Wonga to pay compensation after sending letters from non-existent law firms to customers in arrears

cash-pile-edited The FCA said 45,000 customers of the UK’s biggest payday lender would be compensated after it found that letters threatening legal action from non-existent law firms had been sent to customers, in an attempt to boost collections by increasing the pressure on people in debt. In some cases customers had been charged for the letters.

The practice ended four years ago before the FCA had responsibility for payday lenders and credit, so it does not have powers to fine Wonga. Which? welcomed the tougher line being taken by FCA on irresponsible lending. The FCA stated that it “expects firms to pay particular attention to fair treatment of those who have difficulty in meeting their loan repayments”.

New research on poverty

A study by the Poverty and Social Exclusion project in the UK finds that the number of British households falling below minimum living standards has more than doubled in the past 30 years, despite the size of the economy increasing twofold.

According to the study, 33% of households endure below-par living standards – defined as going without three or more “basic necessities of life”, such as being able to adequately feed and clothe themselves and their children, and to heat and insure their homes. In the early 1980s, the comparable figure was 14%.

Other key figures reveal that

almost 18 million people cannot afford adequate housing conditions
12 million people are too poor to engage in common social activities
one in three people cannot afford to heat their homes adequately in the winter and
four million children and adults aren’t properly fed by today’s standards
Far more households are in arrears on their household bills in 2012 (21 per cent) than in 1999 (14 per cent). The most common bills in arrears now are utility bills, council tax and mortgage/rent.

Access to cash machines for basic bank account holders

_cashpoint-edited Royal Bank of Scotland and Lloyds have announced that are lifting their restriction on their basic bank account holders using ATMS provided by other banks. This means all customers of RBS, Natwest, Lloyds, and TSB should be able to use the whole network by the end of this year. This reverses a controversial decision to which restricted access to ATMs for basic bank account holders.

Ofgem reports fall in price differences between payment methods

Electric_kettle-1-edited Ofgem has analysed differences in price between different payment methods used by consumers following an information request to suppliers in February 2014. It has found that the gap between prepayment and direct debit has narrowed since 2009. Read more here.

Background

Ofgem rules allow suppliers to charge different prices for different payment methods, but only if the amount reflects the cost of providing those accounts. Some larger suppliers do spread some of the costs of prepayment customers among the whole of their customer base. This is consistent with regulations and guidance, which allow for differences. These result in reduced price differences for vulnerable customers, who often do not have the option of alternative payment methods. Suppliers can also charge the same price regardless of payment method, so they can spread the costs they incur across all customers. However, the majority of consumers pay by direct debit (including half of all fuel-poor households) so any change would mean these consumers would pay more.

Findings

Customers who use prepayment meters are now charged around £80 a year more on average compared with direct debit customers for dual fuel. This is a significant fall as the difference was almost £140 in 2009. Ofgem is satisfied that across the market the price on different payment methods reflects the varying costs suppliers face in providing them. The price difference for quarterly payment compared to direct debit has remained at around £80 since 2009.

E.ON fine

Energy-pic Following an investigation E.ON has agreed to pay £12m to vulnerable customers, after Ofgem found it had broken energy sales rules. E.ON has also committed to compensating any customer that it missold to, including automatic payments to some vulnerable customers.

Water strategy for Wales

tap-and-water-edited The Welsh Government is asking for views on its water strategy. Read more here. Consultation closes 04/07/2014. Its website says:

The Strategy’s aim is to ensure that our water resource is resilient, sustainable and is managed to bring benefits to Wales and its citizens.

This Strategy sets out our long-term policy direction on water. We want to balance the long-term needs of the environment with the need for sufficient, reliable water resources and waste water services available to encourage sustainable growth and job creation.

We are developing a more integrated approach to managing water as part of our natural resource management. This integrated approach will help to promote the coordinated management of water, land and resources. This will enable us to maximise economic and social benefits in a fair way while protecting vital ecosystems and the environment.

