Archives for Banking & Saving

LIBOR Scandal Holds Key to £24 Billion Llyods TSB Shareholder Case

Interesting news article suggests: a low borrowing rate gave false impression of HBOS solvency

Angry Lloyds shareholders say the Libor scandal is more proof they were mislead into voting to take over HBOS.

They have instructed lawyers to incorporate in their claim against Lloyds TSB directors the allegation that they knew that HBOS’s real interest rates were not being quoted at the very time that the directors of Lloyds TSB were recommending a merger with the stricken bank.

Lloyds Action Now (LAN) has been campaigning for the past three years for compensation for the 800,000 private shareholders who lost up to 90 per cent of their investment as a result of the deal.

LAN says the declaration by HBOS of interest rates lower than banks that were not in nearly as dire a financial state as itself was a deliberate attempt to hide the depth of the crisis from shareholders and that Lloyds TSB directors ought to have disclosed this.

“On 18th September 2008 HBOS posted figures for LIBOR that were clearly completely false and misleading. We now know that HBOS was not able to borrow from other banks and had to be the recipient of loans of last resort from the Bank of England and the US Federal Reserve in staggering sums,” said Sir Andrew Watson, LAN chairman.

“Despite this HBOS pretended that it was able to borrow money from other banks on an unsecured basis at rates more favourable than, for instance, HSBC Bank could.

“Lloyds TSB directors closed their eyes to this, did not disclose the true position and even hid the fact HBOS had received massive secret loans to keep it afloat in the run up to the takeover.

“In fact we now know that on that very day, 18th September 2008, HBOS was in danger of not being able to open for business because it had run out of cash, could not borrow money and was only saved by staggeringly large secret loans of last resort”, Sir Andrew added. “It is a scandal of breathtaking dimensions.”

According to former Barclays Chief Executive Bob Diamond, questioned over Barclay’s own manipulation of interest rates, the Emergency Liquidity Assistance to HBOS was not £25.4 billion but a staggering £62 billion.

This money was secretly loaned to HBOS between the announcement of the merger in September 2008 and its completion in January 2009.

It was in addition to publicly known loans given to all banks to assist with cash flow during the banking crisis and only revealed by the Bank of England a year after the event.

Lloyds Action Now has nearly 9,000 members and is in final negotiations with litigation funders to bring its claim for a total of around £2 billion compensation to court.

The HBOS merger cost Lloyds shareholders up to £4 a share, according to LAN’s latest calculations. With 6 billion shares in issue the total value of the claim could therefore be £24 billion.

LAN is writing to members of the Treasury Select Committee this weekend suggesting they raise the issue of Libor and Lloyds at their hearing into the banking scandal.

“Bob Diamond gave the impression that ‘low-balling’ the interest rate hurt no-one. In actual fact it hurt 800,000 Lloyds TSB shareholders, the majority of them pensioners, who have lost their life savings,” a LAN spokesman said.

Boosting your savings: a simple guide to ISAs

UK based savers searching for the best savings rates for their money should first make sure that they’re taking advantage of their ISA (Individual Savings Account) allowance. While interest earned from money in an instant access savings account is taxable, cash ISAs offer the opportunity for tax-free savings – up to a point.

The current limit for cash ISAs sits at £5,100 per person per tax year – and it’s worth filling that wherever possible as unused allowances don’t roll over to the following year. You can add to your ISA in chunks throughout the year as many times as you like, paying as little or as much as you like, so long as you don’t exceed the limit.

The other main benefit to using ISAs is that your savings will be available to you instantly should you need to access them – and making a withdrawal doesn’t affect the tax benefits on the rest of your savings. One important thing to note, however, is that if you withdraw some money it doesn’t mean your deposit limit gets topped back up for the year. So if you’ve deposited £2,000 over the year and decide to take £1,000 out, your remaining deposit limit is still a further £3,100 – not £4,100 as some people make the mistake of assuming. Once you put money into your ISA that portion of your allowance is gone for the year, whether you subsequently withdraw that cash or not.

