Research from Britain’s number one comparison site moneysupermarket.com* has discovered the depth of reliance Brits have on credit cards as almost 5 million (14 per cent) admit to regularly using a credit card to pay their household bills, and a further 2.5 million withdraw cash on their cards, potentially costing them around £90 million per year.

Kevin Mountford, head of banking at moneysupermarket.com, said; “Used responsibly, credit cards can be an integral part of household budgeting but it’s alarming to see so many people using their cards to pay for what should be everyday spending. If you are using a card in this way, and not paying off the full balance each month, then you really do need to review your circumstances, as this is the first sign of financial difficulty.

“Sometimes a credit card can be a convenient way to pay for everyday items, but a rule of thumb is to finance a product over its useful lifespan. Funding a large purchase such as a TV over the length of an interest free period makes sense, however if you are paying for your weekly shop over several months, this is a real no-no. Those consumers who are turning to credit cards to fund basic household bills on a regular basis should be hearing alarm bells, as this habit needs to be avoided wherever possible – it’s really a case of robbing Peter to pay Paul.”

The research found that, whilst over half of Brits (55 per cent) use their plastic to fund big ticket items such as TVs and DVD players, spenders are also regularly using their plastic to pay for other everyday transactions such as grocery shopping (43 per cent) and buying petrol (38 per cent).

But a further seven per cent withdraw cash on their credit cards, potentially costing them a combined £90 million in fees annually. Two per cent of respondents use their cards for gambling, which most credit card providers treat as a cash transactions.

Kevin Mountford continued: “Taking out cash on your credit card can be an expensive business, with most cash transaction APRs well over 20 per cent. With the majority of cards your repayments will not clear this debt until debts on balance transfers and purchases have been fully repaid – as the cheapest debts get paid off first, this means you could be paying way over 20 per cent interest for some time.

“It’s no bad thing to use credit cards to help manage your outgoings occasionally but over the long-term, consumers need to be careful that they don’t fall into this debt trap. Many consumers will fund all their days to day spending on credit cards in order to maximise the rewards on offer on the card, but to benefit from this you need to pay off the full balance each month otherwise the interest you will pay outweighs any gains.”

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Before considering any new regulation, the Government should take stock of the important new consumer rights already being introduced by lenders. This is the message from the Finance & Leasing Association, which released figures today showing that spending in March on loans, store cards and credit cards was down by 33%, 20% and 3% respectively compared with a year ago. Meanwhile, credit for car sales grew by 31%.

Against this background, the FLA has called on the Government to think very carefully before implementing its proposals to cap interest rates on credit and store cards and impose a seven-day cooling-off period on store cards. Further regulation of this kind could leave consumers with less choice from legitimate lenders and force some into the arms of loan sharks.

Fiona Hoyle, FLA Head of Consumer Finance, said:

“Lenders are already making significant changes to the way they sell credit, to comply with the EU Consumer Credit Directive and the OFT’s new rules on Responsible Lending. The Government’s proposal for further regulation before these changes have been implemented risks confusing customers and gold-plating the EU Directive, which already gives store card customers a 14-day right of withdrawal.

“15 million people have a store card account. Real customer benefits would be lost if a cooling-off period were introduced.”

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Businesses must take proactive measures to protect themselves against losses caused by eruptions of the Icelandic volcano, advised leading credit management specialist Coface – UK & Ireland.

Coface said companies likely to be affected by the ash cloud caused by prolonged and regular eruptions should adopt a proactive stance to protect their cash flow.

The leading provider of country, sector and business climate ratings and a world leader in credit management services, issued its advice ahead of its annual Country Risk Conference at The Palace Hotel, Manchester, on Wednesday, 9th June.

Businesses that suffered greatly from the disruption included airlines – they were collectively losing £130m a day in revenues during the bans on flights across European airspace and have since suffered further multi-million pound losses* – exporters of perishable goods, those whose products are time or mission critical and companies which trade primarily with mainland Europe.

Firms will also have experienced indirect costs and disruption such as the ash cloud forcing the cancellation of meetings and delays to staff returning from holidays and business trips both in the UK and abroad.
Ian Hollyhomes, Director of Credit Insurance Department of Coface – UK & Ireland, said: “Effects of the volcanic ash won’t be catastrophic and the eruptions may reportedly have ceased but with the situation remaining volatile and unpredictable it could yet take a toll on a UK economy still struggling in a very fragile recovery.

“It is essential that businesses affected in any way by the eruptions in Iceland have contingency plans in place for situations of this kind.”

