Will wonga linga longa

So, Martin Wheatley has ‘sent the boy’s round’ to deal with that scourge on ‘UKplc’s hard working families’ – the Payday lender.

The FCA has announced it’s plans for dealing with these lenders, who dare to go where other’s fear to tread. In their “making sure only firms with a consumer-centric approach can do business in future” the outcome will be a reduction in this type of lending to those consumers who take it up responsibly.  It is a business model based on risk versus reward. Or in society today, the risk is taken but there must be no reward.

From January 2015, cost caps will be in place along with limits on how much you can be charged for late payments or no payment at all for a very long time. The final rules will be published in November 2014 so that firms still seeing viability in the model will have time to prepare for, and implement, the changes.

The FCA “estimate that consumers will save on average £193 per year, translating into £250m annual savings in aggregate

In the UK, some 1.6m people use payday lenders. I am not sure what that says about the economy, society or the banks. But it is a fact that these lenders provide financial succor to many in short term need of ‘wonga’, ‘wedge’, or ‘holding folding’.

Most understand the punitive effect of not repaying such loans quickly. Some do not, or in fact just do not care.

We heard recently that Wonga, the UK’s biggest payday lender (and of course sponsor of Newcastle United Football Club) had been ordered by the FCA to pay £2.6m in compensation for sending letters to some 45,000 of its customers in arrears from non-existent law firms threatening them with legal action.

The FCA, who could not fine the firm under TCF guidelines as it was not regulated by them at the time of the ‘offence’ say that ‘Wonga must identify and pay redress to all affected customers. While some customers will receive cash, others will likely have their outstanding balance reduced.’

The usual suspects entered daylight for a blast at Wonga, Mike O’Connor of StepChange Debt Charity, said: ‘For too long payday lenders have subjected consumers to unfair, misleading and distressing practices and today’s announcement represents a victory for a small number of those consumers.

It is indeed a small victory, most will receive around £50 per ‘punter’. The administrative cost will be far more.

As the City of London police were investigating whether Wonga has broken one of several laws it then emerged the Student Loan Company was using the same tactic to chase graduates for their student loans, and it can now be revealed that the threatening tactics go well beyond the ‘legal loan shark’ with a string of household names using the controversial ploy.

Even high street banks are using Wonga-style bullying letters to chase customers for payments. Barclays, Lloyds, Halifax, RBS and HSBC are among firms who have sent customers letters that look like they are from outside firms when they are not. The letters appear to be designed to put pressure on customers by making them believe requests for debt repayments have been passed on to third parties.

Citizens Advice chief executive Gillian Guy added: ‘it is dishonest of lenders to disguise letters chasing people for money as being from third parties.”

Now whilst I have no warmth at all toward the payday loan industry I have concerns that some, in launching their moral outcry, have overlooked a key issue, these individuals are not repaying a loan made to them in good faith. Wonga and others are lenders who lend where banks or employers would not.

  • The interest rates are enormous and are made very clear
  • Their marketing practices are terrible, as are all in this dark place

But in all cases

  • The letters were sent to those in arrears with their repayments
  • Letters from recovery firms chasing debts are a norm today, and often for very small amounts
  • Many borrowers are responsible, but sadly many are not it would seem in the case of Wonga and the Student Loan Company
  • In Wonga’s case around 45,000 are not.

The TCF crime as I see it is that Wonga created fictitious law firms to chase down debt. Banks and the Student Loan Company ‘waxed lyrical’ too with fictitious debt collection agencies, all no doubt to fire a warning shot that they would like repayment as agreed and expected.

The outcome of FCA enforcement involvement is that very many individuals, who owed money and were in arrears are now being compensated, in Wonga’s case with £50, for borrowing money they could not or would not repay and all because the letters came from a fictitious firm of lawyers (Messr Sue, Grabbit & Runne?) or debt collection agencies rather than real ones?

In another age, the ‘boys’ would have been sent round for a gentle word in their ‘shell like.’

In sharing caring 2014 UKplc, the message being sent out is that if you fail to pay your loan (that perhaps you should not have been granted in the first place) despite many warnings, you will be paid compensation.

At Wonga rates of interest 45,000 defaulters is a huge amount of arrears. Surely the best thing to do for all is simply to stop payday loan firms trading.

After all if more mainstream, responsible borrowers are having their mortgage aspirations severely curtailed by the Bank of England, the Treasury and the FCA MMR, what place should there be for payday lenders in the mix or student loans.

Yet while all this is happening, the FCA has spent a huge sum on regulating to protect the defaulters, the bad borrowers. Is a saving £193 per year really worth all this trouble?

Life is in a previous generation’s ethos about winners and losers. In UKplc today, society is hell bent on having £millions spent protecting people from themselves.

Instead of stating on loan literature “Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it” an alternative would read, “If you do not keep up repayments on a mortgage or any other debt you will be in receipt of an apology from the lender and compensation”.

Although regulation is needed in many areas, perhaps the best and cheapest option in regulating payday lending is to just ban it.

UKplc has completely lost the plot. Or do you feel differently?

