BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

[EXC]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

The Government's response to the consultation was due to be published in the Spring but it looks like it won't publish anything substantive until the Autumn now.


House of Commons Written Answer: Consumer credit
Graeme Morrice (Lab: Livingston) asked BIS when they plan to publish the Government's response to the consultation on reforming the consumer credit regime.

Responding Ed Davey stated that the Government will publish a summary of responses to the consultation in the summer, followed by a more detailed response in the autumn.

[EXC]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

This is the Government's response to the Treasury Select Committee's report on Competition & Choice in Retail Banking.

http://www.publications.parliament.u.../1408/1408.pdf

They have reaffirmed their commitment to end unfair bank charges:

''The Government has also committed to introduce measures to end unfair bank and
financial transaction charges. This commitment is being taken forward as part of the
Consumer Credit and Personal Insolvency Review. The Government is considering
responses to the call for evidence and will come forward with more detailed proposals
later in 2011.''

I suspect that they're waiting on the final report from the Independent Commission on Banking which is due at the end of September.

[Amethyst]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

Thank you for your interest in the Consumer Credit and Personal Insolvency Review. The Government has today published its formal response on the insolvency aspects of the review and a summary of responses on the consumer credit part.
Below is a link to the response document and a link to the press release on the BIS website.
Consumer Credit and Personal Insolvency Review response
http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/c/11-1063-consumer-credit-and-personal-insolvency-responses
BIS Press Release
http://nds.coi.gov.uk/content/Detail.aspx?ReleaseID=420472&NewsAreaID=2
A press release from the Insolvency Service will be available on the link below shortly.
Insolvency Service Press Release
http://nds.coi.gov.uk/
Regards
Peter Lovitt
Peter Lovitt, Consumer Credit Team, Consumer and Competition Policy, Department for Business Innovation and Skills.

[Guest]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

The government apparently need hard evidence that the cap on high interest loans is wise, as it may serve to drive consumers into the grasp of loan sharks.
Isn’t that a bit like the legalising hard drug argument? If something is wrong then it is wrong isn’t it, or am I being naïve?
Surely the answer is to cap the total charge for credit to stop the “Legal loan sharks” .
They still manage to make a profit in other countries where caps are in place and roll overs restricted, the only reason they are expanding at such a massive rate over here is because of the poor regulation and the opportunity to rip us off.
There is baggs of research on this over seas , it as all been done years ago the situation is no differnt over here than it was in Canada years ago when these loans were first introduced and they are now heavily regulated, i cannot understand why something cannot be done now.
This in my view masks the reall problem, that the government should ensure access to affordable credit for the poorer mebers of society, it can be done it just needs the will.
Peter

[Amethyst]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

Insolvency Service PR


The Government is committed to making sure that debt advice is accessible to all, including the most vulnerable. It is also committed to improving standards concerning debt management.

Following consideration of the responses received, the Government has proposed:

* the Money Advice Service should perform a central role in the coordination of debt advice, and should research and develop a delivery model for debt advice
* development of a protocol setting out what to expect from a Debt Management Plan;
* strengthening voluntary codes of forbearance where debtors need a breathing space to seek debt advice or recover from sudden income loss; and
* a consultation on how to facilitate access for bankrupts to a basic bank account
* a consultation on increasing the petition debt level for creditors. The level (currently £750) has not been increased since the Insolvency Act 1986 came into force and we believe that to be able to threaten someone with bankruptcy for such a small amount is disproportionate.

Business Minister Edward Davey said:

"While it is clear that stakeholders have strong concerns about some aspects of the personal insolvency framework, no strong case has been made for a radical shake-up. However, I am convinced that there is more that can be done to improve the delivery of debt advice to the most vulnerable and intend that Money Advice Service take up this work.

"I want to see creditors, debtors and particularly providers working together to improve standards in debt management, so that debtors are directed only to those operating the very best service, leaving no place for the rogue providers who are only in it to make money for themselves."

Ends


Ins/Coms/180


Notes to editors

1 BIS received 216 responses to the Call for Evidence, including from 42 private individuals, 35 from lenders and interest groups with the financial industry, 20 from the free-to-client debt advice providers (or interest groups), 15 from the commercial debt advice providers (or interest groups) and 6 from 'others'.

