Top 5 debt news stories for January 2017

It’s been busy start to the year, with news that HSBC is to redress around £4m to customers after the regulator found unfair charges were added to some of its customer’s debts. Latest figures released by the Bank of England also show soaring levels of consumer debt.

HMRC have released a list of the worst excuses for not paying the minimum wage, as part of a new campaign; and the BBC reported that thousands are missing out on a little-known benefit that could see grandparents £230 a year better off when they retire.

1. HMRC reveals 10 most ridiculous excuses for not paying the National Minimum Wage

An awareness campaign by HMRC revealed a list of the worst explanations employers used to not pay their employees the National Minimum Wage, or National Living Wage.
Excuses such as “she doesn’t deserve minimum wage, she only makes tea and coffee” and “the employee wasn’t a good worker so I didn’t think they deserve to be paid the National Minimum Wage” are just a couple of the reasons that made the list.

The campaign is aimed at raising awareness of both the National Minimum wage and National Living Wage, by encouraging people to check their pay and speak out if they’re not being paid what they’re entitled to.

Business Minister Margot James said:

“There are no excuses for underpaying staff what they are legally entitled to. This campaign will raise awareness among the lowest paid in society about what they must legally receive and I would encourage anyone who thinks they may be paid less to contact Acas as soon as possible.”

As previously reported, the National Minimum Wage is set to increase in April. Here’s a breakdown of the current rates, and the expected rises:

  • £7.20 rising to £7.50 for workers aged over 25
  • £6.70 rising to £7.05 for 21 to 24 year olds
  • £5.30 rising to £5.60 for 18 to 20 year olds
  • £3.87 rising to £4.05 for 16 to 17 year olds
  • £3.30 rising to £3.50 for apprentices

2. Thousands missing out on “Grandparent” credits to boost their pensions

Up to 100,000 grandparents are missing out on National Insurance (NI) credits that could help boost their state pensions, according to the BBC. The trouble is, not many people are even aware the scheme exists.

Back in 2011 the Government launched a scheme called ‘Specified Adult Childcare credits’, that lets parents going back to work after maternity sign a form allowing grandparents or family members to get NI credits for looking after their child.

In some cases this boost could be worth more than £230 a year when the claimant retires, but it’s so little-known that in 2016, only about 1% of eligible grandparents claimed for. The good news is that if you’re eligible and didn’t claim previously, claims can also be backdated.

Ex-Pensions Minister Sir Steve Webb said:

“The scheme is not much use if hardly anyone takes it up.

“The government needs to act quickly to alert mothers to the fact that they can sign over the National Insurance credits that they do not need.”

To check your eligibility, or if you think you’re missing out, HMRC have an application form available on their website, and guidance on eligibility available here (PDF).

3. Consumer credit spending soars to levels not seen since 2008 crash

The latest stats released by the Bank of England show soaring levels of consumer borrowing in the run up to Christmas last year, with levels reaching their highest since 2008.

This worrying trend has sparked warnings from many, including our own Head of Policy, Peter Tutton:

“Alarm bells should be ringing. Previous experience shows how such increases in the levels of borrowing can leave households over-indebted and vulnerable to sudden changes in circumstances and drops in income that can pitch them into hardship.”

These pre-Christmas statistics are more worrying, as they don’t include the extra spending over the festive period. Research for National Debtline found that one in five adults in the UK put Christmas food on credit.

4. Scotland could be first country in the UK to trial universal basic income

Fife and Glasgow councils could be the first areas of the UK to trial a new scheme called ‘universal basic income’.

The idea behind a universal basic income is that everyone would be given an unconditional amount of money from the government, regardless of whether they’re in work or not. Any income people earn on top of their universal basic income would then be taxed.

While the idea of basic income isn’t new (it has its roots in the 16th century) it’s one that’s gradually gaining support from many politicians and groups. Some countries, including Finland, are already trialling their own version of the scheme.

5. HSBC to repay £4m for unfair debt collection practices

The Financial Conduct Authority (FCA) has announced that HSBC bank is to redress around £4m, after it charged unreasonable debt collection fees dating back to 2003.
The debt collection charges were originally imposed by John Lewis Financial (JLFS) and HFC Bank, both part of HSBC.

The FCA found that between 2003 and 2009, many customers had a ‘debt collection charge’ of 16.4% added to their debt balance, when their debts were passed to one of the companies’ solicitors.

However, back in 2010 the Office of Fair Trading found that this charge was ‘unreasonable and unfair’ and forced the firms to stop adding the charges.

The FCA announced in December 2015 that it would reconsider its decision not to investigate allegations about the conduct of HFC following a complaint to the Complaints Commissioner. They have since conducted a review of the issues at both HFC and JLFS and found that around 6,700 customers paid the charge in part or in full prior to 2010, and could be entitled to a redress.

The £4m will be paid to customers affected by the charges, in cases where the unfair charges were added. HSBC and the FCA have explained that no action needs to be taken by customers, as the bank will contact all affected customers to arrange the redress.

That’s everything for this month; remember to subscribe to our newsletter to be kept up-to-date on the latest money and debt news stories.

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