Ofgem reports on Time of Use tariffs

As part of the Smarter Markets Programme, Ofgem commissioned the Centre for Sustainable Energy (CSE) to undertake analysis of domestic electricity use patterns and to model the potential distributional impacts of time of use (ToU) tariffs (energy tariffs with different prices at different times).

Ofgem has published CSEs report – see here A gas ring burns on a ring at a home in west London, Tuesday, Au for more. The tariff modelling undertaken by CSE demonstrates the potential impacts of a ToU tariff on different consumers’ bills. It shows that the types of customers that benefit from ToU tariffs will depend on their current usage as well as how they respond and the types of ToU tariffs on offer.

The publication of this research represents a first step in seeking to understand how ToU tariffs may impact on different customers. Ofgem envisage undertaking further distributional analysis as they make progress towards specific policy decisions as part of the individual projects under the Smarter Markets Programme.

New report on welfare cuts

A new report by Oxfam and the New Policy Institute says the coalition’s welfare cuts have pushed 1.75 million of the UK’s poorest households deeper into poverty, leaving more families struggling to cover food and energy bills.

The report highlights a drop in the overall value of benefits, which rose by less than inflation, as well as changes to housing benefit and council tax support that have forced some families into paying housing costs they were previously deemed too poor to pay.

The report found that 300,000 households have experienced a cut in housing benefit, 920,000 a reduction in council tax support and 480,000 a cut in both.

As a result of these cuts in housing benefit and changes to council tax support, around 1.75 million or the poorest families have seen an absolute cut in their income. Of these, 480,000 families are seeing their benefits being cut twice as they are affected by more than one of the changes. Whether a family is affected and by how much varies based on a range of factors which are largely out of the control of the individual. They depend on council tax band, the cost of local housing, family size and property size. But they all apply irrespective of income. The government needs to instate an ‘absolute minimum’ level of support. It should apply regardless of local authority or tenure and it should be high enough to prevent people from having to walk the breadline

Shelter warns of families on financial knife-edge

why_cash_is_cool-edited Shelter warns that almost 4 million families are living without any safety net.

Some 3.8 million families have only enough money to pay their rent or mortgage for a month if they lose their jobs, the housing charity has said.

Shelter, which surveyed 7,500 people, said high housing costs and stagnating wages meant many were living on a financial knife-edge.

The survey

Shelter’s findings were based on a YouGov survey of 7,500 adults who pay rent or a mortgage. It says 44% of working families with children under the age of 18 could be one paycheque away from losing their homes if they became unemployed because they have little or no savings.

Its researchers also found that 29% of families would immediately be unable to afford to pay for their home if they lost their income.

FCA wants financial services firms to stop charging expensive rates for calls

FCA_logo.2 The FCA is concerned that customers are being charged high rates to contact financial services firms and will consult with industry, consumer organisations and consumers to ensure customer calls are more affordable.

According to FCA boss Martin Wheatley:

“We want to update our rules so that they best meet your needs as a customer. This means charges for both consumer helplines and complaint lines being capped at the cost of a basic rate call – so the same price as calling your neighbour or a family member on their landline”.

FCA will issue a consultation but wants firms to look at their practices in advance of this.

Consultation

The FCA’s consultation will propose the standardisation of the rules so that charges for consumer help, and complaint, lines are capped at the cost of a basic rate call. In a letter to consumer group, Which?, the FCA said it believed that the introduction of requirements in the Consumer Rights Directive, designed to ensure firms no longer charge a premium for calls, should apply to all financial services firms. The Directive requires firms to offer basic rate numbers for enquiries but at present, this does not apply to financial services firms.

In the same consultation the FCA will also look at a number of proposals to improve complaints handling by financial services firms including looking at complaints reporting and responding to the recommendations of the Parliamentary Commission on Banking Standards. The consultation will be published later this year.

ESAN

The Essential Services Access Network