Half a million loans written off after probe into debt collector’s practices

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Half a million people whose payday and car loans were sold to a debt recovery firm will have their loans written off after the financial regulator found failures in the collection process. Motormile Finance UK is paying a total of £154,000 in cash to 2,148 borrowers – equivalent to £69.83 each – and writing off a further £414m in debts where it has been unable to verify the amount owed by some 500,000 people. The firm, set up in 2008, specialises in collecting short-term loans that are passed on from lenders who did not recoup the debt themselves. The Financial Conduct Authority said Motormile failed to properly check the sums that these customers owed, and that the firm’s contact with some borrowers was “unfair and unsuitable”. The write-off is almost twice as big as the £220m in loans that Wonga forgave in 2014, in what was seen as the turning point for payday lending practices. Since the regulator started an independent review of Motormile in early 2015, the company has overhauled its IT systems and hired a new chief executive.

“We have worked closely with Motormile, and are now satisfied with their progress and the way that they will address their previous mistakes,” said Jonathan Davidson, director of supervision for retail and authorisations at the FCA. “This evidences the importance of conducting sufficient due diligence and how failing to do so leads to poor treatment of customers.”

The FCA took over responsibility for 50,000 consumer credit firms in 2014 and has been vetting providers before giving them permission to operate, starting with the payday lenders. The regulator refused permission to 35 loan firms in the last financial year and more than 100 debt management firms left the industry. The number of short-term loans has dropped from 6.3m in the first six months of 2013 to just 1.8m in the first half of 2015, aided by a new cap on fees and penalty charges. Around 400,000 Britons are still on debt management plans after struggling to pay back their original loan. Motormile Finance UK (MMF) reported that profits fell from £3.7m to less than £500,000 last year as it started to make provisions for the FCA’s intervention.

“Working so closely with the FCA has provided MMF with a very clear understanding of what is expected under the new regulatory regime and I can assure our customers that we have embraced this.” said Denise Crossley, chief executive. “We apologise to all of the affected customers and will be addressing the issues through the redress scheme we have agreed with the FCA.” She added that the group is now fully authorised by the regulator, “which is testament to them witnessing first-hand the serious approach we take to our regulatory responsibilities and our desire to treat customers fairly”. Customers do not need to take any action and will be contacted in the coming weeks. Motormile hopes to complete the compensation programme by February.

By Marion Dakers, financial services editor

 


Liz Truss urged by Bar Council to condemn Brexit ruling backlash

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New Lord Chancellor installed

The Bar Council joins calls for the Government to defend the judiciary’s independence after three judges were heavily criticised. Justice Secretary Liz Truss is being urged to condemn “serious and unjustified attacks on the judiciary” following a High Court ruling over Brexit. The Bar Council has joined calls for the Government to defend the judiciary’s independence after three judges were heavily criticised by some Tory MPs and sections of the media. The trio ruled on Thursday the Government must seek MPs’ approval before triggering Article 50 – the formal process of leaving the EU.

The Daily Mail called the judges “enemies of the people” while the Daily Express claimed the ruling was a marker of “the day democracy died”. The Bar Council, which represents barristers in England and Wales, condemned the attacks and called upon Lord Chancellor Ms Truss to do the same. It said: “A strong independent judiciary is essential to a functioning democracy and to upholding the rule of law.” Ms Truss has not spoken on the matter since the court decision and Prime Minister Theresa May has also been urged to calm the backlash in the wake of the ruling. Ex-attorney general Dominic Grieve said the stinging criticism of the trio was “chilling and outrageous” and “smacks of the fascist state”. He said reading some of the press coverage was like “living in Robert Mugabe’s Zimbabwe … I think there’s a danger of a sort of mob psyche developing”.

Bob Neill, the Conservative chairman of the justice select committee, told The Times: “All ministers from the Prime Minister down must now make clear that the independence of the judiciary is fundamental to our democracy.” It comes as Labour leader Jeremy Corbyn demanded Mrs May set out her Brexit plans “without delay”. In a speech to the Class think-tank, he said Labour “accepted and respected” the EU vote result but called for the Government’s negotiating terms be transparent and accountable to Parliament. Mr Corbyn also insisted all UK businesses should be given “assurances” over the impact of Brexit to match those apparently made by the Government to Japanese car-maker Nissan.