2 A copy of the Response to the Call for Evidence is available at: http://www.bis.gov.uk/Consultations/...aitingresponse

3 The call for evidence was conducted between 15 October 2010 and 10 December 2010.

4 The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk

[Amethyst]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

Response HMT

Bank Charges
Introduction
4.1 The Coalition Agreement set out the Government’s desire to end unfair bank charges. The Government has been concerned about the potential for consumer detriment in particular from unarranged overdraft charges (UOCs). Ministers have taken this issue very seriously and have been clear that the Government will not hesitate to act in the best interest of consumers.
4.2 UOCs were the subject of an OFT market study and a widely reported test case, which ended with a ruling by the Supreme Court in November 2009. The Supreme Court found that UOCs cannot be assessed for fairness under the Unfair Terms in Consumer Contract Regulations (UTCCRs).
4.3 The Call for Evidence asked for views on whether the current voluntary, market-driven initiatives to address concerns about UOCs are delivering sufficient improvements for consumers. It further asked about the wider implications of limiting bank charges.
Fig 2 – Responses on Bank Charges
241811324Business and Business RepresentativesIndividualsRepresentative OrganisationsInterest and Consumer GroupsCentral GovernmentLocal Government
Summary
4.4 By and large, banks and building societies argued that existing initiatives that were either market-driven or led by the OFT were already delivering real improvements for consumers, and that a legislative approach was not required and might lead to unintended consequences. On the other hand, consumer groups and some non-banking businesses tended to favour either further regulatory steps or some other action on bank charges to benefit consumers. Consumer groups were particularly concerned about the effect of
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UOCs on financially vulnerable consumers, especially in situations where daily charges quickly accumulate.
Responses
4.5 Responses in favour of limiting bank charges felt that existing voluntary and market-driven initiatives did not go far enough to address concerns around UOCs, although the OFT initiatives were on the whole welcomed. A small number of responses referred to the Supreme Court judgement in 2009 and asked for legislation to make UOCs assessable under the UTCCRs.
4.6 In relation to recent market-driven initiatives, whilst the now increasingly common daily charging structures were welcomed as being easier for consumers to understand, there was some concern that they could in some cases be more expensive than one-off transaction charges. It was also noted that this charging structure could represent a loss of control particularly for financially vulnerable consumers who might struggle to avoid repeated daily charges. Under a daily charging structure, consumers need to have sufficient funds to credit into the account to stop charges from accruing rather than simply ceasing transactions.
4.7 Another observation was that, in general UOCs continue to affect consumers who are more financially vulnerable and that UOCs could exacerbate or create debt problems. A number of respondents also observed that it remained difficult to compare personal current accounts (PCAs). Finally, a small number of respondents pointed to recent OFT evidence that revenue from UOCs had not fallen significantly in recent years.
4.8 Some respondents questioned the fairness of the free-if-in-credit (FIIC) model, where a minority of consumers (including those who pay UOCs) cross-subsidise free banking for the majority (who do not tend to pay UOCs).
4.9 Some responses viewed payday loans as a sometimes cheaper alternative to an unarranged overdraft. They argued that banks and building societies should include information about APRs on their unarranged overdrafts. One response pointed to recent initiatives in the credit card industry, in particular a recently implemented voluntary package on five new rights for credit and store card customers and non-regulatory limits on charges that can be imposed on credit cards. They were concerned about this imbalance between PCAs and credit cards and thought that it was confusing to consumers.
4.10 Responses against any Government action on UOCs argued that existing voluntary and market-driven measures were sufficient to address any concerns, were already providing some real benefits to consumers and should be given time to embed. A number of responses highlighted recent innovations within the market that were providing consumers with better information on, and control over, their charges. For example, some banks and building societies were providing customers with simpler fee structures; more information about their charges, such as text or ATM alerts; and other improvements as part of the OFT voluntary work. These included new Lending Code standards for opting out of unarranged overdrafts and dealing with customers in financial difficulty, and a new annual statement of charges.
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4.11 There was a widely held view amongst responses arguing against any Government action that the FIIC model was preferred by the majority of consumers, although others observed the difficulties for new entrants to enter the PCA market. If charges were limited through regulatory action on UOCs, banks and building societies might look for alternative income streams, including from customers who currently benefit from the FIIC model.
4.12 It was argued that imposing regulation to limit charges would not really help customers who struggled to control and manage their finances. Some responses further argued that limiting prices would be an intervention in a competitive market and that it would not support competitive market outcomes. Instead, responses proposed that more focused initiatives were desirable for consumers who use overdrafts in ways for which they were never intended. A number of responses suggested that further improvements to transparency and switching would deliver broader consumer benefits than any potential cap on charges.
4.13 It was pointed out that consumers were already afforded protection by existing and impending regulation and industry codes, including the Consumer Protection from Unfair Trading Regulations (CPRs), the Consumer Credit Act (CCA) and the Payment Services Regulations; as well as the Lending Code and various agreements on transparency that banks and building societies had reached voluntarily with the OFT. Those respondents felt that adequate information on charges was already provided to consumers both when they opened a new account and subsequently.

