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View Full Version : The Office of Fair Trading stokes... but not quite like Zorro



David Guyatt
04-09-2013, 06:39 PM
More like Grandpa (Private Godfrey) from Dad's Army actually.

On tonights news, one borrower on social security, had borrowed £200.00. Six months later she had paid over £2000 back, but still owed the original £200. She hadn’t relaized that the loan company could take the money right out of her bank account every month, as soon as it was credited with her social security payment. There is nothing she can do to bring the payments to a halt. It leaves her almost penniless each month.


This is an absolute ongoing disgrace, where bandit firms can impose interest rates as high as 4214% and others regularly 2000+%.


I’ve been around awhile and so I remember the days when these sort of practices were not just illegal, but were the sole preserve of organized crime families.

Haven’t we come a long way in 40 years....

But at least, the government get their share via corporation tax. Bless.


So the question asked below “what took [the OFT) so long” really does need asking.


A cynic might say that bandit business sectors are given 10 years free rule, after which they are gradually reined in. In this case, the power to cap interest rates is the key one.


But will it happen?





OFT cracks down on payday loans: what took them so long? (http://blogs.telegraph.co.uk/finance/ianmcowie/100023232/oft-cracks-down-on-payday-loans-what-took-them-so-long/)


By Ian Cowie (http://blogs.telegraph.co.uk/finance/author/ianmcowie/)Your Money (http://blogs.telegraph.co.uk/finance/category/your-money/)Last updated: March 6th, 2013
[/URL]

What took them so long? That’s the first question prompted by the [URL="http://www.oft.gov.uk/"]Office of Fair Trading (OFT) (http://blogs.telegraph.co.uk/finance/ianmcowie/100023232/oft-cracks-down-on-payday-loans-what-took-them-so-long/oft_web_1788799c/) announcement that it has found “widespread irresponsible lending” in the payday loans racket (http://www.telegraph.co.uk/finance/personalfinance/9911974/Payday-lenders-told-to-clean-up-act-or-face-ban.html). As statements of the bleedin’ obvious go, this is a corker.


It is to be hoped that very few readers of these pages will have personal experience of this usurious form of credit. So it is worth pointing out that one of the biggest lenders in this sector charges an annual percentage rate (APR) of 4,214pc. Yes, really.


Such eye-stretching interest rates are only bearable for the briefest periods before compound interest crucifies the borrower. Payday lenders used to argue that their best defence was in their name; these loans were only meant to last until the next pay day, when even sky-high APRs resulted in reasonable costs for short-term credit. (http://www.telegraph.co.uk/finance/personalfinance/borrowing/loans/9911820/Payday-lenders-QandA.html)
Now the OFT has found that half of payday lenders’ revenue is derived from rolled over or refinanced debts (http://www.oft.gov.uk/news-and-updates/press/2013/20-13#.UTdzZGGCzMA) which prove ruinous for borrowers. Put simply, those who remain in the red for longer than a few weeks, may never escape. That means many debtors in this £2bn market are soon in no position to shop around for better value.


So the OFT is quite right to propose refering the payday lending market to the Competition Commission and to call for tougher curbs to be imposed by the Financial Conduct Authority (FCA) (http://www.fsa.gov.uk/about/what/reg_reform/fca), which begins work next month. As the OFT drily observes: “The FCA will have significant powers and resources beyond those available to the OFT, including powers to cap interest rates and to impose a ban or a limit on the number of rollovers lenders may offer.”


However, before it does so it should remember that many borrowers only took out payday loans because they could not raise credit from conventional lenders. Firmer financial regulation of high street banks displaced demand and created a new market lower down the food chain. Hobbling payday lenders with new restrictions will prove popular but may also drive desperate borrowers into the arms of loans sharks.


The fundamental problem remains that too many people are following the Government’s lead and living beyond their means. One reason is that it is easy to borrow but difficult to save.
For example, it takes minutes to obtain a payday loan but hours to start a savings scheme, such as a pension. One of the unintended effects of financial regulation has been to replace expensive saving schemes with even more expensive debts. The FCA must make reversing that trend a priority.

Jan Klimkowski
04-09-2013, 07:29 PM
It's fundamentalist free market economics.

Praying to the False God named Deregulation.

Capitalism red in tooth and claw.

David Guyatt
04-10-2013, 09:39 AM
It's fundamentalist free market economics.

Praying to the False God named Deregulation.

Capitalism red in tooth and claw.

Aye. "Markets will regulate themselves", said the ghoul of Thatcher past...

And so they did. Look what happened.

A bankrupt world, shortly to implode economically followed by mass suffering.

But hey, those who benefited have already squirrelled their money safely away in Singapore, Hong Kong and elsewhere. Or should I say our money, as we're all going to have to pay their debts for them.

Jan Klimkowski
04-10-2013, 05:11 PM
Yup.

£20 billion stolen from British taxpayers.

This Master of the Universe will sacrifice his knighthood but thinks he still deserves a pension of over £400k a year.

As austerity bites, repeat after me: "We're all in this together."

Once a lie, always a lie.


Sir James Crosby (http://www.guardian.co.uk/business/2013/apr/09/james-crosby-give-up-knighthood-pension), the former boss of HBOS, has asked for his knighthood to be revoked after a scathing report by MPs found that he sowed the "seeds of destruction" at one of Britain's biggest banks.

Crosby was chief executive of HBOS until 2006, but was described as the architect of a strategy that just two years later led to the bank having to be rescued by Lloyds and eventually bailed out with £20bn of taxpayers' money.

He said he was "deeply sorry" for his role in HBOS's failure and asked for his knighthood to be removed. He is believed to be the first person to have voluntarily offered to hand back a knighthood. The 57-year-old chose to give up the honour, granted in 2006, rather than face the prospect of being stripped of it – as Fred Goodwin, the former boss of RBS was last year.

Crosby also offered to hand back 30% of his £580,000-a-year pension. He will still collect £406,000 annually in pension payments – 80 times as much as the average private sector worker. On Tuesday he also quit his £125,000-a-year role on the board of catering company Compass.

David Guyatt
04-10-2013, 05:34 PM
Crosby also offered to hand back 30% of his £580,000-a-year pension. He will still collect £406,000 annually in pension payments – 80 times as much as the average private sector worker. On Tuesday he also quit his £125,000-a-year role on the board of catering company Compass.

Presumably that only covers his pension at HBOS from 1994 until 2006 - 12 years. Or £33,830 per year, per years of service in payout terms.

I assume it doesn't cover the pension entitlement from yes, his time as deputy chaifrman of the Financial Servces Authority, from 2006 until his resignation in 2009. That would be another 3 years and if the payout is similar another £100k odd annually. This is not to even mention his previous occupation prior to HBOS, or his annual bonuses and profit shares.

He's doing okay.

My guess is that he was given the choice, loose the knighthood or his full pension. The reason I say this is because I know someone, a banker, who was given a choice too (under different circumstances, admittedly). He could have his giant profit share or a knighthood, but not both. He took the money.

Peter Lemkin
04-10-2013, 05:43 PM
..Presumably, because one can't sell a Knighthood on ebay or even in secret in the dead of night/knight.....and they weren't into it for the prestige and pomp...but only for the money!....

Magda Hassan
04-11-2013, 01:13 AM
..Presumably, because one can't sell a Knighthood on ebay or even in secret in the dead of night/knight.....and they weren't into it for the prestige and pomp...but only for the money!....
With the money he gets from his combined pension he will still be able to buy one if he wants and probably still have change left over to buy a small European manor house with a few serfs too. Looks like a win-win situation for him really.