen a decrease in rental fees during February with people looking to make best of use of the holiday and purchase a property, say LSL Property Services PLC.

The Buy-To-Let Index from LSL showed that the average rent in England and Wales for February dropped by 0.6% to £707 per month after an increase in January. Although the amount of rent being paid dropped slightly in February, rents continue to rise on an annual basis with an increase of 3.5% – a £24 rise in the past year.

The biggest decreases were in the Midlands, with rents falling by 2.2% in the East Midlands, and by 1.8% in the West Midlands. Rents rose in three regions, increasing by 0.7% in the North East and 0.5% in both Wales and the South West. Rents dipped by 0.4% in London, only the second monthly fall in the past 14 months.

In the last 12 months the largest increases in rents have been in London, where rents rose by 5.6%, and the East of England, where rents increased by 5%. On an annual basis, rents have only fallen in one location, dropping by just 0.2% in the East Midlands.  

David Brown commercial director of LSL Property Services said:

“The looming spectre of the end of the stamp duty holiday has taken its toll on tenant competition in the run-up to the deadline, easing the upwards pressure on rents. In February, an increased number of tenants either became owner occupiers, or seriously considered property purchase, rather than renewing their contract or seeking a different rental property.”

“With fewer tenants than usual actively competing for properties, combined with a slight improvement in the number of rental properties becoming available, many landlords priced less aggressively to avoid the prospect of a void period.” 

“In the longer-term, it’s difficult to see a prolonged decrease in the tenant demand underpinning rental inflation. There are already indications that mortgage lending is falling back, and that mortgage rates are beginning to climb, which will limit the number of prospective homebuyers leaving the rental sector.”

“While the NewBuy scheme may support a limited number of first-time buyers, its impact will undoubtedly be off-set by the removal of the stamp duty holiday. As a result, and given the growing number of households, the pressure will remain on the private rented sector.”

“Stabilising house prices have bolstered the total annual returns property investors currently enjoy. In addition, healthy rental yields and historically attractive mortgage rate are drawing in investment from prospective landlords. However, to accommodate the UK’s growing number of households, and given the lack of money available for social housing, the private rented sector must continue to expand – and the government must address this in the Budget.”

“A simple change to capital gains tax, allowing landlords to reinvest capital gains without it being taxed would help stimulate further growth, reducing the strain on the current provision of rental accommodation.”

“Tenant finances have been boosted by the easing level of inflation at the start of the year, allowing many to get their monthly budgets in order – and this has reined in the overall level of rental arrears. Nevertheless, it’s clear that the bulk of arrears are being accounted for by a growing minority who are falling further and further behind with monthly payments. As unemployment rises, we anticipate this proportion of renters will climb.”

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KPMG: Potential Tax Breaks Could Boost UK Economy

Tuesday, March 13th, 2012 10:41

New measures that could provide a small boost to the UK economy could be with us as soon as this months budget, according to KPMG.

David Kilshaw, chair of private client advisory at KPMG in the UK, explains:

“A ‘giveaway’ budget is not on the cards but there are changes expected on targeted tax incentives for investment that could be very valuable.  Amendments to the non-dom rules to allow them to invest in qualifying UK businesses could open the door to monies flowing into the UK.  And the introduction of a new Seed funding regime plus changes to existing enterprise investment schemes should make these investments more attractive to business angels, entrepreneurs and high net worth individuals.”

The key tax incentives expected for investment are:

  • changes to the non-dom tax rules around investing monies held offshore  into the UK
  • enhancements to the Enterprise Investment Scheme and Venture Capital trust rules, and
  • the introduction of the new Seed Enterprise Investment Scheme.

David Kilshaw continued:

“Imagine the scenario…. A non-dom (“Mr Non-Dom”) has been resident in the UK for a number of years and has always opted for the remittance basis of taxation (under which only foreign income and foreign chargeable gains that he brings into the UK are subject to UK tax).  An interesting business opportunity is put to him to invest in a UK trading company.  However, over the years he has used up all funds that have already been taxed in the UK and any offshore capital (ie monies which can be remitted to the UK tax free).”

“The only monies he has available to remit to the UK would be subject to a tax bill for Mr Non-Dom of up to 50 percent – increasing the effective cost of his investment. Investing £1m would cost him £1.5m, because half as much again of the cost of the investment would go to the Revenue.”

“However, we expect new rules to be unveiled around the time of the budget to change this situation.  According to proposals that have been out for consultation, an exemption for non-doms is on the cards under which they can invest monies into businesses tax free.”

“There are some restrictions: the businesses must either be carrying out a trading activity or undertaking the development of commercial property (not residential) and the investment must be in actual companies, not in sole traders or partnerships.  But there are no upper or lower limits to the level of investment – which is positive for those with deep pockets who see the UK as a good business opportunity.”

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Co-Op: Two Thirds of UK Adults Have of a Debt Problem

Wednesday, February 29th, 2012 14:46

New findings from The Co-Operative Bank show that over two thirds of all UK adults admit to having a debt problem with a third of these not prepared to confront their debt issues.