Requirement for banks to identify and act quickly on snowballing penalty charges/unmanageable debt
A number of respondents saw no immediate need for action as banks were already compelled via OFT Irresponsible lending guidance and the Lending Code to act when it was obvious that a consumer was in difficulty (eg through the incurrence of repeated
43
penalty charges). Following this, the banks and OFT were now working together to help customers avoid penalty charges. These developments needed time to develop and bed in. It was also pointed out that any such action could only be in respect of the consumer’s account with the bank in question and not in respect of the debtor's overall financial position. Other respondents believed more could be done in this area, eg the Lending Code should be expanded to require more information on overdraft rates in current account statements and on costs incurred during the statement period.

[Amethyst]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

CONSUMER CREDIT ACT

Replace any remaining areas of automatic unenforceability of credit agreements with unenforceability without a court order or another appropriate penalty
Several respondents were in favour of the proposal. Many referred to the activities of claims management companies (CMCs) that exploited the automatic unenforceability provisions of credit agreements. They argued that it was unjust to lenders and to consumers who behaved responsibly but who ultimately had to pay more for their credit as a result of lenders building non-payment into their business models. Consumers who had to pay fees upfront, even when claims were unsuccessful, also suffered detriment. Respondents argued that closing the automatic unenforceability “loophole” would remove the incentive for CMC activity and would stop consumers having debt written off because of minor technical breaches that caused no detriment. They also maintained that the power of a court to review cases and order enforceability ensured that consumers’ interests were properly safeguarded.
In contrast, other respondents were against the proposal, arguing that lenders who had failed to provide the most essential and basic information in pre-April 2007 credit agreements should not be relieved, retrospectively, from the sanction for this failure. They also maintained that consumers should be able to obtain remedy easily without the need for protracted court action. One respondent accepted that the actions of CMCs had been detrimental but argued that the remedy should be more effective regulation of CMCs, rather than changes to consumer credit legislation. It was also argued that this issue was properly considered when the CCA 2006 was passed and an appropriate cut-off date for the unenforceability provisions was established then; there was no compelling evidence for changing that decision.

Require consumers to show genuine disadvantage before a breach of the CCA can make an agreement unenforceable
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Many responses to this question referred to the question on automatic unenforceability of credit agreements. There was some acknowledgement of a trend over recent years to use technical arguments concerning the documenting of agreements as a means of avoiding the repayment of a legitimate debt. One respondent believed that the presumption of unenforceability encouraged this behaviour among some less scrupulous consumers and argued that all agreements should be presumed enforceable until or unless a court held that there had been a breach that caused the consumer to suffer detriment, in which case the court could make an order enforcing the agreement on different terms or refusing to allow its enforcement. Other respondents argued that it was right that the onus should be on the creditor to ensure their agreements were legally compliant in the first place.

[Amethyst]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

FINANCIAL OMBUDSMAN

Rationalise role of FOS
Several respondents felt that FOS was doing a good job in protecting the role of the consumer. There was praise for its independent and impartial role as well as the innovative work undertaken to ensure its service was widely accessible to consumers. Its continuation was essential to ensure consumers retained confidence in the financial services sector. There were calls for more to be done on transparency of information, including enhancing the current complaint tables to include information such as a breakdown of complaints via brand, market share, total levels of redress as well as the routine publication of all FOS decisions and the regular publication of ‘emerging issues’ identified as a result of incoming complaint cases. One respondent noted the perception that FOS was paid for by banks and therefore on the side of the banks. Its sanctions could seem weak compared to the profit that could have been made from a miss-sold loan.

In contrast, other respondents expressed concern that the fee structure in place provided too much incentive for consumers, or more particularly for CMCs, to put in spurious claims. This was a particular problem for lower value credit because of the non-refundable £500 fee that had to be paid by the lender to the FOS in respect of each case referred to it, regardless of its merit. There were calls for FOS to do more to manage more effectively those CMCs who were acting inappropriately, either directly through the development of rules around how they will handle CMCs or by linking in to work being undertaken by the MOJ. Changes were needed to the charging structure in order to take account of inappropriate claims submitted by CMCs or where the lender had already offered appropriate redress to the consumer. There were also concerns expressed about the nature of FOS rulings, which some felt were interpreting the law much too broadly.

