Tuesday, 26 February 2008

Stop the Payday Lending Scandal - Sign our Petition

Payday lending is growing exponentially in the UK.

U.S lenders, such as Dollar financial, have exported their business to the UK (trading here as 'Moneyshop') and now have over 200 stores in the UK. Pay day loans carry APR's of up to 1,000% and are regularly rolled over ensuring that households in financial problems are trapped into a cycle of credit dependency. Although the US pay day lending industry is subject to interest rate restrictions in their own country (including a 36% APR cap on pay day loans made to US military personnel), no such restriction on interest rates is in place in the UK.

Debt on our Doorstep have now launched a petition on the Number 10 Website calling on the Prime Minister to ensure an investigation is conducted into the UK pay day lending industry. Debt on our Doorstep is also calling on the Prime Minister to reconsider its previous decision not to introduce interest rate ceilings in the U.K.

You can sign the petition here http://petitions.pm.gov.uk/Payday-lending/

The petition closes on 27th March 2008.. Please e-mail your friends and ask them to sign up.

Sunday, 24 February 2008

Does the world really need the Jordan Credit Card?

From the Sunday Mirror
EXCLUSIVE After the jewellery, the lingerie and books.. it's the Jordan credit card
By Lara Gould Tv Editor 24/02/20

Glamour model Jordan aims to inflate her assets even further - by launching her own credit card.

The 29-year-old - real name Katie Price - is planning a "pink and girlie" card targeted at young women. A source said: "Katie sees this as the next step in developing the Jordan brand. She's lent her name to a string of other products and campaigns so why not move into the financial sector?"

But the idea has caused outrage among consumer groups, who fear the card could lure impressionable youngsters into debt. Jordan has already put her name to a lingerie range for Asda and a line of jewellery for Argos and has written a series of books, including her latest autobiography Pushed To The Limit. She also plans to bring out her own range of jewellery, clothing and cosmetics.

The mum of three, who recently spent more than £43,000 on her latest round of plastic surgery, has applied to have an official Jordan logo registered, featuring her naked silhouette.
She will be the first British star to front their own credit card - a trend kicked off in the US four years ago by rap music mogul Russell Simmons and tycoon Donald Trump - star of the American version of The Apprentice.

But Damon Gibbons, of Debt On Our Doorstep, said: "This is a totally irresponsible idea. Jordan is a very influential celebrity who has a lot of young fans who want to be just like her. Giving them a credit card endorsed by Jordan herself will encourage youngsters to spend cash on living a lifestyle they wouldn't normally be able to fund.

"Uk debt is currently up to around £1.3trillion. The last thing young people need is to be sold a glossy celebrity-backed credit card."

Jordan, who lives in a £3million farmhouse in East Sussex, has an estimated £30million fortune with pop singer husband Peter Andre.
Last night a spokeswoman for the model said: "This is something we are in talks with financial companies about doing in the next year.

"It will be the Katie Price credit card and it will be her own card rather than something Katie just puts her name to."

Tuesday, 19 February 2008

Northern Rock Nationalised

The decision to nationalise Northern Rock represents the ultimate failure of the private sector to sort out its own problems arising from the credit crunch. Heavily reliant upon public investment in the entire banking sector (and increasingly upon the use of sovereign funds from overseas governments) the financial sector is no longer capable of raising funds to rescue those banks in the biggest trouble.

This is bad news. Not least because it also means that many other projects reliant upon raising large amounts of capital will also find it more difficult to proceed. Look around any UK city, and you will find a skyline of cranes putting up retail developments, swanky city living apartments, theatres and cinemas. But already many of these projects are in jeopardy. As last weekend's Guardian reported from Manchester, many of those city apartments have already come down sharply in value. There is every likelihood that new developments will stand empty for some considerable time as consumers lack the confidence to buy and mortgages are harder to find.

