Posts Tagged ‘Government’

OFT to Close Rogue Debt Collectors

Friday, July 20th, 2012

The Office of Fair Trading is being given the power to instantly stop rogue money lenders, debt collectors and debt advice firms from operating.

The government has decided to amend the Financial Services Bill, which is currently in the Lords, so that the OFT now has the power to suspend firms’ consumer credit licences with immediate effect.

At the moment appeals can hold up such decisions by up to two years.

Consumers’ association Which? said the move was a “good step forwards”.

Richard Lloyd, executive director of Which? said:

“Our research has found that people taking out payday loans are often caught in a downward spiral of debt.”

“So it is important that the Office of Fair Trading will have the power to instantly suspend the credit licences of unscrupulous lenders caught breaking the existing rules.”

The OFT’s powers will stay in place until the regulation of consumer credit businesses is transferred to the new Financial Conduct Authority in April 2014.

The Consumer Affairs Minister, Norman Lamb, said:

“This will put a stop to those companies who exploit vulnerable consumers whilst dragging matters through a slow legal process.”

“It will also give a boost to legitimate businesses, with the swift suspension of unscrupulous traders.

“The new measure is part of a concerted approach to strengthen protection around consumer credit, including issues such as payday lending and debt management.”

In the past decade there have been numerous attempts by the OFT to regulate the rapidly growing “industries” of short-term money lending, loan-broking, debt collection and debt advice.

But despite clear rules of conduct being in place for a long time, the industries are still plagued by rogues who ignore the rules for as long as possible.

Lee Manning, of the insolvency professionals trade body R3, said the new power for the OFT should be applauded, saying:

“This will hit rogue companies who provide goods or services on credit, lend money, collect debts or help people with debts.”

“This includes payday loan and debt management companies who break the rules – they have arrived in force on the internet and on our High Streets, while regulation has been slow to keep up.”

Sarah Brooks of Consumer Focus said:

“Companies under threat of losing their consumer credit licence have no incentive to improve their behaviour and some use the appeal process to gain more time to cash in at their customers’ expense.”

“It isn’t often that the regulator resorts to taking away licences, but it is a vital tool to have if it feels firms are not playing fair with their customers.”

Source: Debt Collection News

Tags: Debt Advice, debt collection agencies, debt collectors, debt management, Government, office of fair trading
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New Credit Ratings Rules ‘To Help Markets’

Wednesday, June 20th, 2012

Tighter controls on credit ratings agencies should steady volatile markets and cut out conflicts of interest, MEPs have said.

A plan approved by the European Parliament’s Economic and Monetary Committee now triggers talks with EU governments and the European Commission on the final terms of new legislation designed to curb agencies’ powers.

Italian socialist MEP Leonardo Domenici, who steered the proposals through the Parliament, said: “The debt crisis in the eurozone has demonstrated that credit rating agencies have gained too much influence on the financial markets to the point of being able to interfere in the political agenda. We need to restore a balance here.

“Credit rating agencies should provide an information service to investors and consumers. We don’t expect them to give political opinions. Their work should respect rules on quality and transparency but should also be subject to a system of liability.”

The European Commission threatened a crackdown last November because a series of ratings downgrades by the main agencies at key moments in the unfolding eurozone crisis were seen as worsening the drama.

EU Financial Services Commissioner Michel Barnier said more competition was needed in the sector, with more accountability by agencies for any mistakes. He even suggested banning such agencies from downgrading countries in the eurozone bail-out scheme.

The draft accord falls short of that but says that as sovereign debt ratings can affect the credibility of nations and increases their borrowing costs, the agencies’ pronouncements should reflect national situations and avoid comment on policy changes.

MEPs also want to force agencies to publish annual timetables of dates for publishing its sovereign ratings, to give countries time to prepare for them. But Conservative MEP Ashley Fox warned that a fixed calendar for issuing ratings would make markets more “twitchy”. He said:

“The commission and some MEPs have sought to overstretch the EU’s reach into areas where it is not needed and, at the same, failed to deliver the obvious and limited reforms which could have made a real difference.”

While he successfully talked down efforts to ban agencies such as Moody’s, Fitch and Standard and Poor from issuing unsolicited ratings at all, Mr Fox said the rest of the proposal was a “wasted opportunity.”

The agreed compromise would force them into a strict reporting calendar, adding “needlessly” to market volatility around the report date. The EU would also create its own credit-worthiness authority, a move Mr Fox said would lack independence and therefore credibility.

Source: Press Association

Tags: Banking, credit rating, EU, Europe, Government
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Government Neglecting Small Businesses

Thursday, May 24th, 2012

A recent report by the Growth Factory has revealed that many small businesses are being neglected by the Government.

