Barclays Bank Error In Your Favour - Collect £100M

I see that Barclays is fond of playing Monopoly, and has managed to create a bank error (for once in its customers' favour) that will entail a refund to affected customers (estimated at being around 300,000) of around £100M.

Barclays customers are to receive compensation because it miscalculated the interest owed on personal loans, the errors date back to October 2008.

Other divisions (Barclaycard, Barclays Wealth and Barclays Corporate) are now undertaking a review to see if customers were short-changed by the errors ("technical documentary errors").

Barclays will write to customers in the coming weeks. Barclays is quoted by the Telegraph saying that said it had "identified certain issues with the information contained in historic statements and arrears notices relating to consumer loan accounts. It is therefore implementing a plan to return interest incorrectly charged to customers".

A spokesman for the bank said:

"Barclays has proactively reviewed information it has historically sent to its customers relating to interest charges, where we have found technical documentary errors. As a result Barclays has identified certain issues with the information contained in some statements and arrears notices relating to consumer loan accounts. 

Due to these notification errors, interest was not due on certain accounts during the period that Barclays made this mistake, and whilst no one has been mis-sold to, customers are entitled to have their interest payments returned. No customer will pay more than they were ever contractually expected to. 

Barclays has notified the Office of Fair Trading (OFT), which is responsible for consumer credit issues, and is implementing a plan to return interest payments to customers as swiftly and efficiently as possible. Barclays is undertaking a review of all its businesses where similar issues could arise to assess any related issues. 

Any affected customer will be contacted by Barclays and customers do not need to take any action."

To add to Barclays shame, campaign group Move Your Money said that Barclays was the lowest scoring financial institution out of 70 assessed, scoring four out of 100 possible points for honesty and customer service.

Well done Barclays!

Local Lending Data For 10,000 Postcodes

The government have announced that the UK’s biggest lenders will reveal how much they lend at a local level across 10,000 postcodes.

The new data, published for the first time by the end of this year, will allow businesses and the public to see how the banking and building society sectors are serving the wider economy, and in what areas of the UK there less lending.

The data will be published by the British Bankers’ Association (BBA) and the Council of Mortgage Lenders on a quarterly basis and show the outstanding stock of lending that has been committed to customers across three categories:

• loans and overdrafts to SMEs
• mortgages
• unsecured personal loans (excluding credit cards)

Each postcode will be broken down by category to show the exact lending being made to each.

All very well maybe, but why delay it until the end of the year?

Payday Loan Companies Drinking In The Last Chance Saloon

The Office of Fair Trading (OFT) has come up with the unremarkable conclusion that there is evidence of widespread irresponsible lending by payday lenders.

The OFT has targeted the leading 50 payday lenders (which account for 90% of the market), and has proposed to refer the payday lending market to the Competition Commission.

Clive Maxwell, OFT chief executive, is quoted by the Telegraph:

"We have found fundamental problems with the way the payday market works and widespread breaches of the law and regulations, causing misery and hardship for many borrowers. 

Payday lenders are earning up to half their revenue not from one-off loans, but from rolled over or refinanced deals where unexpected costs can rapidly mount up."

The review carried out by the OFT noted that particular problem areas included; lenders failing to adequately assess affordability before lending, failing to explain properly how payments will be collected and aggressive debt collection practices.

The OFT noted that:

"Payday lenders' revenues are heavily reliant on those customers who fail to repay their original loan on time."

The OFT have now presented the 50 with the "last chance saloon option", namely that they must take "rapid action" to address the OFT's concerns and show within 12 weeks that they are fully compliant.

Any firms which fail to cooperate will face enforcement action.

Whilst the action will, to some extent, rein in the mainstream payday lenders there still remains those who operate outwith the law; namely loan sharks. Unfortunately those people, so desperate that they will borrow from payday lenders that charge extortionate rates of interest, who are denied credit from payday lenders in the future will be forced to go to loan sharks.

The fundamental problem is not that of extortionate interest rates, but of a large swathe of society that has run out of credit, cash and options.

BBA Blames The Weather For Savings/Lending Imbalance

The British Bankers' Association (BBA) reports that personal deposits rose by 6.2% over the year to January. However, net mortgage borrowing from the banks grew by a mere 0.2% in the year to January.

The reason for such an imbalance (despite pressure from the government for the banks to lend more)?

The BBA blame the weather!

 

BBA statistics director, David Dooks said:

“January’s severe weather impacted adversely on what was already a subdued picture of borrowing demand from households and businesses. While general economic growth stalls, low consumer and business confidence generates a natural tendency to restrain borrowing appetite, repay borrowing where possible and to build up cash and savings as a buffer.”

Weasel words!

The reality is that banks are doing all they can to shore up their balance sheets, lest another self inflicted financial storm rocks their boat.

The Great Green Loan Rip Off

The government has announced today, with all the usual fanfare and razzmatazz, that those wishing to improve the energy efficiency of their homes will be able to borrow money to buy energy efficient boilers and to insulate their homes etc.

However, what the government doesn't tell you is that the interest rates charged on these "green loans" will be relatively high, and that the "green assessors" (doubtless trained at taxpayer expense) who will visit your home to asses its "green needs" will charge for their services.

In other words it is a rip off!

Osborne's Statement on Barclays Fraud

I see that the Treasury state that George Osborne is to make a statement on the Barclays fraudulent manipulation of LIBOR:

"HM Treasury ‏@hmtreasury

The Chancellor will be making a statement to Parliament at around 1215 about the FSA investigation into bank borrowing rates, known as LIBOR"

You will observe that they have politely avoided using the word "fraud".

Whilst the avoidance of the word "fraud" may suit the sensibilities of those in Whitehall I suspect that, once people who owe Barclays money (eg mortgages, personal loans etc) wake up to the fact that the rates that they paid were based on the fraudulent manipulation of LIBOR, the word "fraud" will be liberally peppered across the myriad of class action suits that are bound to arise.

Wonga To Offer Business Loans

Wonga, which specialises in short-term personal loans, is launching a new product aimed at businesses.

It will, subject to checks, offer businesses loans of between £3,000 and £10,000 for up to a year with APR's rising from between 16.6% to 180%.

Whatever happened to Project Merlin (that was meant to make £190BN available to SME's) then?

Barclays Accused of "Reckless Disregard"

An independent report prepared for Guardian Care Homes (GCH), which operates 30 care homes, by derivatives experts at JC Rathbone Associates accuses Barclays of "reckless disregard" over its sale of a set of complex derivatives to GCH.

GCH are suing Barclays for £36M, and the report will be used in its case against the bank.

The Telegraph notes that the report alleges that the terms of the loan posed "a risk of breach of covenant", while also claiming that the hedges sold to GCH were never likely to have protected it against rising interest rates.

Barclays in a statement last week said:

"This action is completely without merit and we will contest it vigorously. Barclays is satisfied that it provides sufficient information to enable a client to make an informed, commercial decision about the products it offers."

On Friday, Bob Diamond, CEO of Barclays, said the number of complaints was "very small", but admitted "mistakes" were likely to have been made.

The banks marketed these products as protection against potential higher future costs, the products do not do this. It would have been in the hapless purchasers' interests to take out a simple to understand fixed rate loan. Unfortunately, for the hapless customer, the commission earned by the banks on these complex financial products were higher.

I will leave you with the thoughts of Bob Diamond, 3rd November 2011:

"The only way that banks will win back the public's trust is to become better citizens. That starts with how we behave, and in demonstrating we act with trust and integrity. 

At banks this means the interests of customers and clients must be at the very heart of every decision made."

How very true!