[Amethyst]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

Great to see so many respondents - particularly individuals such as Bob Egerton.... disappointing that none of the other advice forums/campaign groups (MSE/CAG etc) submitted responses though - particularly considering the direct relevance of the issues and wide scope of the consultation.


This was our response to the bank charges question: Legal Beagles Consumer Forum

[EXC]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

Great to see so many respondents - particularly individuals such as Bob Egerton.... disappointing that none of the other advice forums/campaign groups (MSE/CAG etc) submitted responses though - particularly considering the direct relevance of the issues and wide scope of the consultation.


This was our response to the bank charges question: Legal Beagles Consumer Forum

It's a bit disappointing that only 13% and 2% (respectively) of responses to bank charges were made by consumer groups and individuals, when you consider what a big consumer issue it is.

It's a shame as when I read the summary of the responses I got the impression that they gauged the merits of a view on a given issue by the number of responses to it.

It looks like the Government is trying to come to some kind of voluntary agreement with the banks (alas OFT) before considering any regulatory action:

''On both store cards and bank charges, the impact of recent changes in the market on consumers is not yet clear. Instead, the Government is still working with industry to determine the most appropriate course of action. We will, however, regulate to address consumer detriment if suitable alternatives cannot be agreed.''

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Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

I recollect highlighting the opportunity to contribute to a "call for evidence" some months ago (but can't recollect exactly which thread this was on). It looks as if only around 200 individual people and "interested bodies" responded to this "initiative" by BIS (Vince Cable's department) to comment on Bank Charges and many other means of screwing those most vulnerable debtors.

The results are outlined in the attached documents - very disappointing - especially given the huge influence we could have had - based on the number of people in CAG etc. - and the even larger numbers who have complained about Bank Charges etc. in the past few years.

It also looks as if every Bank etc and a few other Consumer Groups (including one along lines of "lawful longish low dogs with big ears and mournful expressions") did reply - but that CAG as a group and over 99.9999% of individual CAG members did not seem to do so. It's therefore hardly surprising the report is so uninspiring - and offers little hope of any positive outcomes in the short term!

If we don't take these chances to get our views heard by Cabinet Ministers then what chance do we have of getting things changed?

BD

http://www.bis.gov.uk/assets/biscore...ency-responses

http://nds.coi.gov.uk/content/Detail...2&NewsAreaID=2

Sheriff puts Bank of Scotland to proof on bank charges - Page 64

[Amethyst]

Not sure if that's meant as a compliment...I don't thing CAG's contribution would have made it any more inspiring lol - but good he's giving them a kick up the bum for not bothering. I suppose they could always have requested confidentiality.

Ahh knew I had posted some kick butts on there somewhere - took me a while to remember that username tho lol. Sheriff puts Bank of Scotland to proof on bank charges - Page 45


No suprise the gov. sound like they are leaning towards voluntary compliance. They seem to do it with everything lately.

I can't get the FSA website to work at the mo either grrrr - was trying to find if they actually mae new regs for switching as I can't remember...but I bet that was just guidelines too.

[EXC]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

I can't get the FSA website to work at the mo either grrrr - was trying to find if they actually mae new regs for switching as I can't remember...but I bet that was just guidelines too.

I don't recall the FSA announcing new regulations or even guidelines for account switching but the Payments Council recently announced a new switching initiative
Payments Council - Payments Council to deliver easy account switching for all customers

But of course the Payments Council is dominated by the industry and I suspect that the switching initiative is designed to head off the Treasury Select Committee's idea of 'account portability' - where your account number works like a mobile phone number and you can switch providers taking the number with you without payees & creditors needing to know you've changed provider.

[EXC]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

[quote=Amethyst;221442 I suppose they could always have requested confidentiality.

[/quote]

Or pleaded ignorance more like.

Somehow I doubt it as only 2 weeks ago they sent this rambling and incoherent e-mail to all MPs asking them for their ''support and assistance'', seemingly unaware that Government had asked them for their support and assistance by issuing the consultation.

Post # 233 Bank Charges Campaign Continues - Page 12

It's just lazy, armchair campaigning at it's worst.

[Amethyst]

Re: BIS & HM Treasury Consumer Credit and Personal Insolvency Review - Consultation

Aequitas' letter is good though I think a reference to the consultation responses just published might have been a good idea. I don't understand the refund of court fees though - well I do, I just disagree. I do think people get angry about the wrong things on there sometimes. Hey ho.