He said that businesses require strong credit management to address potentially damaging issues such as:

• disruption to their cash flow;
• disruption to customers’ cash flow that may cause a decline in demand or late payment or even non-payment of bills;
• the need to monitor the financial position of customers and/or suppliers facing their own volatility for a prolonged period

“The total effect on gross domestic product could be offset by the fact that losses suffered by some sectors could be more than compensated for by others but while this helps the overall picture it’s no consolation to businesses that have had money wiped from their bottom line,” added Ian.

Speakers at the half-day conference are Juan Gomez and Dr Mohamed Djeddour, Head of Economic Strategy at Manchester’s Commission for the New Economy and Head of International Business Programmes at Manchester Business School (MBS) respectively, Philip King, chief executive of the Institute of Credit Management (ICM) and Coface Analyst Christine Altuzarra.

The Conference – to be hosted by Xavier Denecker, the managing director of Coface – UK & Ireland – is targeted at finance directors and credit management professionals, their advisers and those with an interest in country risk.

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The OFT is taking part in a campaign to warn people of the dangers of loan sharks that charge exorbitant interest and use violence and threats to enforce debts.

As part of the ”Stop Loan Sharks” campaign, the OFT and the Trading Standards Illegal Money Lending Teams have released a new video urging people to report loan sharks, and will be distributing around 200,000 leaflets and posters throughout England, Scotland and Wales.

There are an estimated 165,000 households in the UK using illegal money lenders, with half of these in the most deprived areas of the country . Particular loan shark hotspots include Scotland, the North of England and the West Midlands.

Anyone lending money should have a consumer credit licence from the OFT. Licensed lenders have to comply with legal obligations in dealing with customers, including the use of proper paperwork and fair collection methods. Unlicensed loan sharks will often offer cash loans without paperwork, they may take benefit or bank cards as security, and threaten or use violence to get money.

Ray Watson, Director of the OFT”s Consumer Credit Group said:

”If you”ve borrowed money from a loan shark you haven”t broken the law, they have. Loan sharks cause misery to thousands of families and should be stopped. If you have information about loan sharks, report it to the Illegal Money Lending hotline.”

Jacqui Kennedy, Director of Regulatory Services at Birmingham City Council said:

”It”s great to have the support of this campaign in our continued fight against loan sharks. It”s vital that we get our message out to vulnerable people that loan sharks are never a good option. It may seem like easy cash at first but very quickly people can become trapped in a spiral of debt, with entire communities having their lives controlled by loan sharks and living in fear and despair. I”m sure this campaign will help people understand just how dangerous loan sharks are and that there is help available.”

Nationally, the Stop Loan Sharks project has so far helped more than 11,500 people, written off more than £31 million of illegal debt, secured more than 60 years in prison sentences including an indefinite sentence for public protection, and seized £1million in cash.

Loan sharks can be reported to the Trading Standards Illegal Money Lending Team by calling 0300 555 2222, texting ”loan shark” and the details to 60003 or sending an email to reportaloanshark@stoploansharks.gov.uk

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One in three Australians have indicated they will pay bills late in the year ahead and one in four households has indicated they would be most likely to miss the mortgage payment if they find themselves short on cash. These findings are from the latest Consumer Payment Priorities Study, released by credit reporting agency Dun & Bradstreet.

The study reveals that many Australians are unaware of the consequences of paying their bills late, with six in ten (57 percent) individuals saying they’d be more likely to pay their accounts on time if they knew late payments were listed on their credit report and can negatively impact their credit profile. A payment can currently be listed on an individual’s credit record if it is 60 days overdue.

However, in a step which will help to ensure that people who are struggling with credit aren’t exposed to more, new credit reporting laws – which have been accepted by the Federal Government – will allow payments to be listed on an individual’s record if they are just one day late.

In addition, the study reveals that younger Australians and those in lower income households are more likely to pay their bills late in the year ahead. One in five (21 percent) older Australians (aged 50-64) indicated they will pay at least one bill late – this compares to one in three for the two younger groups (18-34 and 35-49).
Meanwhile, 30 percent of people in high income households ($80,000+) said they expect to pay late in the year ahead – this figure jumps to 37 percent for households earning les than $80,000.

Gross mortgage lending declined to an estimated £10.2 billion in April, down 12% from £11.6 billion in March and 1% from £10.3 billion in April 2009, according to new data from the Council of Mortgage Lenders. This is the lowest April total since 2000 (£9.3 billion).