On Friday, Mrs May suffered a setback after a pro-Brexit Conservative MP resigned over “irreconcilable policy differences” with the Government. Stephen Phillips announced he was quitting over what he perceived to be a failure to appreciate the need to consult Parliament over Brexit. His resignation as MP for Sleaford and North Hykeham has fuelled speculation the PM will call an early election. However, a Number 10 source insisted Mrs May stood by her declaration that she would not go to the country before 2020. Meanwhile, the woman behind the successful High Court challenge on triggering Brexit has been subjected to a torrent of online abuse, including rape and death threats.

Gina Miller, who was born in Guyana in South America, has also been the target of racist rants by internet trolls, who have called for her to be deported.

 


Bank of England left embarrassed by forecast u-turn

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The Bank of England is seen in the City of London in London

The Bank has binned gloomy post-referendum growth projections and now admits it may have to hike interest rates after all. Let’s be frank, this is hardly the first time the Bank of England has got something wrong. It missed the financial crisis, it misjudged the strength of the housing market in the run-up to it, it underestimated the inflationary surge in 2008 and overestimated the economy’s capacity to recover from the Great Recession. But rarely has the Bank ever got an economic forecast quite as wrong as this one. In fact, one can go one step further: this is the biggest forecast u-turn in its history as an independent central bank.

Think about it.

In August, its first forecast after the referendum vote, the Bank slashed its gross domestic product projections more than in any single Inflation Report on record. Today, it raised its GDP forecast more than in any single Inflation Report on record. It is, of course, a deep embarrassment. Having cut interest rates to the lowest level in history and pledged to cut them again, the Bank has now had to admit that it no longer has plans to cut them. In fact, with inflation now forecast to rise further above its 2% target than at any point in recent history (that tends to happen when the pound falls) it has had to signal that it may have to raise rates if prices continue rising.

Very awkward indeed.

And yet, the story is not quite as straightforward as those headline revisions might suggest. For one thing, that near-term upgrade is followed by a big growth downgrade in the following years. The upshot is that actually in three years’ time the economy is set to be a few percentage points smaller than the Bank forecast last time around. That raises a deeper issue about the economics of Brexit: the real damage (or indeed boost) will be determined by the way the negotiations go in the coming years, and by the nature of the deal the UK eventually secures.

Will it be a deal that keeps the borders open and trade flowing? Will it clamp down on commerce and freedom of movement? These are the things that will determine economic growth and productivity in the coming years. It is too early to make a decent stab at predicting any of that – though the Bank’s medium term forecast cut suggests it believes the process might dampen growth in the coming years. Will it be right on that? As the former Governor, Mervyn King, used to say, the one thing we can be sure of is that none of our forecasts will be completely accurate.

Ed Conway Economics Editor

 

 


Why Philip Hammond should be getting ready to break up RBS

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Conservative Leader Theresa May Addresses Party Conference

The new series of The Missing is surely the gloomiest television of the year. But it has nothing on the endless saga of RBS, which seems to use the same disturbing time-shift device: whenever there’s a horrible new plot twist, you have to spot whether we’re in 2008, 2011 or today.

The crippled bank, still 73 per cent state-owned, has lost £2.5 billion in the first three quarters of this year, having just paid out another £425 million in ‘litigation and conduct’ costs chiefly relating to mortgage-backed securities hanky-panky in the US. Since its bailout eight years ago, it has lost considerably more than the £46 billion of taxpayers’ money that was pumped into it, and has never reported a full-year profit. Attempts by chief executive Ross-McEwan, after three years in post, to persuade analysts to focus on the bank’s positive underlying performance, rather than the extraordinary charges that are the legacy of his cursed predecessor-but-one Fred-Goodwin, fall quarterly on stony ground.

The harsh truth is this: if ever there was a company that cried out to be broken up, its operating business either sold to the highest bidder or if unsellable then parked in a ‘bad bank’ to be gradually wound down, RBS is surely it. The parent brand deserves to be buried forever, even if the main subsidiary brands of NatWest and Coutts are still viable and the original Scottish branch network might have a new life under a new (or old) name. But the one serious attempt to sell off a significant piece of the group — the separation of 314 branches into a ‘challenger bank’ under the revived and well-respected name of Williams & Glyn — has turned into the biggest cock-up of all.

The disposal was insisted upon by competition officials in Brussels, to be done by 31 December next year as a condition of the 2008 bailout. Plans for flotation of Williams & Glyn this year were abandoned because it proved too difficult to clone a separate computer platform; ‘restructuring costs’ relating to that and other problems amounted to £301 million in the most recent quarter alone. Next, Santander withdrew as a potential buyer because of incompatibility with its own superior systems; and after a recent second look, the Spanish group withdrew again because the price asked by RBS was too high for the can of worms on offer.