Equally, many commercial developments are likely to be stopped. The commercial property market started to squeal loudly in pain last month with many share prices tumbling. It's hard to see the financial sector wanting to invest in new developments for commercial property even if it had the ability to get it's hands on the levels of cash that this would require. But the reality is, cash and liquidity is now of vital importance to the banks themselves so less likely to be available for investment. That supply side crunch feeds through as both inflationary pressure (demand remains high) and as a threat to growth (by removing the funds for investment), which poses such problems for monetary policy in the UK.

So no surprise that the Northern Rock fiasco has resulted in nationalisation. But what next? Northern Rock has been actively repossessing customers in arrears in recent months. Will the Government want to take responsibility for evicting families from their homes, or will they now take an active role in leading mortgage lenders to adopt better ways of dealing with debt. Today's call by union leaders to preserve jobs at Northern Rock needs supporting, but further demands to review debt management, arrears and repossession policies also need to be urgently raised with new boss Ron Sandler.

Thursday, 14 February 2008

Credit scoring: What is it good for?

A recent German investigation into credit scoring systems has revealed that the cost of credit has little to do with objective assessments of customer risks and calls for greater transparency to be provided.

The research report, which is currently only available in German is available from the European Coalition for Responsible Credit website: www.responsible-credit.net

Debt on our Doorstep's proposals for action, issued in late 2007, already includes the following call:

"Credit pricing must be made more transparent. In particular, the industry should publish details of the factors taken into account when determining the interest rate offered to borrowers following a loan application, and the relative weighting that they have applied to these. Where the rate offered to a borrower is higher than the advertised rate, lenders should be under an obligation to state clearly why the applicant’s credit score was not adequate to support the offer of the lower rate."

The German report appears to provide further support for this proposal.

Bradford & Bingley Reveals Trouble Ahead

Bradford and Bingley yesterday revealed a halving of profits as a result of failed investments in the U.S sub-prime housing market, and a surge in mortgage arrears with its UK borrowers to 40%. The declaration has caused some commentators to accuse B&B's management of a lack of 'credibility', and caused a meltdown in the value of B&B's shares (which lost a quarter of their value in a single day), and casts doubt on claims that the UK's lenders have been more responsible than their US counterparts.

The backdrop to the announcement from B&B is a combination of rising respossessions and falling property values, with the ratio of secured debt repayments to income at its highest level since the housing market crash in the early 1990's. In addition, the credit crunch is now starting to have an impact on businesses and employment. Although yesterday's figures revealed that unemployment continues to fall, business optimism is on the floor with an increasing number of employers forecasting that they will be laying workers off at some point in the next 12 months.

Despite these warning signs, the UK has not started to consider the types of support packages that will be required to protect consumers from the impact of a sharp downturn in the housing market.

In the US, steps have now been taken by lenders to restrict mortgage foreclosure actions and commitments given to take additional steps to help borrowers in difficulty as a means of preventing a flood of respossessed properties from further depressing house prices. As yet, no such discussion has been initiated by lenders in the UK. Neither has Government considered how it can improve assistance to borrowers that fall into arrears - for example by increasing the level of mortgage assistance available to the newly unemployed.

In the light of the Bradford and Bingley announcement, Debt on our Doorstep calls for a tri-partite forum involving lenders, Government, and consumer agencies to be convened as a matter of urgency to develop a package of support measures and improved protocols for dealing with consumers in arrears and to make recommendations to improve responsibility in lending.

Monday, 11 February 2008

Dood Workshop on Responsible Lending Proposals

Damon Gibbons, Chair of Debt on our Doorstep, will be leading a workshop at the forthcoming Debt conference hosted by Kirkby Unemployed Centre, Merseyside on 28th February.

The workshop will focus on Dood's Responsible Credit 'proposals for action' which were launched in late 2007, and Gibbons will provide an update on Debt on our Doorstep and the European Coalition for Responsible Credit's perspectives for the current credit crisis.

Further details concerning the conference are available from Helen Jones at KUC, helen.jones@kuc.org.uk