A slight seasonal decline was expected as Easter fell in April this year. Gross lending remains broadly in line with our forecast for lending of £150 billion for 2010 as a whole.

In today’s market commentary, the CML notes that there have been signs of increased mortgage availability in recent months with higher loan-to-value mortgages becoming available and rates falling slightly. But it remains a difficult market, particularly for first-time buyers without large deposits, and lenders continue to face funding challenges. The CML says that the imminent fiscal squeeze will drag on the speed of the recovery, which in turn will slow the pick up in the housing market, although the Bank of England’s welcome of the plans to address the public finances is likely to mean that interest rates can remain low for longer, which will help to support the market.

CML director general Michael Coogan commented:

“We welcome signs in the coalition agreement that some housing priorities are on the government’s radar. But we still do not know how the incoming government plans to address the funding gap looming over the next few years in the mortgage market. It is important that the new government grasps this nettle. Unless funding issues are addressed, any recovery in lending may well be curtailed as the repayment date on the support schemes gets closer.”

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Gross mortgage lending declined to an estimated £10.2 billion in April, down 12% from £11.6 billion in March and 1% from £10.3 billion in April 2009, according to new data from the Council of Mortgage Lenders. This is the lowest April total since 2000 (£9.3 billion).

A slight seasonal decline was expected as Easter fell in April this year. Gross lending remains broadly in line with our forecast for lending of £150 billion for 2010 as a whole.

In today’s market commentary, the CML notes that there have been signs of increased mortgage availability in recent months with higher loan-to-value mortgages becoming available and rates falling slightly. But it remains a difficult market, particularly for first-time buyers without large deposits, and lenders continue to face funding challenges. The CML says that the imminent fiscal squeeze will drag on the speed of the recovery, which in turn will slow the pick up in the housing market, although the Bank of England’s welcome of the plans to address the public finances is likely to mean that interest rates can remain low for longer, which will help to support the market.

CML director general Michael Coogan commented:

“We welcome signs in the coalition agreement that some housing priorities are on the government’s radar. But we still do not know how the incoming government plans to address the funding gap looming over the next few years in the mortgage market. It is important that the new government grasps this nettle. Unless funding issues are addressed, any recovery in lending may well be curtailed as the repayment date on the support schemes gets closer.”

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After suffering the effects of the worst economic downturn in six decades, the trade credit insurance sector is seeing encouraging signs of increased interest in its products, according to one industry executive.

“There have been a lot of comments about our products, our industry, mainly negative,” said Fabrice Desnos, chief executive of the U.K. operations of credit insurer Euler Hermes, at the annual conference of the British Insurance Brokers Association. He said much of the criticism came from people who didn”t know much about the industry.

The economic crisis led to an increase in corporate insolvencies, Desnos said. There was talk that trade credit insurance had no future, but with inquiries now up, the market is showing itself to be very resilient, he said.

“Having seen, especially in the U.K, 10 years of very, very significant economic growth,” Desnos said, the market saw a sudden drop in pricing. There is nothing worse for insurers than a one-in-60-year event, he said. On top of that, there was widespread denial outside of the industry about the extent of the economic crisis. He cited advice from a U.K. government minister that there was no problem.

The insurance sector faced the challenge of offering clients clear direction on acceptable levels of risk, Desnos said. Some decisions were unpopular, but it is unreasonable to expect insurers to walk into certain losses, he said. In the main, the trade credit insurance sector reacted well to the crisis, he said.

“Our aim as credit insurers was to protect ourselves but also try and protect our clients to the best of our abilities,” Desnos said.

Euler Hermes, which describes itself as “the world”s leading credit insurer,” said in April 2010 the global economy is improving, but “very unevenly.”

“The structural impact for developed countries is significant: their weight in the world economy has shrunk considerably with the crisis, with their shares of global trade volumes and global industrial output declining by respectively two percentage points and 4.6 percentage points,” Euler Hermes said in a statement at the time. Euler Hermes is part of Allianz Group.

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Figures published today show the first sign of an upturn in investment by British businesses using asset finance. The Finance & Leasing Association’s (FLA) latest figures show that asset finance (leasing and hire purchase) provided to UK businesses for investment in new equipment increased by 11%1 in March this year compared with the previous year, the first month of year-on-year growth since September 2008.

£1.7 billion of asset finance was provided for new equipment in March this year, compared to £1.5 billion in March 2009. It will fund new manufacturing plant, computers, company vans and other types of business equipment.