£1,247 is the accumulated average of credit card, loan and overdraft debt for people where, until they reach this threshold, they do not believe they have a debt problem

The Co-operative Bank believes that those who are doing nothing to tackle their financial situation are suffering from the ‘DRIP syndrome’ where people with debt either:

  • Deny that they have debt
  • Rationalise the reasons why they are in debt
  • Ignore that they have debt
  • Postpone putting their affairs in order

As a result, more than one in eight are turning to gambling and the lottery to get out of debt, while one in twenty people are in debt to payday lenders, with around a quarter (22%) admitting to being in debt for five years or more.

The research also shows that half the population (50%) has slipped into further debt in the past year, with the average debtor building up £325 in extra debt since Christmas alone. Reasons for the debt ‘pile up’ include the rising cost of living (28%), increased energy bills (28%) and rising fuel costs (16%).

Robin Taylor, Head of Banking at The Co-operative Bank, said:

“It’s no surprise that people are feeling the pinch at the moment and that debts are mounting up, but what is surprising is that many people are choosing to ignore their debt and are suffering from what we have identified as DRIP Syndrome.”

“Our research also shows that the ‘debt alarm’ doesn’t go off until people owe more than £1,000, which can be a real struggle to pay back. Managing your money with steps such as writing a list of incomings and outgoings and regularly checking your bank account will help you get on top of your finances now before problems get any worse.”

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Why Credit Checking a Company Can Save Thousands

Monday, February 20th, 2012 11:24

Credit checking a company before offering them credit facilities can potentially save thousands of pounds in the long run, a leading commercial debt collection agency has said.

Federal Management have revealed that by performing a company credit check - which is now becoming a necessity for businesses across the UK – the potential cost saved in knowing the likelihood of receiving payment on time can run into the several thousands of pounds in legal fees.

Performing a credit check is no different now to any other method of due diligence you may perform on a company. If you know beforehand that a business or individual is accruing debts on a regular basis then you are almost certainly not going to offer a credit facility. Again, if a company has several outstanding county court judgements against them, why would you provide a credit facility? It seems a fairly simple question to answer but the fact of the matter is companies up and down the UK continue to ignore this very basic of tasks and are regularly having clients who are becoming non-payers.

Anyone who has a problem with non-payers of invoices, or have overdue accounts should contact Federal Management immediately on 0844 875 4022 to discuss the matter.

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Consumer Confidence Reaches Highest Level

Thursday, February 16th, 2012 12:39

The Nationwide Building Society Consumer Confidence Index for January 2012 has revealed consumer confidence has risen to its highest level for five months.

Nationwide’s Chief Economist, Robert Gardner said:

“After ending 2011 close to all time lows, consumer confidence staged a modest recovery at the start of 2012, picking up by nine points to 47.  Nevertheless, sentiment remains subdued by historic standards, with the main index almost 30 points below its long-run average.”

“Given the challenging economic backdrop, with the UK economy contracting in the final quarter of 2012 and the unemployment rate rising to its highest level since 1995 in recent months, the improvement may prove to be little more than a temporary bounce.”

“However, a number of other economic indicators have also surprised and been more positive than expected in recent weeks, which may be an indication that underlying economic conditions are not as weak as feared.  Surveys of business activity in the manufacturing and service sectors picked up unexpectedly at the start of the year.”

“The sharp fall in inflation, from 5.2% in September to 3.6% in January may also be lifting consumers’ spirits, easing the squeeze on strained household budgets.”

“Looking forward, renewed hope that the UK will avoid a double-dip recession may support sentiment, especially since the downward trend in inflation is set to continue through 2012.  But with the UK recovery likely to remain weak in the first half of the year, a significant and sustained rise in consumer confidence remains unlikely in the near term.”

“There was a noticeable improvement in expectations in January with confidence towards future economic conditions helping to drive this measure up during the month.  Historically, the Expectations Index has been the most volatile of the three core indices – indeed, a sharp deterioration in this component during the second half of 2011 helped push the main confidence index to its lowest level on record.”

“Given the uncertain economic outlook, this measure is likely to remain fairly volatile.  No doubt developments in the Eurozone will continue to play an important role in shaping how people view the UK’s future economic prospects, given the strong economic and financial linkages with the single currency area and the UK’s reliance on exports to drive its recovery at present.”

“Consumers expressed a greater propensity to spend on household goods in January with 40% of people believing it to be a good time to buy.  This is up from 31% in December and has now reached its highest point since the introduction of the 20% VAT rate twelve months ago.”

“Falling inflation and price cuts announced by the UK’s big energy suppliers may have left consumers feeling hopeful that the squeeze on household budgets will ease, boosting their spending power.”

“Given the uncertain economic outlook there was no surprise that consumers remained cautious about making major purchases, with twice as many people judging it to be a bad time rather than a good time to make a major purchase.”

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Moody’s Cut European Credit Ratings

Tuesday, February 14th, 2012 11:11

Credit Referencing Agency Moody’s have downgraded the credit rating of several Eurozone members, including Italy, Spain and Portugal.

Slovakia, Slovenia and Malta also saw their ratings lowered.