Stocks and shares ISAs are also available. If you’ve filled your cash ISA and have more to invest over the tax year then you are able to use a further £5,100 in stocks and shares to complete your overall £10,200 ISA allowance. Or, if you prefer, you can use the whole amount for stocks and shares (although this obviously means you will have no tax-free cash savings) or split across the two however you see fit, so long as the cash ISA portion is no higher than £5,100.

Once your ISA allowance is used up then its time to look elsewhere if you have more to save. Shop around for the best savings rates in terms of instant access savings accounts or perhaps consider a fixed rate savings bond if you can afford to put some money away for a set period of time.

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Junior ISA Saves £500M

Second post of the day and I have to admit that not much work has gone into this one either.

Reason being, if you type ‘junior’ into Google at the moment the top suggestion that drops down is ‘junior isa’.

It’s a bit of a hot topic and there’s plenty of buzz.

What started me wanting to write something was an email I received from the IFS.

I’m working through some exams with them (passed one a week ago today!) so I get regular news and updates and they have released the following:

London, U.K., 28 November, 2010: Financial education charity, the ifs School of Finance, has welcomed the Government’s announcement that a new tax free savings account, dubbed ‘Junior ISAs’, is planned as a successor to the Child Trust Fund. 

 Rod McKee, Head of Financial Capability at the ifs School of Finance, said:

“The creation of Junior ISAs is a great initiative to help encourage parents and grandparents to save for their children’s future. It is particularly pertinent following the findings of the recent Browne Review which indicate young people will need to play a bigger part in funding their own education.”

“Junior ISAs provide an excellent opportunity to save for the increasing financial burdens associated with higher education but this alone is not enough to ensure wide uptake. We need to start with education on why long term saving like this matters, so both parents and young people can be better prepared. At the moment there is no mandatory requirement for financial education in secondary schools, at the very age when it is most beneficial.  We need to give financial education a higher status both in terms of curriculum status and formal evaluation via exams to effect change in money attitudes.” 

The ifs School of Finance was the first provider of GCSE, AS and A level equivalent qualifications in personal finance and is the only provider of A level equivalent qualifications in the area.

End.

They make a good point. Financial education in school is a great idea! It might make children and teenagers a bit more grateful for everything they get and why the answer is sometimes ‘no’.

It will also make them better prepared for the real world and their expectations of work and in a service based economy it can only help to improve the opportunity for employment.

Hopefully the release and subsequent availability of the Junior ISA might go some way to raising awareness and at the same time it’s a way of the Government spending £500M less of taxpayers money per year.

For more, here’s a pretty comprehensive description:

http://www.thisismoney.co.uk/savings-and-banking/article.html?in_article_id=517245&in_page_id=7

Tribute Paid to Cash Machine Inventor John Shepherd-Barron

This is an article I’ve been sent so apologies if you’ve read it somewhere else.

There is no doubt the cash machine has had a massive impact on the way we access and ultimately spend cash across the world and so respect is most definitely due.

‘Tribute Paid to Cash Machine Inventor’ – Good one! Wish I’d thought of that…

And the facts are quite interesting too! 20,000 cash machine transactions in a single minute!

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John Shepherd-Barron, the man credited with inventing the world’s first cash machine, has died at the age of 84. Mr Shepherd-Barron’s invention has transformed the way that we get hold of our cash, not just for us in the UK but for people across the world. From humble beginnings, the cash machine has grown to the extent that last year UK cardholders withdrew £193 billion from cash machines.

The world’s first cash machine was installed at a branch of Barclays bank in Enfield, Middlesex.  On 27 June 1967 actor Reg Varney, later to star in the TV series On the Buses, made the first ever cash machine withdrawal. The first cash machines were very basic: they were only ever located at bank branches and relied on a token being inserted, which was obtained from counter staff, rather than a plastic card that we use today. Today’s machines are much more sophisticated – enabling customers not only to obtain cash, but top up their mobile, check their balance, request a statement and change their PIN. While cash machines were once a novelty, they have become part of daily life for most of us. LINK, operator of the UK cash machine network, last month recorded 20,000 cash machine transactions in a single minute.

