Millions of people in overdraft will see their overdraft charges cut. The Halifax, with more than 5 million customers with current accounts, ha instead introduced a daily penalty of £5 if you go into the red. The bank previously charged £35 for a refused payment due to insufficient funds, £35 for authorised transactions whilst in the red, and £28 for using an unauthorised overdraft.

This all amounts to a month is £155 rather than £238 A DAY under Halifax’s previous charging arrangements.

The NatWest has announced that it was cutting the charges for a bounced cheque from £38 to just £5.

This all seems to have resulted from pressure from the Financial Services Authority although letters we have seen from banks imply that it is simply as a result of a “long-term review”.

No matter what the truth, it is a fact that banks need to be more transparent in their charging and customers need to be given a fairer deal.

Some borrowers are finding it impossible to gain access to the best mortgage deals, loans and credit cards despite having paid all their bills on time. Why? Because the credit reference agencies have made errors on the credit file they hold on that person.

Nobody gets everything right one hundred per cent of the time and this applies to the credit agencies as well. They make mistakes – but you pay dear for their mistakes!

Confusing you with someone else, recording other peoples’ credit problems on your file and general inaccuracies can wreck your credit rating and cause you untold headaches.

Our advice is check your files held by the three main credit reference agencies – Equifax, Experian and Callcredit. You are entitled to receive a copy of your file for an administration fee of £2 - and go through it with a fine tooth comb. If anything is wrongly recorded, the agencies have procedures you can follow to have your file corrected. The problem is that it all takes time and is a pain in the neck!

But until your record is corrected credit will either cost you more or even be refused. So once you have your record spot on, it’s a good idea to make the same check every year.

The FSA wants to reform the way mortgage lenders agree new mortgages. It’s proposals include a ban on self-certification mortgages and more detailed verification of the borrowers income.

The FSA’s 7 points are as follows:
1. A ban on self-certification mortgages which some have labelled “liar loans”.
2. Borrowers to provide far more detils about their income.
3. Abolish fast-track applications where mortgages are approved without detailed checks.
4. More stringent affordability checks to ensure borrowers can cope if interest rates rise.
5. Buy-to-let mortgages to be regulated.
6. All second charged loans to be regulated
7. All non-bank mortgage lenders to be subject to new and more rigorous, capital requirements.

Jon Pain, the FSA’s Managing Director is reported as saying, “We have to, learn from the lessons of the past. Affordability tests are important as we want to be sure that a borrowers net income is enough to cover the prepayments.”

Next Wednesday, judges at the Supreme Court will rule on the legal battle about unfair bank charges.

This is the case between the Office of Fair Trading and the main high street banks and will decide whether the OFT can assess the fairness of overdraft charges – which have been as much as £39 a time for exceeding your account limit. The Court of Appeal has already ruled that charges can be assessed but the banks appealed to the Supreme Court which is the highest court in the land.

It is estimated that 1.1 million people have £1.7 billion worth of charges awaiting this decision because a freeze was placed on complaints back in July 2007 when the banks appealed against the Court of Appeal’s decision in favour of the OFT.

Banking experts believe that the banks could face a £20 billion payout if they were forced to repay all the charges under dispute.

A third of fresher students at University are still waiting fort their student loans and grants to help pay their rent and food after the student loans system collapsed in administrative meltdown.

Students are reporting that the Student Loans Company has lost forms and seems unable to answer queries – and even answer the phone! This has meant that the Universities have had to step in and financially assist in the worst cases.

Apparently, a document scanning system at the loans Company failed losing documentation and forcing staff to go back to manual processing. But in practice the debacle looks more complicated than that with as many as 175,000 students waiting for their money.

This is not the first year that the Student Loans Company has got into a mess. They know the likely workload well in advance, so why, oh why, can’t they organise themselves better?

Students choosing a student bank account don’t need to worry that they’ll be saddled with the same bank after graduating. After graduating, students can open an account with any of the banks that offer “graduate accounts” and simply transfer their debt from their student account.

What’s more on transfer, some banks offer an interest free period. Take the Halifax for example. They will offer an interest free overdraft for up to £3,000 for the first 12 months – beyond that period, the rate is currently 19.8%. If the prospect of 19.8% puts you off, consider the Co-operative bank. Their graduate account offers a £2,000 interest free overdraft for 12 months followed by interest at 9.9%.

If you want an interest free period of more than 12 months, consider Lloyds TSB and the Royal Bank of Scotland. They offer interest free facilities of £2,000 in the first year followed by £1,500 in year 2 and £1,000 in year 3.

