Complaints about loan scams still increasing

August 23rd, 2011

Concerning news this week has shown that complaints about businesses that demand upfront fees for loans they never arrange have risen yet again, according to the Office of Fair Trading (OFT).

There were 3,167 complaints made to advice service Consumer Direct in the 12 months to the end of June, compared with 2,059 the previous year.

The OFT, independent advisors and this blog have all warned consumers not to pay a fee before receiving a loan. This is not standard practice and is a strong, although not conclusive, sign that you are being ensnared in a scam.

In June the OFT said that it was planning to strengthen regulations to safeguard borrowers. At that time it was estimated that 270,000 people had paid upfront fees to credit brokers in the previous year.

Many of the complaints involved credit applications during which potential borrowers were told to send an upfront fee through a money transfer service. A more suspicious demand is difficult to imagine so consumers are advised to be aware of this tactic.

There has also been an increase in complaints about companies who are not interested in the applicant’s credit history, that ask for payment of fees upfront and then disappear with the money.

Consumers are advised to check out the company carefully before agreeing to anything, including asking for a landline number, a physical address and doing a search about the company online, as well as checking that they have a valid credit licence.

Earlier this year, the OFT said it would close down rogue credit brokers, as well as propose changes to regulations that would give more opportunity to have fees refunded if loans were not made.

It also said it would ask the government to consider changing the law to ban outright the practice of credit brokers demanding upfront fees in exchange for arranging loans.

The OFT runs a register which shows whether a company has a valid licence to offer credit.

The problem with this type of scam is that the victims are often so desperate for money that it blinds them to the screamingly obvious flashing neon signs that read ‘scam’ in ten foot high letters.

In such a situation advice to take calm, rational decisions that take all the relevant factors into account is usually useless. However, if you or anyone you know are considering taking out a loan then that is exactly what you should do. If in doubt, consult a debt charity for assistance.

Posted in Personal Loans | No Comments »

A look at this month’s inflation figures

August 19th, 2011

Despite the weak growth figures and summer holiday season inflation continues apace. In fact, the UK government’s targeted rate of inflation rose in July, following higher prices for clothing and footwear and fees for financial services.

The rate of Consumer Prices Index (CPI) inflation rose to 4.4% from 4.2% in June, according to figures from the Office for National Statistics (ONS). The Retail Prices Index (RPI) measure was unchanged at 5%.

Clothing and footwear prices measured for CPI saw their biggest annual increase since records began in 1997.

Bank of England governor Mervyn King has written another letter to the chancellor to explain why CPI inflation remains well above the 2% target rate. The governor must write a letter every three months if CPI is more than one percentage point above or below the target.

He blamed the continuing high inflation rate on, “the increase in the standard rate of VAT to 20%, and past increases in global energy prices and import prices”. It is worth noting that he also stressed that “the big risks currently facing the UK economy come from the rest of the world”.

The Bank of England said last week that it remained confident that inflation would return to its target level in the next two years.

Chancellor George Osborne replied to Mr King’s letter saying that, “A crisis of confidence in the global economy demands a global response”. He called for credible cuts in countries with big deficits and a “rebalancing of global demand to support growth”.

The ONS said the main contributors to inflation came from financial services, clothing and footwear, furniture, household equipment and housing rent. It said one of the biggest contributions had come from fees for financial services, which rose in July but had fallen in the same month last year.

The main downward pressure on inflation came from food and non-alcoholic drinks.

The big picture is still that rises in energy prices and in particular the VAT hike at the start of the year are still keeping inflation high. At constant tax rates, CPI inflation was 2.8% in July.

July’s inflation figures are particularly important because they are used to determine how much regulated rail fares can increase. Under the government’s new formula, fares will be able to rise by RPI+3%, which means average fares will be able to go up by 8% next year.

In other research, Kantar Worldpanel found that while grocery price inflation had grown 5.2% in the 12 weeks to 7 August, compared with the same period the previous year, grocery sales had only risen by 3.8%.

This shows that shoppers are trying to manage their ‘personal’ inflation by trading down. It’s therefore unsurprising that the discount retailers have pushed further ahead this month. Aldi performed particularly strongly, taking its market share to 3.6% from 3% at the same time last year.

Posted in Personal Loans | No Comments »