The Growth Factory report was published today by a group of influential Conservative backbenchers and is calling for promotion of start-up loans for small businesses as part of a series of initiatives designed to encourage economic growth.

Personal asset lender, borro, welcomed the move but suggested that there were viable alternative lending streams also available.

Paul Aitken, CEO of borro, said:

“Britain’s small businesses have been neglected by the Government and the high street banks for too long. While we welcome the calls laid out in the ‘Growth Factory’ report, the reality is that lending targets have not been met and many SMEs are swimming against the tide for survival.”

“It is vital that over the coming year small businesses are able to access the finance that they urgently need while avoiding the high levels of red tape that currently exist. The future well-being of the economy depends on these companies achieving their goals and securing growth.”

“At borro we are seeing increasing numbers of small business owners securing loans against their personal assets to help maintain and grow their business. We have seen a 308% increase in loans funded for Q1 2012 versus the same period last year, with small business owners making up over 60% of our customer base. ”

“With their average loan value rising 17% from £17,000 to £20,000 in the first quarter of this year, it is clear that small businesses are taking advantage of the alternative funding opportunities available to them.”

Tags: borro, Government, growth factory, small businesses
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SME’s to Recieve Financial Support From Government

Thursday, June 16th, 2011

Small and Medium sized enterprises (SME’s) are to be given access to a new range of government backed financial schemes which will allow access to a variety of loans and grants.

There will be initially two main UK-wide initatives, the Enterprise Finance Guarantee (EFG) scheme and Enterprise Capital Funds (ECFs), alongside a range of separate programs in England, Scotland, Wales and Northern Ireland.

ENTERPRISE FINANCE GUARANTEE SCHEME

EFG was set up by the former Labour government to encourage more bank lending to SMEs.
Under the scheme, the government guarantees 75% of an SME’s bank loan, with the lenders covering the remaining 25%.
It is open to companies with an annual turnover of up to £25m, and loans from £1,000 to £1m are available, repayable over 10 years.
Firms can seek to use EFG to access new loans, refinance existing loans, convert overdrafts into loans, gain a new overdraft or extend a current one, and cover cash flow shortages.
It is available for all sectors of the economy except the coal industry.
However, there are partial restrictions in the agriculture, financial, education, forestry, insurance, and transport sectors.
In November 2010, the coalition government announced that EFG would continue for the next four years, making about £2bn available.
It aims to help 6,000 SMEs each year access capital.
Companies seeking to gain an EFG-backed loan due so via their bank.
A guide to the full terms and conditions of the EFG scheme is available from the Department for Business website.

ENTERPRISE CAPITAL FUNDS

ECFs are government-backed venture capital funds that aim to invest in fast-growing SMEs.
Established in 2006, £150m of public funds have been invested in the scheme so far.
And the coalition government announced last month that a further £200m would be made available over the next four financial years.
Organised by government agency Capital for Enterprise, the government now invests in nine venture capital funds, having a stake of up to 67% in each fund.
It is to one of these funds that SMEs need to approach to make an application.
The current ECFs are: Amadeus Enterprise Fund, Catapult Growth Fund, Dawn ECF, IQ Capital Fund, MMC Ventures ECF, Oxford Technology ECF, Panoramic Growth Equity, Seraphim ECF and the Sustainable Technology Fund .
Although open to SMEs in most business sectors, it is typically hi-tech companies that make successful applications.
In exchange for a stake in their business, SMEs can access million of pounds worth of investment, typically over a 10-year period.
After that time, they have to pay back the funds plus interest.
Companies making the following products cannot seek ECF investment – synthetic fibres and yarns, motor vehicles, shipbuilding, steel, coal, agricultural and fisheries items.
Transportation firms are also ineligible.

OTHER ENGLISH SCHEMES

At the end of November the coalition government launched the Regional Growth Fund.
While available across the whole of England, it is specifically designed “to help those areas and communities that are currently dependent on the public sector make the transition to sustainable private sector-led growth and prosperity”.
So areas such as the North East are likely to be in the driving seat for successful bids.
A total of £1.4bn of funds – grants, loans and loan guarantees – will be available from 2011 to 2014.
The aim of the scheme is to support projects “with significant potential for creating long-term private sector led economic growth and employment”.
SMEs and larger companies will be able to apply on their own, or in partnership with other firms and/or public sector bodies.
The minimum bid threshold is £1m, and more information on the scheme – and how to apply – is available from the Regional Growth Fund page of the Department of Business website.
Local authorities also usually have grants available for small firms, as do the nine English regional development agencies, who can also advise on what European grants may be available.
However, the regional development agencies are to be abolished by March 2012 at the latest.
They will be replaced by a new Local Enterprise Partnerships, which will be partnerships between local authorities and business groups.
When established, these will take over the business support roles of the regional development agencies.
In addition, SMEs in England can get a full range of advice on what financial support is available to them by contacting Business Link – the government advice service for English companies.