 

www.panaceaadviser.com

 

Hospitality or Inducement? Summer feeding frenzy, but not for you or I

Summer in UK.plc can be fantastic when the weather is good. And with summer we see the season slowly start with the Derby, Royal Ascot, Queen’s Club tennis, Glastonbury and ending with an orgasmic weekend rush of Henley regatta, Wimbledon finals, the British Grand Prix and Le Tour with some post coital inhaling of fresh air at Cowes Week in August.

We can forget about any World Cup football enjoyment since England got elimated early, but headlines were still made for all the wrong reasons by Ray Whelan, a director of FIFA’s official hospitality partners MATCH.

He was arrested in Brazil as part of an investigation into illegal ticket sales at the Copacabana Palace, Rio de Janeiro’s best hotel reserved for FIFA’s great and the good.

The arrest, along with another 11 people, came as part of the cunningly named ‘Operation Jules Rimet’ looking into ticket touting.

I used to be a great lover of sports, playing and watching. Tickets were relatively easily attainable and there was a feeling of inclusivity, that the ordinary ‘guy’ and of course ‘girl’ could attend events with relative ease, enjoying the spectacle of top quality sport.

But tickets to major events seem to have fallen victim to touts or the need to place on display pointless, gratuitous celebrity at the expense of the true aficionados.

Whilst not wishing to deny the great and the good the opportunity to attend the above, can someone explain to me why so called ‘Royal Boxes’, Royal enclosures’ and ‘VIP areas’ are rammed full, day after day, with the same people:

  • Assorted Royals of varying importance or irrelevance
  • Politicians of varying importance or irrelevance
  • Pippa Middleton
  • Her mother, father and brother
  • Celebs of varying importance or irrelevance
  • David Beckham
  • Kathryn Jenkins
  • Jude Law
  • Goldie
  • Michael Fassbender
  • Naomi Campbell
  • Amanda Holden
  • Joey Essex and other ‘Towies’

Sorry, I got a bit carried away there but I think you get the gist of it.

So whilst the likes of you and I may spend good money to get tickets (if you are lucky) or queue, enter ballots and still not get tickets or decline/not get offered provider corporate hospitality, the great and the not so good come up winners all the time.

Brand association and sponsorship hangers on get the best seats at the best events all the time, not the real fans and certainly not the real introducers of business in our industry as they have been airbrushed out by regulatory diktat.

Not to say that the financial services regulators miss out on life’s little treats and luxuries, as history has shown.

Just a thought, would a ticket to any of these summer events from provider sponsors cause demonstrable consumer detriment on an industrial scale?

But it is very TCF and inducement compliant though eh?

As a footnote, of the more than 3 million tickets for the World Cup it was actually possible to buy, 445,500 were allocated to Mr Whelan’s MATCH Hospitality business, according to FIFA.

At the time of writing, in ‘Elvis speak’, Mr Whelan has ‘left’ the Copacabana Palace by the back door. He may not come back for a while.

A seriously nice little earner though ‘Terry’!

 

www.panaceaadviser.com

Longstop matters – who cares

I exchanged some tweets, phone calls and e-mails over the last few days regarding the e-petition for Fair Liability for Financial Advice –http://epetitions.direct.gov.uk/petitions/52958.

This is an excellent initiative started by Helen Turner at Tenet, an initiative that really deserves support. But, the e-peitition expires on the 23rd July and I am very concerned that only 6,402 have signed this at the time of writing. Helen’s target is 10,000.

It may be that RDR has dulled adviser sensibilities but for goodness sake, when will the realisation dawn that the continual refusal to reinstate the longstop by the FSA and the current FCA position of ‘willing to discuss’ will probably see the same ‘outcome’. No longstop in place.

APFA is keen to be seen as having succeeded in getting the FCA to conduct a review of the longstop but many advisers would see this as too little, way, way too late. Additionally,those in APFA leading this campaign need to have a rethink about strategy and unless you advisers start ‘stamping your feet’ in greater numbers, nothing will ever get done.

I think regulator attitudes over many years and from many regulators has confirmed that with 20% plus reductions in the adviser community, linked to very poor trade body leadership over many years, a singularly consistent willingness to ‘capitulate’ on the longstop and other key issues by successive APFA and AIFA leaders, regulators past and present see advisers as weak.

And with a weight of a regulatory induced loss of trust seeing public opinion supporting the concept that anyone in financial services is a ‘villain’, they can ride roughshod over a decent group of highly regulated people concerned about their livliehood and future security, especially in retirement.

APFA have a meeting with the FCA soon on the longstop. Despite earlier reports to the contrary, Alan Lakey (the only APFA council member with actual detailed knowledge, understanding and experience of fighting the longstop) has now been invited by APFA to attend that meeting however we do not of course encourage blows to be exchanged.

Such a meeting is a good sign in some ways, but given that the definition of a pessimist is simply a well-informed optimist, I would take the view that the result will be a reworking of old arguments. That is that unless the reinstatement of the longstop can be proven to have no consumer detriment…well you know the rest.