The cost of mortgages is on the up despite bank’s costs falling to record lows. The cost of three and five year fixed mortgages has risen again despite bank’s paying less to obtain the funds they lend.

It means that for a £100,000 mortgage, the banks are making £515 more annual profit than they were just nine months ago in January. Figures show that the average price of a three year fixed rate mortgage increased from 4.67% in July to 4.81% at the end of August. For five year deals the price increased from 6.68% to 5.72%.

At the same time, the three year interest rates paid by the banks on the wholesale money markets was 3.3% and five year rates were 2.6 %.

But the biggest cash cow for banks are tracker mortgages. Banks are borrowing funds for these products at 0.7% and lending it out on tracker mortgages at 3.84%.

In our view these represent market forces where the demand for mortgages simply exceeds the volume of funds which banks, post credit crunch, are prepared to supply. Until demand and supply come more into balance, we are likely to see the banks making hay whilst the sun shines and taking the opportunity to boost their profits and balance sheets.

Interest rates on personal loans are continuing to rise as lenders remain worried about borrowers keeping up with their repayments.

The rates from Marks & Spencer, Egg, and Tesco have all recently risen by 1.2%, 1% and 0.2% respectively. Twelve months ago, the typical interest on a three year loan for £5,000 loan was 11.2% whereas today it is 12.2%.

Rates have risen because lenders think that the outlook for defaults continues to worsen. As a result the anticipated losses have to be covered by the majority of customers who do fulfil their obligations. This tends to indicate that the banks are supporting those economists who foresee a worsening unemployment rate. Now that the government is clearly planning savage cuts in expenditure the fuller, longer term affect of the credit crunch it is coming home.

We have to advise that despite the recent signs of recovery, the best advice remains batten down the hatches.

Universities are have to arrange emergency funds for thousands of students whose loans have failed to arrive in time for the new academic year The Universities are stepping in to provide money for living costs and to delay payments for accommodation as the backlog in despatching loan grants continues. Without this action the students affected would be unable to afford food and rent.

A spokesperson from Universities UK said that all universities had put arrangements in place to support students who faced financial difficulties which were not of their making.

It is the Student Loans Company that seems to have messed things up yet again. How many years does this cock up need to be repeated before the Student Loans Company learns the message that there is a huge influx of work in September each year?

But the Loans Company blames students for delaying their applications and say that if they got them in on time, this problem would not exist. However, they are finding it difficult to explain why students are having great difficulty getting their phone calls answered. “We’re sorry if some of our customers are having difficulties getting through”, they said.

This years, 1 million students have applied for loans and about 830,000 grants have been paid out leaving 170,000 high and dry!

Top economists say that UK interest rates could remain low for years. Their forecasts come as the Bank of England hinted that if necessary, it would continue to pump money into the economy, thereby depressing interest rates.

Only a month or two back economists were forecasting that base rates would begin to rise from their all time low of 0.5% but now their expectations of a rise are being pushed back. There have even been forecasts that the 0.5% rate could last for years!

But other economists warn that things could change markedly after the election next year. They say that as government spending will have to be cut to close the budget gap, interest rates could have to rise.

All very confusing isn’t it?

The average cost of overdrafts stands at an all time high – 18.9% which is the highest since the bank of England’s records began in 1995. It would seem that the bailed out banks like the Royal Bank of Scotland, are responsible for the highest charges.

The cost of personal loans is lower with an average rate of 13.1% and this is the highest since 2004.

This is further confirmation, as if any were really necessary, that customers are not seeing any benefit of the historically low Bank Rate which is standing at 0.5%. It is clear that whilst the banks are restricting the amount they lend, they are boosting their profits and balance sheets by pushing up charges on all their financial products.

This combination of record levels of interest and restricted supply of credit is set to choke economic activity in the UK and negate the affect of the £1.4 trillion of public money that the public injected into the UK banking system. And figures out this week show that recovery in the UK is lagging the USA and mainland Europe. The reason given for this is that financial services were a large proportion of the UK’s output and it is that sector that has been most badly affected by the recession.

This all suggests that if the UK’s recovery is to get going, the Government will have to tackle the availability of credit.

Lloyds TSB clients face charges of up to £200 a month if their current account goes into an unauthorised overdraft but if users of the banks’ Islamic account goes overdrawn, only £15 is charged. This has led the bank open to accusations of religious discrimination.

