Plans to ban leaseholds on new-build houses in England

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“Unfair charges” levied on buyers of new-build houses could be banned in England under a proposed crackdown.

Leaseholds on new-build houses would be outlawed, while ground rents could be dramatically reduced, under government plans subject to public consultation.

Ground rents can double every decade, crippling home owners and in some cases making a property impossible to sell.

“Enough is enough. These practices are unjust, unnecessary and need to stop,” said Communities Secretary Sajid Javid.

The proposals, which are subject to an eight-week consultation, apply only to England.

The leasehold system has existed for a long time in England and Wales, especially in blocks of flats.

Leaseholders own their homes for a fixed period of time, on a “lease” to a freeholder, but many have long leases, for example for many decades, and experience no problems.

Traditionally houses have nearly always been sold as freehold properties, meaning the buyer owns the building and land it is built on outright.

But the trend for new-build houses being sold as leasehold has accelerated in recent years.

Katie’s story: ‘My biggest mistake’

Katie Kendrick bought her new-build home from Bellway in Ellesmere Port, Cheshire, three years ago for £214,000.

“It’s the biggest mistake I’ve ever made,” she told the BBC.

Katie knew the house was leasehold – meaning she owned the property for the 150-year length of her lease agreement. But she claims she was told by the sales representative that because of the long lease it was “as good as freehold” – a property owned outright.

She thought nothing of it, and says she was told she would be able to buy her freehold after two years, believing it would cost between £2,000 and £4,000.

But a year and a half later, she received a letter from Bellway saying her freehold had been sold to an investment company, which was now quoting £13,300 for her to buy it.

What Bellway did – selling a new home as leasehold, and then selling the freehold separately to an investment company without informing the family living there – is not illegal.

The government said it was a particular problem in the north-west of England.

Leaseholders typically pay ground rent to the freeholder, but can be caught out by clauses allowing for dramatic increases in these fees, which come on top of management charges for the upkeep of communal areas.

The Department for Communities and Local Government (DCLG) said the terms of some leases “were becoming increasingly onerous”.

It cited examples of:

  • A homeowner being charged £1,500 by the freeholding company to make a small change to their family home
  • A family home which is now impossible to sell because the ground rent is expected to hit £10,000 a year by 2060
  • A homeowner who was told buying the lease would cost £2,000 but the bill came to £40,000

MPs have described the situation as a “national scandal” and the “PPI of the housebuilding industry”.

The DCLG said its proposals aimed to make future leases fairer by reducing ground rents so they “relate to real costs incurred”.

About 21% of private housing in England is owned by leaseholders, with 30% of those properties houses rather than flats, according to figures from the Department for Communities and Local Government.


Rise in personal loans dangerous, Bank of England official says

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A sharp rise in personal loans could pose a danger to the UK economy, a Bank of England official has warned.

Outstanding car loans, credit card balance transfers and personal loans have increased by 10% over the past year, the Bank’s financial stability director Alex Brazier said.

In contrast household incomes have risen by just 1.5%, he said.

“Household debt – like most things that are good in moderation – can be dangerous in excess”, Mr Brazier said.

Mr Brazier, in a speech to the University of Liverpool’s Institute for Risk and Uncertainty, added that this increase in debt was “dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy”.

He warned that High Street banks were at risk of entering “a spiral of complacency” about mounting consumer debt levels.

“Lending standards can go from responsible to reckless very quickly.

“The sorry fact is that as lenders think the risks they face are falling, the risks they – and the wider economy face – are actually growing,” Mr Brazier added.

Mr Brazier hinted that the Bank of England could force banks to take further safeguards against the risk of bad debts if it was deemed necessary.

Just last month, the Bank of England told banks to beef up their finances against the risk of bad loans.

They were told to set aside £11.4bn in the next 18 months in case future economic shocks meant some borrowers could not keep up their repayments.

Mr Brazier said by September the Bank will have assessed whether the rapid growth in consumer lending “has created any small gap in the line”.

“If it has, we’ll plug it,” said Mr Brazier.

In June, Bank of England governor Mark Carney said lenders appeared to have forgotten some of the lessons of the financial crisis.

Despite these concerns, Mr Carney stressed that the UK financial system was far stronger than at the time of the great banking crash in 2008-09.


MoneySuperMarket fined for sending seven million unwanted emails

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Price comparison website MoneySuperMarket has been fined £80,000 ($103,000) by the Information Commissioner’s Office for sending more than seven million emails to people who had opted out of receiving its communications.

The firm said it apologised “unreservedly”.

The emails regarded changes to the terms and conditions of the site.

However they also invited people to “reconsider” their opt-out.

Asking them to do this is against the law, said the ICO.

“Organisations can’t get around the law by sending direct marketing dressed up as legitimate updates,” said ICO enforcer Steve Eckersley in a statement.

“When people opt out of direct marketing, organisations must stop sending it, no questions asked, until such time as the consumer gives their consent. They don’t get a chance to persuade people to change their minds.”

MoneySuperMarket issued an apology.

“We take the protection of our customers’ data and privacy very seriously,” said a spokesman.