There is a sense amongst many advisers that by simply being a limited liability company or partnership this provides protection from stale claims. I would suggest that advisers think again. A substantial stale claim, or a number of them, if successful can put your limited liability company out of business. And given that ‘phoenixing’ is a thing of the past, and the FSA and now FCA see liability and responsibility falling upon controlling individuals in certain instances, you should, in ‘Hector speak’ be very afraid.

The point is clear about the longstop, in fact follow this link –http://www.panaceaadviser.com/main/p20.php?cx=014967606690113664965%3Aghrmkhjba3a&ie=UTF-8&q=longstop&search=go- and you can see how much involvement we have had in the campaign to reinstate.

The Limitations Act should apply to all citizens in this country, not an ’Animal Farm‘ version. And only Parliament can act to either impose or remove protection from the law. In not referring to a removal in FSMA 2000, Parliament did not remove it, as the regulator would suggest it did.

Barrister Peter Hamilton summed up the whole lack of longstop position very well as follows: “Thus, under the law, I know in advance where I can and cannot park my car. But if I could park only where some official specified after the event, I would have no right to park at all. Similarly, if my right to my possessions is watered down to mean only a right to hold them until the FOS decides it is fair and reasonable for me to pay them to somebody else, then I have no ‘right’ in a true sense to my possessions at all. This conclusion is reinforced by the fact that there is no appeal and the fact that any judicial review of a FOS decision on the merits of a case is, for all practical purposes, impossible because of the vagueness of the subjective (‘in the opinion of the ombudsman‘) fair and reasonable criterion”.

The e-petition needs 100,000 votes to get a debate in Parliament, which is unlikely however 10,000 would be noisy. In addition to a successful judicial review being granted or a case going to the European courts, this is your opportunity to begin the fight back.

Sign now, or as they say, forever hold your peace…and suffer the consequences.

www.panaceaadviser.com

Summer Madness, has uk.plc finally lost the plot?

Being born in the ‘50’s has some benefits, the best ones being that my generation, in the most part, had access to decent education, work was an aspiration, common sense forged life skills. Benefits were something that came with a job, bastards were illegitimate children and not a form of abuse hurled at you for doing nothing wrong, the police were actually on the streets, a pension was income in retirement, not a place to stay in France, Ethics was a code of conduct and not a county north of the Thames….. well the list could be sooooo long.

So with summer upon us the start of the so called ‘Silly season” has arrived.

This years front runners in the ‘how much did it cost to find this out’ and‘how stupid can people be and get paid for it’ will soon be caught up in the race for the bottom over the coming months.

Runners and riders so far:

  • Research shows that children with learning disabilities and special needs may be at increased risk of being bullied.
  • I may have been wrong to condemn Christian B&B owners for banning gay couple because those with religious beliefs have rights too’, says top judge.
  • A Grimsby fisherman and a new set of European rules that stopped him catching a Dover sole for supper.
  • Ladies day at Ascot- vomit, tattoos and fascinators.
  • Headphones can form 120 ‘complex knots’ in your pocket because loose ends weave through coiled strands. Physicists tumbled a string in a box 3,415 times to investigate tangling.
  • A ‘disproportionately high number’ of athletes and sports stars are privately educated amid the dire state of competitive sport in state schools, according to the head of Ofsted.
  • Drinking, smoking, obesity and the legacy of holidays in the sun arefuelling a sharp rise in cancers.
  • Toddlers who watch lots of TV do worse at school – and even sets left on in the background can be harmful, a leading expert has warned. Lynne Murray, a professor of developmental psychology, said that two large-scale reviews made it ‘absolutely clear’ that watching television has no benefits for under-twos.
  • A trader at a £4billion Mayfair wealth management company claims her boss greeted news she was pregnant by saying: ‘I knew something like this was going to happen.’Emilie Gregg told a tribunal she was ‘bullied, harassed, victimised and blatantly discriminated against’ for taking maternity leave from her £150,000-a-year job.
  • Should smartphones and laptops be banned from classrooms?Researchers find even the smartest students are distracted by social networks at school.
  • England captain Steven Gerrard was at the centre of an escalating row between Nike and Adidas over the leisure kit being worn by the players in Brazil, decking the England squad in their gear with little or no FA branding, in addition to the official supply items for on and off the pitch. Never mind the team performance ‘outcome’, all items of leisure kit are now at knock down prices too.
  • North Tyneside council has issued families with a 13 point code for children on ‘how to play nicely outside’.

In football speak, c’mon UK. Do we really need to pay people to tell us something so very obvious that anyone with an ounce of common sense could see.

The UK is being taken for a ride by so called experts, politicians, human rights groups, lobbyists, lawyers, regulators etc. ‘Boots’ and ‘raining’ are words that spring to mind.

But top prize for summer madness goes to Deeb Salem, a former Goldman Sachs Group Inc. (GS) trader who said he helped the bank earn more than $7 billion and wants to be paid the almost $5 million difference between his 2010 bonus and what he told his mother to expect. Salem said his bonus was unfairly docked because of a written warning he received about his 2007 self-evaluation. It was rejected by the Financial Industry Regulatory Authority in New York.

What is needed is a return to common sense, caveat emptor, removal of no win no fee, morality and in Mr Salem’s case, a little modesty.

 

www.panaceaadviser.com