The Islamic account attracts Muslim clients to the bank by allowing them to bank in accordance with their faith. Sharia law does not allow interest to be paid so these accounts do not have a overdraft facility. So if a payment is made and the account has insufficient funds, the payment is blocked and a “returned payment charge” is levied. But on some accounts there is an arrangement whereby such payments are authorised and a £15 “unplanned overdraft fee” is charged. The bank says that the £15 payment is a fee, not interest and as such is in accordance with Sharia law.

However, standard current account users who go unauthorised into the red by over £100 are hit with fees of £20 per day for up to tens. This means charges of up to £200!

One commentator said, “It strikes me that this is bordering on the illegal. One cannot help thinking that the bank is bending over backwards to assist Muslims to the detriment of everyone else”.

What do you think?

The Institute for Public Policy Research, the Labour Party’s think tank, has recommended that middle class students should be denied student loans to fund the cost of living whilst at University and tuition fees.

If this were to happen, their parents would be forced to shoulder more of the cost – £3,225 for tuition alone possibly rising to £7,000 if Universities succeed in their lobbying for higher fees plus living expenses. Denying middle class student the opportunity of part funding their University education through a student loan would place untold pressures on the middle classes.

These proposals from the Institute for Public Policy Research are in effect a massive stealth tax on families whose aim is to ensure their children are fully educated for the 21st century. The Governments reaction has been luke warm to the report but they have refused to dismiss its conclusions saying that the Government is committed to making sure that money is not a barrier to people going to University whatever their background.” Few could argue with that sentiment but as usual, the devil will be in the detail – when and if it appears!

The bloodbath in the loans market has meant that many of the small and medium sized loans companies that once sold loans have gone bust or dissolved, particularly those that sold to people with impaired credit.

The result is that many clients who make a claim because they believe they were mis-sold payment protection insurance cannot reclaim against the business that sold the loan to them, because it no longer exists. Instead they are appealing for refunds from the Financial Services Compensation Scheme.

Take Picture – they were a specialist lender whose PPI premiums for a five year loan often amounted to 50% of the initial loan value. The problem is that Picture went into liquidation last year so any customer that makes a claim is re-directed to the Financial Services Compensation Scheme. And under that process, compensation can easily take 12 months to come through.

There are suspicions that some of the lenders have dissolved themselves to avoid the mis-selling liabilities that stood on their books. In our view, if that can be proved, then lawyers should find ways to hold the Directors personally responsible for the company’s mis-deeds.

The interest you are charged is as much a reflection of the lenders’ financial circumstances as it is of yours. These are the main factors that affect the interest rates you pay:

The Bank of England’s official Base Rate
These days this affects saving rates more than lending rates. Only Base rate tracker mortgages are directly affected by movements in the Base Rate.

Money market interest rates
There are two interest rates which are very influential to the you are charged. Firstly, there’s what’s called the LIBOR rate. This is the rate banks pay to borrow money from other banks for short periods. Then there’s the SWAP rate. This is the rate banks pay for borrowing money from other banks for longer periods. These interest rates particularly influence the cost of fixed rate mortgages and those tracker mortgages that are linked to LIBOR.

The bank’s money supply
The principle is simple: If the lenders are short of money to lend but the demand is there, they’ll charge more and vice versa. At the moment the mortgage companies are using higher interest rates and higher deposit requirements to effectively control demand. As their coffers are replenished you’ll see lending criteria being relaxed.

Pressures on lenders to increase their cash reserves
Post credit crunch, the Financial Services Authority has forced lenders to hold twice as much in cash reserves. This means they have less to lend. And as we all know, some of the banks owe the Government billions which they’ll have to repay. This all creates pressures on them to increase their profits. How to the respond? Guess what, they charge us more!

Your Deposit
The bigger your deposit the more equity you’ll own in your home – and bankers like you to have plenty of equity - as that means they’re more certain to get back the money they lent you, if things go wrong. This means that they entice borrowers with plenty of equity by offering them the lowest rates.

Your Credit Score
The large credit agencies such as Experian, constantly collect information about your finances. They know who you owe money to and who you have applied to for credit and whether you’ve missed any payments. They also record defaults and County Court Judgements etc. They then use all this money to score you for your credit worthiness.

The lenders of unsecured loans and credit cards also use this information to decide not only whether to lend you money, but what rate to offer you.

The banks are at it again! There is growing evidence that small businesses are being steered away from The Government’s Enterprise Finance Scheme and into loans that gave the banks fatter profits. Don’t just take our word for this – a report from the all party Business and Enterprise Committee also says so!