“We apologise unreservedly to the customers affected by this isolated incident and we have put measures in place to ensure it doesn’t happen again.”


Mastercard £14bn ‘overcharge’ legal action fails

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A £14bn class action lawsuit against MasterCard has been thrown out by the Competition Appeals Tribunal.

The former financial ombudsman, Walter Merricks, had claimed that 46 million consumers had been overcharged by MasterCard over a 16-year period.

But the court ruled that the case could not proceed through a collective – or class – action.

The ruling was welcomed by Mastercard, which said the claims were completely unsuitable.

The tribunal found that even if a loss had been suffered, and could be estimated across the whole class, there was no way any individual could receive compensation equal to the loss that he or she had actually suffered.

The case was filed in September 2016, and followed a European Court of Justice (ECJ) ruling against the level of so-called interchange fees – the amounts that retailers have to pay on debit and credit cards.

It related to the fees charged by MasterCard between 1992 and 2008.

“We welcome the Competition Appeal Tribunal’s judgment refusing certification for the proposed collective action,” said a spokesperson for Mastercard.

“As set out in MasterCard’s arguments to date, we believe that the claims were completely unsuitable to be brought under the collective actions regime.”

Interchange fees have since been capped by the European Union.


Lloyds under fire over HBOS fraud compensation

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Lloyds Banking Group has said it is close to offering compensation to 30 customers caught up in a criminal conspiracy involving former bankers at its HBOS subsidiary.

The bank has already missed its own deadline of 30 June for paying redress to all victims. So far, only five have accepted compensation offers.

MPs and victims have criticised the compensation scheme.

The fraud saw small businesses pressed into hiring “turnaround consultants”.

Two corrupt HBOS bankers pressured the customers into using consultants Quayside Corporate Services, led by David Mills.

He and his accomplices bribed the bankers with cash, gifts and prostitutes, then used their relationship with the bank to bully the business owners into handing over exorbitant fees and, eventually, control of their companies.

The business customers, in the words of a judge, were left “cheated, defeated and penniless”.

‘Progress’

After bad publicity following the fraudsters’ convictions in February, Lloyds chairman Lord Blackwell said compensation claims would be handled “within weeks, not months”.

On Friday, the bank published an update on its compensation, saying it was “close to” making 30 offers.

Adrian White, chief operating officer for commercial banking and the man leading the review, said: “We are now continuing to make progress in getting offers to victims of the HBOS Reading fraud. We have now either made offers or are in the detailed assessment stage for nearly half the victims in the review. It is important we get the fullest possible information from victims to ensure we can factor in everything that could contribute to their compensation offer.”

But so far only 16 compensation offers have been made – and many more were caught up in the fraud.

The banker at the heart of the fraud, Lynden Scourfield, was in charge of supervising accounts for more than 250 small business customers.

Unsettled

Victims of the fraud have criticised the bank for seeking to dictate the terms of its compensation scheme rather than seek their approval.

They were not asked to agree the bank’s appointment of Professor Russel Griggs to review its compensation offers.

They have also been unsettled after a senior Lloyds executive claimed the bank had no evidence of criminality until the fraudsters’ trial began in 2016.

The small business customers who uncovered the fraud, Paul and Nikki Turner, sent detailed allegations of fraud to the board of HBOS in 2007, attaching documentary evidence later used in the 2016 trial.

They sent further evidence to every member of Lloyds’ board in 2009. At the time Lloyds dismissed their evidence and instead spent large sums on lawyers seeking to evict the Turners.

Concern

It has also emerged that Lloyds conducted internal reviews into the conduct of Mr Scourfield and others as far back as 2006.

In April, Lloyds Banking Group appointed Dame Linda Dobbs, a former high court judge, to review the bank’s handling of the fraud, which took place from 2002-2007, in the years before the trial in 2016.

During this time the bank consistently refused to say anything in public or acknowledge criminality. However, victims of the fraud have not yet been contacted in relation to the review.

MPs say they’re concerned the bank’s compensation scheme lacks transparency and independence. The bank will not show victims who is deciding their compensation offer, or reveal how it is worked out.

‘Suspicion’

Lord Cromwell, chair of the all party parliamentary group on fair business banking, said: “There appears to be a lack of transparency, and therefore a lack of public confidence, in the processes set up unilaterally by Lloyds for assessment and settlement of claims.

“Inevitably this creates suspicion and we are hoping that Lloyds will now accept our repeated invitations to make the processes – including the nuts and bolts of valuing claims – far more open to assessment by victims and their advisers. Without that it is hard to see how this matter can end other than in bitterness and litigation.”

Shadow business minister, Bill Esterson, said: “The victims of the HBOS Reading Fraud deserve to be treated in a fair and transparent manner. It is clear from the concerns that have been raised with me that this is not happening, and the Bank must be held to account.

“Any process of compensation must be transparent and beyond reproach, yet the details of the scheme as described to me provide no comfort that this is the case.

“Businesses in the UK deserve to have confidence that we are doing everything we can to support them when things go wrong, and it appears to me that there is a massive systemic failure when Banks are allowed to be their own judge, jury and executioner behind closed doors. This must change.”


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