OTHER SCOTTISH SCHEMES

For details on all the various finance schemes available in Scotland, the first port of call is Business Gateway, the Scottish government’s business support agency.
Specific initiatives in Scotland include innovation grants available from Scottish Enterprise.
And like in England, grants are also available from local authorities, and via European Union funds.
SMEs in the north of Scotland and its islands, should also contact the Highlands and Islands Enterprise.
This assists by investing in the development of strategic industries, product and market research, and in pilot projects.

WELSH SITUATION

In Wales, the Welsh Assembly Government itself takes the lead on business support matters.
The business support page of its website lists all the forms of government-backed grants and loans available for Welsh SMEs.
Further, its subsidiary body, the Welsh European Funding Office, offers in-depth advice on applying for European Union finance.
Local authorities across Wales can also provide details of what grant schemes they operate.

PICTURE IN NORTHERN IRELAND

Information on additional government-backed finance schemes in Northern Ireland is provided by Invest Northern Ireland, Northern Ireland’s regional economic development agency.
In addition to its own website, it operates nibusinessinfo – Northern Ireland’s online business advice service.

Tags: financial support, Government, grants, Loans, SME's
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Government Struggling to Recover £1.85bn in Benefits

Thursday, March 18th, 2010

The government has made overpayments to 1.6 million people through the benefits system and is struggling with debt recovery of £1.85bn that it is owed, a report from a committee of MPs concludes today.

Families on low incomes are being forced into debt to pay back the cash, the Commons spending committee said.

Some 50,000 people owe £5,000-£10,000, 23,000 owe £10,000-£20,000 and 8,600 owe more than £20,000 to the government after mistakes in the payments system.

The most common error is failure to reduce payments after claimants’ earnings increase but the scale of the inefficiency in the system is revealed by the fact that hundreds of thousands of people have experienced more than one mistake.

The report from the public accounts committee is released as the government receives an unexpected pre-election boost this morning as the number of people claiming unemployment benefit posted its biggest fall since 1997.

Ministers will today announce further work placements to help young people into a career.

The rising numbers of people indebted by the benefits system is a result of the government getting better at identifying where people have been overpaid – suggesting that millions has gone unaccounted for in the past.

While the amount of money reclaimed is also increasing, it is not keeping pace with the soaring level of debt identified. People are also increasingly struggling to repay the money in the recession.

In 2007-08 some £9.3m in small overpayments were written off because the amount was too small to spend the money retrieving the cash.

In contrast some 8,600 people face the most serious debts of over £20,000. Ministers are considering selling off some or all of the debt to the private sector, but the MPs on the committee warn that any sale should include safeguards for the welfare of vulnerable debt collection customers to avoid debt collectors or bailiffs cracking down on people who have been unwillingly overpaid.

The department does not have a reliable mechanism for assessing what level of debt recovery repayment people who have been overpaid can afford, leaving the process open to abuse, the report says.

Edward Leigh, the chair of the committee, said: “The current economic malaise is only likely to make worse the rate at which debt can be recovered.

“If the department is to deal with this rising trend in benefit debt, then it has to improve the way it approaches the prevention of debt. It should also review its procedures for validating claims for income support, a benefit which is particularly susceptible to big overpayments. It needs to set targets to reduce the debt owed by claimants with multiple and high-value debts, as well as targets for the difficult process of recovering money from claimants who regularly move on and off benefits.”

Theresa May, the shadow work and pensions secretary, said: “Labour need to get a grip. It is unforgivable that while taxpayers are tightening their belts the government is racking up more debt through poor administration. These figures are symptomatic of a benefits system that isn’t working.”

A DWP spokesperson said: “The report recognises that DWP’s debt management operations have improved, with recovery increasing from around £180m in 2005-06 to over £280m in 2008-09. Additionally 97% of the benefits paid out in 2008-09 were paid out correctly.

“Our new task force will address debtors who owe the department over £10,000 and we can take them to court if necessary. However, we accept that there is more we can do and so we will consider the committee’s recommendations carefully.”

Jim Knight, the employment minister, will today unveil the latest 7,000 jobs for 18-24-year-olds under the Future Jobs Fund, which pays employers up to £6,000 to take young people on. The new positions include jobs as sports coaches, youth workers, solar panel installers, and classroom assistants.

Tags: Benefits, debt collection, debt recovery, Government
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