Great Britain, France and Austria avoided the downgrade but did see their status changed to “negative outlook”  which implies a 30% chance of a downgrade over the next 18 months.

Amendments to Ratings

  • Austria – Remained at Aaa – Outlook changed to Negative
  • France -  Remained at Aaa – Outlook changed to Negative
  • Italy – Lowered from A2 to A3 – Down One Notch
  • Malta – Lowered from A2 to A3 – Down One Notch
  • Portugal – Lowered from Ba2 to Ba3 – Down One Notch
  • Slovakia – Lowered from A1 to A2 – Down One Notch
  • Slovenia – Lowered from A1 to A2 – Down One Notch
  • Spain – Lowered from A1 to A2 – Down Two Notches
  • UK - Remained at Aaa – Outlook changed to Negative

As the figures above show, Spain saw the sharpest fall in with the countries credit rating dropping two notches.

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Bridging Market Suffering From Influx of New Lenders

Monday, February 13th, 2012 16:21

Research released by privately funded bridging lender West One Loans claims that 46% of brokers say the rush of new lenders into bridging has had a negative impact on the market.

West One Loans carried out a poll amongst brokers with almost half saying that new entrants hadn’t made any sort of positive impact on the market and one in four brokers claiming the impact has been wholly negative.

In a damning indictment of the new entrants, 15% of brokers suggested lenders are rushing into an industry they don’t understand, for short term gain. 11% brokers also said the increasing number of lenders has made writing bridging loans more complicated because of the greater range of criteria between lenders. 

West One Loans Chairman, Duncan Kreeger, said:

“With the bridging industry performing so well, inevitably it has attracted some unscrupulous figures from the mortgage industry’s past. They see bridging as little more than a cash cow to be plundered in the short term. They offer misleading headline rates, hoard proc fees, and attract negative press to bridging as result.”

“We need to make it clear there is no room for these people in the bridging market. Professionalisation of the industry has come on leaps and bounds in the last few years – that is partly what is driving its success.”

“It’s clear brokers think the influx of new lenders has improved some aspects of the industry. They say competition has increased, which has pushed down costs and helped raise standards – but only up to a point. The shadier operators are threatening to sully the reputations of all bridging lenders.”

“Despite the fact they are writing more bridging loans, and expect to write 27% more loans in 2012, brokers clearly aren’t enamoured with all the new lenders in the market. It is important lenders keep brokers sweet if they want the growth of the bridging industry to continue unabated.”

“That means being flexible on the types of loans they can offer brokers, and having access to different funding lines. It also means not drowning them in red tape, not hoarding proc fees, and rewarding brokers who push through plenty of deals.”

“Lenders need to recognise that maintaining high professional standards is important, not just for their own balance sheets, but also for their relationships with brokers and the reputation of the industry.”

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HMRC to Place Business Checks on Hold

Friday, February 10th, 2012 11:39

HMRC has put its business records checks programme on hold until a ‘revamped’ approach is launched ‘early in the 2012/13 financial year’.

A review of the pilot programme found ‘clear evidence that it is effective in improving record-keeping practices in smaller businesses’. But it recommended more targeted checks linked to education and support, HMRC said.

The pilot of checks on SMEs’ statutory business records began last April. ‘Up until 4 January 2012, 2,437 business records checks had been carried out. These found that 28% of those businesses visited had some issue with their record keeping, and an additional 11% had issues serious enough to warrant a follow-up visit.’

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Property Value Sees January Drop

Friday, February 10th, 2012 11:24

According to the latest LSL Property Services/Acadametrics England & Wales House Price Index, property prices fell by 0.2% in January as annual rate of decline accelerates to 1.4%.

The LSL Price Index claims overall transaction were up 5.1% year on year with the most rapid increases in the North at 5.9%

LSL Properties Commercial Director, David Brown, said:

“Prices edged down in January, dropping further than the normal seasonal slowdown we expect to see in the first month of the year. This means prices are now falling at 1.4% on an annual basis – the fastest rate of decline since September. This has been driven by growing concerns among property buyers about the state of the global economy – especially the extent to which the eurozone crisis will slow the market.”

“But despite this fear among some buyers, mortgage lenders have shown commendable confidence, injecting almost 20% more finance into the market in December 2011 than they did at the same time last year. This has prevented prices falling further in the last few months.”

“The market is being buoyed by cash buyers – especially for high-value properties in the South-East – who see British real estate as a safe haven from global financial woes. As a result, prices in London have bucked the national trend, not falling in any of the last six months, and growing annually by 3%.”

“Despite the relatively slow movement of prices, transaction numbers rose sharply in the final months of last year. This was driven by the increasing availability of mortgage finance. The largest increase in transactions was in the North, while the smallest rises were in Wales and London – the only two regions to have seen price increases over the last year.”

“This shows transactions are being held back in areas where prices are rising by the limited number of properties up for sale, but that an excess of for sale property in other regions has had the opposite effect. Sellers in areas where prices are growing are therefore charging a premium due to the scarcity of properties on the local market and buyers elsewhere have an excellent opportunity to secure affordable properties.”

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