Other cash machine facts:

• At the end of 2009 there were more than 63,000 cash machines in the UK compared to just over 22,000 in 1996.
• In 2009 we made 2.9 billion cash machine withdrawals, taking out £193 billion in the process. In 1996 we made 1.6 billion cash machine withdrawals, taking out £80.2 billion.
• In 2009 more than 42,000 cash machines were situated away from bank branches. In 1996 a mere 4,000 were situated away from bank branches.
• In 2009 the average amount withdrawn per cash machine visit was £66. In 1996 it was £50.
• More than 80% of our cash is obtained through cash machines. 34.7 million adults now regularly use cash machines compared with 26.1 million of us in 1997. 
• The busiest day of the week at cash machines is Friday and the busiest second ever was on 30 April 2010 at 12:10:52pm when there were 433 transactions.

Barclays Bank Addresses Unlawful Charges

As a customer of Barclays I can only comment on what I know although it may be the case that other banks have already put measures in place to placate the masses regarding bank charges.

Barclays have introduced a ‘reserve amount’ in addition to the pre-agreed overdraft limit to act as a buffer. Mine’s £250 in addition to a £1000 overdraft. This means I can go overdrawn by £1250.

Instead of being charged a fee of £30 (if I go over my overdraft limit and don’t clear it the same day), I will only get charged £22 per 5 day period for being ‘in the reserve’.

However, although this fee is for a 5 day consecutive period, I have been told (by calling Barclays) that the £22 is actually charged in the same way as the old fee. If I don’t clear the reserve the same day I use it I will be charged.

If I don’t clear the reserve in 5 days I’ll be charged another £22.

2 problems I see with this:

1/ The previous £30 fee was a ‘one off’. If I went over my agreed overdraft limit and didn’t clear it the charge would be £30 and if I left the excess uncleared for any length of time no more fees would be charged (Unless more money came out of the account).

2/ The fee is charged after day 1 but it is for a 5 day period. I think the fee should only be charged if the ‘reserve’ is not cleared in 5 days.

All this really does is reduce the charge slightly and then act as an incentive to get funds into the bank or risk another fee in 5 days time.

My next question is: How long will it take Barclays to notify someone who has stepped into the reserve? 5 days? More? Less?

Part of the reason people were charged in the past was due to Barclays allowing people to take out more than they had available. E.g. If you had £20 left in the bank and went to a cash machine it would probably let you take out £30+.

Barclays assumed you would know this would take you over the limit but you’d clear it by the end of the day.

The reality is many people only think they know how much is in the bank.

I have been told by Barclays that they will no longer allow people to take more than they have in order to prevent badly managed accounts from being repeatedly charged.

 

Unlawful Bank Charges – What’s the Alternative?

It’s all over the news and I heard Martin Lewis (MoneySavingExpert.com) getting quite emotional on the radio today about unlawful bank charges.

Of course we’d all love to have totally fee free banking and yes it’s true banks don’t only make money by charging fees. Here’s an informative thread on the consumeractiongroup.co.uk forum http://www.consumeractiongroup.co.uk/forum/campaign/47583-how-banks-make-their.html.

The recent events focus primarily on overdraft charges that are imposed when a customer exceeds their agreed limit.

If banks didn’t do something when people exceed their limits some might become more irresponsible with their spending knowing they wouldn’t be penalised.

Is it fair to let banks foot the bill for sending out a letter to inform people they’ve overspent? Probably not. So the issue isn’t the existence of charges, merely the amount.

If banks decide to abolish these charges and impose a monthly or annual account fee then a large number of people who have never exceeded their limits and always live within their means will be unfairly charged.

But, is this all a lot of fuss about nothing? I’ve heard many stories about people being charged under circumstances that were most definitely not their fault resulting in debt and further charges but equally I’ve heard of lots of people successfully claiming back the charges with a simple phone call.

Admittedly most of these happy endings have started to materialize since the advent of the bank charges bandwagon (or at least, we’re hearing more about them…) so it’s hard to deny that making a claim is a worthy exercise.