So far £400 has been offered under the Enterprise Finance Scheme to over 4,000 businesses. But the report shows that banks have not always offered the scheme but instead pushed their business clients into loan deals at higher interest rates. There was also evidence that banks were also insisting that business owners provide their home as security. If the business had a EFS loan the bank would receive qualified guarantees and their homes would not be needed as security.

If you have first hand experience of your bank acting like this, the Business and Enterprise Committee wants to hear from you. The Committee wants you to write to them before 12th October this year describing your experience.

As the banks tighten their credit criteria are and more people are being refused any form of credit. That goes for loans, mortgages and credit cards.

According to Datamonitor, by the end of 2009 some 9 million people will be unable to raise credit from Britain’s banks. That’s 1 in 7 people.

On top of this, the companies that only two years ago were lending to those with poorer credit histories are falling like flies. London & Scottish went bump before Xmas, Benefitial Finance closed last month and Cattles appears to be teetering on the brink. That leaves just a few companies such as Provident Financial operating.

But don’t rush to Provident. They operate through agents going door to door collecting weekly instalments and their interest rates are eye watering. What would you guess their typical interest rate is? 25%? 30%? Could it be 40%? No it’s a mere 100%!

For some the only other option is what’s called a “pay-day loan”. That’s a loan given to workers to tide them over until they receive their next pay cheque.
A typical charge fort this service is £25 for a £100 loan. And that works out at an annual interest rate of 2000%. So perhaps we should consider Provident as a bargain!

These interest rates look morally wrong to us. We think that the Government will have to set up an enquiry into what is happening to see whether these interest rates are giving rise to excess profits – and if they are, they’ll have to set a cap the maximum interest rate and charges.

At last the Government has decided to ban credit cards from posting out unsolicited cheques. The credit card companies will also be banned from increasing interest rates without warning and forced to raise the minimum monthly payment.

Last year over 14 million promotional cheques were sent out by credit cards. The technique of sending out these un-requested cheques has proved to be highly profitable for the credit card companies. The interest charged on the money was usually higher than the rates on the card. And then there were usually handling fees of up to 2.5%. Not cheap! As a result many consumers have been led into excessive debt and it was clear that this practice would have to stop at some time.

These reforms were published in a White Paper last week. But that wasn’t all. There is going to be a crackdown on illegal loan sharks and plans for an advocate who will fight on behalf of those consumers who have been cheated by financial businesses. Finally, a specialist enforcement team is to be formed to focus on online fraudsters.

To us this is all good news. Let’s hope that the proposals in the White paper are implemented without further delay.

Banks have been easing in big increases in the cost of personal loans. Within the last month several loans companies have increased their headline interest rates by at least 1% making the headline rates over 9%. This is happening despite the Bank of England holding its base rate at 0.5%.

The average headline rate on personal loan is now 9.07% - but remember if you have any level of distress in your credit history, the rate you’d be offered would be considerably higher. Indeed, at the moment, more people are being absolutely refused a loan than are receiving an offer.

If you want a loan of up to £10,000, then our advice is try to get an unsecured loan. However, the odds are that you will only be offered anything over £7,500 as a secured loan – that means that if you were to default on the repayments, the lender has a legal entitlement to sell your home to obtain the monies to repay the loan. So if you are tempted by a secured loan think long and hard about the potential repercussions.

Of course, if you don’t own your own home you wouldn’t qualify for a secured loan anyway – it would be an unsecured loan or nothing!

The housing charity “Shelter”, says lenders are not following agreed guidelines aimed at limiting repossessions.

Last year a “pre-action protocol” was agreed which laid out the ways lenders should assist borrowers before starting repossession proceedings. But it seems that as the guidelines are just that – guidelines not imbedded in law, they are being ignored by the lenders and some courts.

In Shelter’s survey which was run in conjunction with The Citizens Advice Bureau and National Debtline, it was found that just less than a half of mainstream lenders were observing the pre-action protocol. The very worst were the sub-prime lenders lending to people with impaired credit ratings. Here only one fifth were observing the protocol.

Shelter said, “These people are already the most vulnerable and should be the borrowers most seeking the protection of the protocol”.

But it is not only the lenders who are at fault, the courts also come in for critism. Three out of every four Judges were asking the lenders for more information about the efforts they had undertaken to sort out the borrower’s financial problems. But despite that, repossessions had increased by 23% beteen the last quarter of 2008 and the first quarter of 2009.