Now the Clydesdale & Yorkshire Banking Group — a hard-nosed operator recently spun off by National Australia Bank — has made a tentative offer, causing its own share price to dip as a result. But RBS says neither this nor any other Williams & Glyn sale can hope to be signed off by the end of 2017. In which case, Brussels may appoint its own ‘trustee’, somehow to force the disposal to completion.

What a farce. Philip Hammond, with none of George Osborne’s baggage to carry on this one, should call for a reappraisal of RBS’s chances of ever returning to the private sector in anything like its present size and shape. If he wants to set a generous time limit, he might say ‘before the opening of Heathrow’s new runway’. But if the expert advice is that the likelihood is close to zero however distant the deadline, he should send in a ruthless hit squad of accountants and liquidators to retrieve whatever value for the taxpayer they can find.

That would at least have some justice to it, since it is what RBS was accused of doing to so many of its struggling business customers during the recession.

http://www.spectator.co.uk/author/martin-vander-weyer/

 


The worst airline for delays – and what you’re owed if your trip is affected

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Heathrow-Airport

Flights get delayed all the time – but not all airlines are happy about paying up afterwards. These are the worst (and best) airlines when it comes to disrupted travel. Every day at this time of year, the UK’s airports help to ferry hundreds of thousands of British holidaymakers all around the world. And, while we all hope for a smooth start and end to our time away, sadly some peoples’ plans do get hit by late flights. In fact, recent research by consumer group Which? found that almost a quarter of flights out of UK airports are delayed by 15 minutes or more. But what happens if you are lumbered with a late flight? And who is going to sort you out most effectively if the worst happens?

That’s why I thought I’d go through your rights when your plane is delayed, and work out which airlines deal with their delays most effectively…

When can you claim?

There are 3 basic rules as to whether you’re entitled to compensation for a delays:

  1. The flight must be delayed by more than three hours, and the delay has to be compared to the time the flight is meant to arrive and not the time that it takes off (oh, and ‘arrival’ counts as the point at which the cabin crew open the doors… not when the plane touches down)
  2. The flight must take off from the UK or European Union. If it’s a long-haul flight into the UK/EU, it must be via a UK or European airline and the flight must be longer than 3,500km
  3. The issue must be ‘within the control of the airline’ (so bad weather or air-traffic control disputes are going to leave you without any compensation)

What you can claim for also has some fixed guidelines:

  • If the flight is less than 1,500km and the flight is more than three hours late, then you can claim €250
  • If the flight is between 1,500 and 3,000Km and the flight is more than three hours late, then you can claim €400
  • If the flight is more than 3,000km and leaving the EU, or is an EU airline flying into the UK and is between three and four hours late, then you could get back €300. (If it is more than four hours late, then you could expect up to €600.

 

But just because your flight delay should mean compensation, it doesn’t mean the airline will just hand it over.

Dealing with delays

Using unique insights from the tens of thousands of airline customers who raise their flight delay complaints via resolver.co.uk every month, I’ve looked at which airlines you’re most likely to complain about, and which will sort your issues out most effectively if you do…

The most commonly complained about airlines                                                                                                                   

  1. Ryanair
  2. British Airways
  3. Thomson Airways
  4. easyJet
  5. Thomas Cook Airlines
  6. Flybe
  7. Jet2
  8. Norwegian Air
  9. Vueling Airlines
  10.  Monarch

Of course, a lot of complaints, doesn’t mean a lot of unhappy people – so here are the satisfaction rankings (out of 10, where 10 is satisfied and 1 is very unsatisfied) too:

The best airlines at dealing with your delays

  1. Monarch 7
  2. British Airways 7
  3. Virgin Atlantic 7
  4. Thomson Airways 7
  5. Flybe 7
  6. KLM Royal Dutch 7
  7. Emirates 6
  8. Jet2 6
  9. Qatar Airways 6
  10. Air France 6

The worst airlines at dealing with your delays

  1. Vueling Airlines 4
  2. Turkish Airlines 4
  3. Norwegian Air 4
  4. Etihad Airways 5
  5. Wizz Air 5
  6. Lufthansa 5
  7. easyJet 5
  8. Ryanair 5
  9. American Airlines 5
  10. Delta Airlines 5

 


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