But should people have to go through the process of making a claim every time they step over their limit?

Irresponsible spending should be countered with some kind of deterrent whereas charges for accidental overspending should be refunded at least in part if not fully and banks should (as many already do) help customers in difficulty to get back on track instead of spiraling into further debt.

If banks simply reduced their charges then those who knew they’d overstepped might not think it so unfair and some might not even bother trying to reclaim them and provided the banks continue to reverse those charges deemed genuinely excessive or unlawful, wouldn’t that seem reasonable?

Bank of England Base Rate – Interest – ed?

In changing times when the interest rate is rising and is said to continue doing so, it pays to know where you stand.

Keeping an eye on the Bank of England base rate can give you some idea of trends and so can keeping updated on inflation and inflation reports.

So where can you go to keep updated?

The answer is quite simple really.

http://www.bankofengland.co.uk/

It’s all there where you would expect it to be. Spewing forth from the proverbial horse’s mouth!

You can even subscribe to email alerts for the facts as and when they happen.

If you currently have savings in an account that is paying less than the Bank of England base rate, you are not really getting a good deal. (If a bank can earn more than you can on YOUR money, it’s not really fair!)

Check out some offers on savings accounts.

If you have a mortgage that has an interest rate well above the base rate, you are probably not getting a good deal.

Compare Mortgages Online

 

Reclaiming Bank Charges by Phone

I originally intended to send to my bank a copy of the letter on my previous post, the letter for reclaiming bank charges.

I reviewed my recent statements, totaled up the charges I felt were unlawful based on information I found at thisismoney. I also noted the dates on which these charges occurred.

I then realised I didn’t know the correct address to send the letter so I called my bank to ask them. While I was on the phone I asked the assistant if he could help me with the claim or if I had to send the letter. I also asked what my overdraft protection fee was protecting me against.

Within moments I was speaking to a customer services manager and it turns out the overdraft protection fee is not required so I was immediately offered a refund of 12 months payments. £48. As I had to date had no use for the service it provided (in event of illness or redundancy my overdraft would be repaid), I accepted the refund.

I then mentioned the unlawful fees of which there were 3 and I was also immediately offered a refund for 2 of them. OK so it’s not the full whack but I’m not greedy and to be fair that covers the cost of the letter, the envelope, ink and postage and the time of the nice lady I spoke to, plus a small tip.

I was fortunate that my fees were small by comparison to some of the horror stories I’ve heard and also very infrequent. The three I’ve mentioned all happened in the space of 5 days over Xmas when I was guilty of forgetfulness and frankly not interested in banking!

If you’re going to attempt to reclaim your charges over the phone the most important 3 things are:

1. Know the facts. Find out all you can so you know your rights and where you stand. 

2. Be prepared – have all the details of all the charges you feel are unlawful to hand.

3. Be nice. – You’re talking to a person at work not ‘the bank’. I get the impression the banks are geared up to handle more of these claims and at the moment the law is on your side SO THERE’S NO NEED TO SHOUT!

Reclaim Bank Charges Letter – Get Back Unlawful Fees

So here it is. The letter that could help get your bank charges repaid to you.

There’s been a lot of hype about this recently and I’m actually about to give it a try for myself.

Replace required sections with your own details:

 

Dear Sir/Madam,

Ref: account number: (your account number)

I understand that the charges applied to my account in relation to the following (enter details of what charges were for) are unlawful.

When I opened my account I entered into a contract with you, at which time you agreed to act lawfully. The fees you have been applying to my account in relation to the above are unlawful under Common Law, Statute and consumer regulations.

You have taken (enter charges amount here) from me, plus the following in (enter overdraft interest amount here) overdraft interest and I would like to request repayment of this (enter total sum) total sum. I also ask you to ensure any default notices entered against my credit record are removed entirely.

Please repay this money in full and remove any default notices within 14 days. If this is not done, I will begin a claim against you for the full amount, plus interest and my costs.

Yours sincerely,

(Your signature)

 

Personally it seems a bit too blunt but if it gets the job done…!