Know your rights – December’s debt news

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Know your rights - December's

Know your rights – December’s debt news

The Christmas decorations are packed away and many of us might be packing a bit more padding than we were this time last month.

One thing’s for sure however; money never takes a break from making the news, even during the festive season.

There’s been some pivotal changes by the Financial Conduct Authority (FCA) in how much interest payday lenders can charge their customers, and they also took a closer look at complaints procedures for financial firm customers.

Let’s look at all the latest goings on…

A cap on payday loan interest

As of 1st January, payday loan rates have been capped at 0.8% per day of the amount borrowed, and all fees have been capped at £15. The new rules state that no-one will have to pay back more than twice the amount they borrowed, as we explained in our recent article.

Our chief executive Mike O’Connor shared his thoughts on the new payday loan cap in our press release welcoming the new rules:

“Caps on interest and charges are welcome, but on their own they only deal with part of the supply side of the problem, not the demand.

“Every week, more than 10,000 people come to us in financially desperate situations. Millions are living on the edge of falling into problem debt, and these people need much more support so that short-term high-cost credit is not seen as the best, or indeed only, answer.”

Fee-free basic bank accounts

The government and the banking industry have made an agreement to establish new fee-free basic bank accounts that’ll be available from the end of 2015.

MoneySavingExpert.com reported about this more accessible type of bank account which is being made available partly due to new European Union rules stating that everyone must have access to a basic payment account by 2016.

Customers who use this basic bank account won’t incur any fees for bounced direct debits, standing orders or for overdrawn balances. The account will also come with a debit card and access to the ATM network.

According to this article from This Is Money, it’s estimated that over a million adults in Britain don’t have a bank account, usually due to a poor credit score, and 58 million across the EU.

Refund on ‘Together’ loans

Sky News reported that 40,000 British borrowers are due to be repaid thousands of pounds in compensation after the High Court ruled against former bank Northern Rock in a test case over the wording in past loan documents. Approximately 41,000 former customers of the lender will receive an average of £6,300 each.

First-time buyers to get 20% on starter homes

David Cameron has laid out plans for a scheme offering 100,000 first-time buyers a 20% discount on new homes. MoneySavingExpert.com reported this development as part of a move to get more people on to the property ladder.

While the exact details are still being worked out, the Government confirmed that the initiative will be available to first-time buyers aged under 40, and that the new homes are to be built in England over the next five years. Under the proposals, starter homes will be built on under-used or unviable sites that aren’t currently identified for housing on public and private land.

It’s worth noting however that the proposal prevents the re-sale of properties for a period of time. This is to stop buyers netting a ‘windfall profit’, and could mean that buyers will be prevented from selling their home for between five and 15 years.

The FCA’s stance on consumer complaints

The FCA are proposing changes to the way financial firms such as banks handle consumer complaints, according to this article from FT Adviser. The FCA believes that allowing firms to handle complaints more quickly and efficiently will benefit customers in the long run.

Another potential new rule is that financial services firms will no longer be able to use premium rate telephone numbers for customers. In addition, once customers receive a response from the firm they’ve complained to, they will be able to escalate the complaint to the Financial Ombudsman should they feel that the case hasn’t been adequately dealt with.

Scotland in the red

StepChange clients in Scotland have the highest level of council tax arrears in the UK, according to the report we released in mid-December.

Of the Scottish clients who came to us for advice between January and June 2014, 39% were behind on their council tax bill. Worryingly, this was an increase of 20% since 2010. On average, those clients who found themselves in arrears owed £1,534, which is almost double the UK average of £798.

Payday loans are also a concern for many people in Scotland as well as the rest of the UK. The average payday loan debt of Scottish clients in the first half of 2014 was £1,438. This is the largest amount of all of the UK nations, £129 more than the UK client average.

And finally…

We sign off with the lovely story of Joe Rilqueme, founder of video sharing app Videoshop, who surprised his parents on Christmas day by paying off their mortgage. If you’re going to watch the video, be sure to have some tissues handy!

We’ll be back next month with more debt news!

Rachel Connor has been with the charity for over 8 years, starting in Helpline before joining the MoneyAware team in 2012. Rach enjoys travelling, video games, watching anime, reading and creative writing in her spare time (currently writing a Young Adult fantasy series). She had a previous life as head writer on Cartoon Network's Ed Edd n Eddy and as a copywriter for LivingSocial. She's also written comics and graphic novels for the animated series Regular Show.

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