While these figures are cause for cautious optimism, new asset finance business remains significantly lower than pre-recession levels. The lack of investment during the recession has led to ‘Rusting Britain’, as businesses make do with old and energy-inefficient equipment, and are unprepared to meet market demand as the economy recovers. Research has found that the fall in business investment in the most recent recession was greater and more rapid than in the recessions of 1980 and 1990.

Commenting on the statistics Julian Rose, Head of Asset Finance at the FLA, said:

“These figures suggest that Britain’s businesses are beginning to increase their investment in new equipment. Many use leasing because it helps them to manage their cashflow and to obtain the business equipment they need, when they need it, and at reasonable cost. But the new Government needs to help by giving small businesses that lease equipment the same tax incentives as those that can afford to buy outright.”

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New analysis from Experian®, the global information services company, reveals a sharp increase in personal insolvencies among middle-class professionals and the super rich during 2009.

The analysis, presented to senior credit risk professionals from UK financial institutions at Experian’s Credit Risk Summit event in London, shows that the highest number of personal insolvencies occurred in Torquay, where 10 in every 1,000 adult residents became insolvent during 2009. Llandudno, Irvine, Falkirk and Skegness also saw high concentrations of insolvency, with around eight in every 1,000 residents becoming insolvent. Hamilton saw the biggest rise in insolvencies, from four to seven in every 1,000 residents between 2008 and 2009, an increase of 57 per cent.

The Global Power Brokers consumer type identified by Experian’s Mosaic classification saw personal insolvencies increase by 43 per cent in 2009. These types are highly educated and privileged people living in the exclusive areas of London such as Kensington, Chelsea, Regent”s Park and Hampstead. Likewise, there was a 36 per cent increase in the number of the financially successful people that make up the Serious Money group becoming insolvent.

Experian’s analysis of County Court Judgments further highlights the recession’s impact on the wealthy groups. While the number of County Court Judgments was down across the majority of consumer groups in 2009, the biggest increase was in the Serious Money consumer type, which saw its count of County Court Judgments increase by 12 per cent. Distinctive Success, highly educated, high-earning, middle-aged professionals, saw County Court Judgments increase by six per cent and Parish Guardians, typically lawyers, board directors, accountants and tax consultants living in picturesque rural locations such as South Woodham Ferrers in Essex, Pulborough in West Sussex and Nailsworth in Gloucestershire, saw a five per cent increase.

2009 saw a 41 per cent increase in personal insolvencies amongst Yesterday”s Captains – retired, middle-class couples and widows living in area such as Solihull, Cheadle and Cardiff’s Whitchurch district on final salary pensions or from investments in companies they once managed. There was also a 38 per cent increase amongst Hardworking Families – older married couples typically employed in mid-level administrative positions within organisations where they have worked for many years. There are high concentrations of this consumer type in the Kidsgrove and Alsager areas of Staffordshire, Coalville in Leicestershire and South Benfleet in Essex.

Despite the sharp increases in personal insolvencies and County Court Judgments amongst more affluent groups, the majority continued to come from consumer groups living in former council housing who have stretched their finances attempting to emulate more affluent lifestyles.

The Legacy of Labour consumer group, typified by older people living on limited incomes in the council estates of Northern and Midland industrial towns such as South Shields, Walsall and Sutton-in-Ashfield, saw the highest count of personal insolvencies (10,751) during 2009, 10 per cent more than during 2008. Legacy of Labour also received 43,675 County Court Judgments during 2009, the most of any group. Stressed Borrowers, a low-income group of family heads living on former council estates in areas of southern England like Croydon, Crawley and Bracknell suffered 9,321 insolvencies during 2009, up by almost six per cent on 2008.

Only Military Dependants, people serving in the armed forces and their partners, saw a significant drop in insolvencies (down 21 per cent) during 2009.

Phil Cotter, Managing Director for Credit Services at Experian, UK & Ireland, commented: “Our analysis shows that the recession impacted all sections of society, with the most exposed becoming insolvent at a higher rate than ever before. Groups that had come to rely on manufacturing and low-skilled service sector jobs have been hit the hardest, but the biggest increases were amongst the UK’s most affluent and successful consumer types.

“Predicting risk in consumer lending has become more complex, with accounts once correctly considered medium to low risk and profitable increasingly entering collections due to the changing economic climate. Lenders need to ensure that their credit risk and collections capabilities evolve to enable the most responsible and sustainable lending decisions. Our analysis underlines that it is vital to obtain a thorough understanding of each and every customer throughout the credit lifecycle, including the total value and risk they represent, as well as how they are exposed to changing micro-economic conditions.”

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