An individual voluntary arrangement (IVA) is a five or six year commitment...
April’s debt and money news
We look at the latest proposals from the Financial Conduct Authority to help people with persistent credit card debt.
We also examine the latest figures on unpaid child maintenance, news on the Wonga data breach, a pensions warning to parents, and a welcome rise in the national living wage…
The FCA proposes new ways to reduce problem credit card debt
As a result of their comprehensive study of the UK credit card market, the Financial Conduct Authority (FCA) has proposed new rules to tackle the problem of persistent credit card debt.
During their research they analysed the credit card accounts of 34 million consumers over a five year period and conducted an in-depth survey of 40,000 people.
They found that 650,000 people in the study have been in persistent debt for the last three years or more, while a further 750,000 have been making only minimum payments over the last three years.
Proposals to help customers:
- Where someone has paid more in interest/charges than they have towards their borrowing for 18 months, they’ll be considered to be in persistent debt. They’ll be informed that increasing their current rate of repayment would reduce their cost of borrowing and told that if they continue low repayments for a further 18 months their card may be suspended
- After 27-28 months, they’ll be reminded, and at 36 months, firms will have to write to them with affordable repayment plans and explain their card will be suspended unless they engage with them
- On new cards, customers will decide whether want to be asked before receiving credit limit increases (opt-in), or to have it done automatically (opt-out). If someone doesn’t answer, their account will be opt-in. People making minimum repayments for 14 months or more won’t receive them without asking
- Allowing customers to search for card quotes without damaging their credit rating
- Alerting customers before any interest offer ends
- Warning customers about their level of borrowing
Our Chief Executive, Mike O’Connor, doesn’t think the remedies go far enough:
“We welcome moves to tackle persistent debt, but we are concerned that these proposals will not fix the central issue that credit cards, which are supposed to be a short-term form of borrowing, often become long-term and expensive debt.”
Read the full report on the FCA findings and suggested remedies.
The single parents’ charity Gingerbread is calling for the government to compensate 1.2 million people in the UK who are owed child maintenance payments.
The Child Support Agency (CSA) was set up in 1993, and after difficulties with assessments and pursuing absent parents, it was replaced in 2012 by a new Child Maintenance System (CMS).
While most of the money owed was built up over the years that the CSA was in place, more has still built up under the new CMS, a further £93 million in fact.
Janet Allbeson from Gingerbread said:
“They shouldn’t just be able to walk away and say its history when it’s due to their errors and their poor practice that money hasn’t been collected. That’s wrong and the government should pay for that…”
The Department for Work and Pensions stated:
“We actively pursue non-resident parents to recover unpaid maintenance and we are transferring existing arrears from the CSA to the CMS. The new system is designed to encourage parents to come to their own family-based arrangement.”
Parents who care for a child at home rather than work are being urged to sign up for child benefit or risk losing out on thousands of pounds in their state pension.
Following a shake-up of the child benefit system in 2013 fewer parents are registering to claim, and in doing so are losing out on ‘pension credits’. New parents who realise that they haven’t registered can only get the credits backdated a mere three months.
So far the government have no plans to notify the 50,000 women who could be affected, or change the backdating rules to minimise any potential losses.
By the time these women reach state pension age they could discover that they’ve unwittingly given up a large amount of their entitlement simply by not claiming child benefit.
Former pensions minister Steve Webb has said:
“Tens of thousands of mothers with young children are missing out on vital state pension rights. This risks setting back the cause of equality for mothers by a generation. HMRC were alerted to this problem last year and have done nothing about it.
The government needs to take urgent action to ensure that mothers get the pension protection to which they are entitled.”
If you have children and are currently not working, you should register for child benefit now to avoid losing out.
Wonga have revealed that they are “urgently investigating illegal and unauthorised access to the personal data of some of its customers”. It’s estimated that 245,000 UK clients, and a further 25,000 clients in Poland, may have been affected.
The breach was initially thought not to have included any personal data, but was later discovered to have included a wide range of information which one expert has described as ‘particularly worrying’. The stolen data included names, addresses, telephone numbers and the last four card digits of their credit cards.
If you’re worried that you may have been affected, Wonga are advising that you:
- Inform your bank and monitor your account for suspicious activity
- Be cautious about cold calls or unusual online activity
- Call Wonga’s helpline for support: 0207 138 8330 or visit their webpage
Changes introduced to the National Living Wage and National Minimum wage that came into effect on 1st April mean that you’re entitled to a pay rise.
If you’re aged 25 and over, your National Living Wages entitlement will rise from £7.20 to £7.50 per hour.
This would mean that if you’re working a 37.5 hr week your annual wage will rise by £585 and your weekly wage will increase from £270 to £281.25.
The National Minimum Wage has also risen:
- If you’re aged 21 to 24 years old it rises from £6.95 to £7.05 per hour
- If you’re aged 18 to 20 years old it rises from £5.55 to £5.60 per hour
- If you’re under 18 years old then it rises from £4.00 to £4.05 per hour
- If you’re an apprentice it rises from £3.40 to £3.50 per hour
If you’re entitled to the increase you should check your payslips and complain to your employer if you don’t receive it.
If you still don’t receive the rise read more about your rights at work and how to report your employer. Don’t lose out!