See the latest IBAS Comments on banks and banking

Controversial payment protection insurance (PPI) should not be sold to a customer within 14 days of being sold a loan , the Competition Commission says.

Of course the BBA have objected but customers have been ripped off for too long and vulnerable people most of all - IBAS endorse the Competition Commission's actions. One banking rip-off is closed down - at last. - 13th November 2008

Jack Straw, the Justice Secretary, has ordered an investigation into a legal loophole that allows lenders to repossess a home without a court order. The inquiry was announced in response to a High Court ruling that supported a decision by GMAC-RFC, the General Motors mortgage lender, to sell the property of a borrower who was in arrears. It confirmed that mortgage lenders could sell a property without a court repossession order if a borrower fell two months into arrears. - 11th November 2008

FSA consults on regulating retail banking conduct of business - The FSA is inviting responses by 16 February 2009 for it's proposals. If you've had a banking complaint and attempted to get the BCSB to do something about and failed - then here's your opportunity. - 05/11/2008

REPOSSESSION threatens half a million homeowners according to the Bank of England but new Government rules should better protect those falling behind with mortgage repayments. The new legal guidelines, coming into force on November 19, state that lenders must explore options to help people stay in their homes. These may include extending the loan term, changing the type of mortgage by perhaps switching to an interest-only deal, deferring payment of interest, or adding arrears to the overall loan. However, under the new arrangement, sub-prime lenders who are not members of the Council of Mortgage Lenders are excluded.- 30/10/2008

Now that the 'dust is settling' on what has been a memorable week - in which banks were 'rescued' from the brink of bankruptcy, it is worth looking back to see where this mess has built from and why banks become so hated and how they protected themselves and were also protected by others from increased regulation. The lack of proper regulation is what we are all going to be paying for now. - 14/10/2008

Early overdraft victory for banks -  Banks have largely won the latest round of a High Court battle over the fairness of overdraft charges. Judge Mr Justice Andrew Smith says most customers will not be able to use common law to challenge bank charges levied mostly between 2001 and 2007 - 09/10/2008

Fraudsters target bank accounts  -The credit crunch is causing identity fraudsters to target bank account holders, a report says. The all-party parliamentary group on identity fraud says thieves are finding it more difficult to use fake identities to open new accounts because of restrictions on credit. The group warned that fraudsters are now targeting existing accounts. One scam involves a bogus e-mail from Revenue and Customs, asking for bank account details to receive a tax rebate. - 08/10/2008

The banking industry's incompetence, mismanagement, greed and recklessness, have finally burst the bubble of continuous profit making from ever increasing consumer debt. The full losses from sub-prime lending woes, whilst already huge, are still not yet fully revealed. What does this mean for banking consumers? UK Banking consumers will now inevitably own the Northern Rock because Nationalisation is the only option left which can repay the huge bank guarantee from the Bank of England. IBAS believe that Banking consumers will be left ‘shouldering the weight’ of multiple failures in the banking systems and the financial pain caused by bankers incompetence, mismanagement, greed and recklessness over the last decade, which will result in global financial pain which will cause  damage for a long time to come.

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The Financial Ombudsman Service (FOS) has called on regulators to take more action to stop the mis-selling of Payment Protection Insurance (PPI) - 10^th September 2008

In the UK the FSA have published The UK Financial Risk Outlook 2008. It is a bleak forecast, which states that nearly one-fifth of those who took out a mortgage between April 2005 and September 2007 risk property repossession. This represents a 1.04 million group and includes those who took out their first home loan, and those who remortgaged from one deal to another. All these customers, who have borrowed at a time when property prices were soaring, have two or more of the FSA's three 'high-risk' factors.

The factors as stated by the FSA are:

1) Putting down a deposit of 10 per cent or less on a home.

2) Taking a mortgage for longer than 25 years.

3) Borrowing more than 3.5 times the customer's annual salary.

The FSA is particularly worried about 150,000 who have all three high-risk factors as these are the most likely to have their homes repossessed, the FSA has said in it’s annual Financial Risk Outlook.

The CML forecasts for repossession in 2008 are already quoted as being much higher than the 27,000 for last year and that was the highest since 1999. But, in our opinion everyone who has a mortgage, savings or investments should read the FSA Report. It is not just for those who are over indebted and who will obviously find it harder to remortgage this year.  

All lenders will be looking at each new lending application and new criteria will apply, to protect the lender from more problems from what they perceive as ‘over borrowing’ consumers. 

A `good risk or bad risk' tag is not historic in times like these. Lenders will reassess a consumer’s ability to repay and many will find they are considered a poor risk now, even though they have not reneged on any past borrowing commitments.

IBAS see 2008 as being a very difficult year for all banking consumers. This is not just based on the incredibly large value losses, initially created by sub-prime lending failures in the US. Huge losses are evident as ‘fall-out’ from sub-prime lending problems which have spread to become global issues. The really frightening aspect is the speed with which the ‘fall-out’ has impacted into global financial losses and  sparked global market crisis.

IBAS believe it is impossible to imagine that the huge values of the losses (so far evident) will not impact on each and every one of us within the next twelve months.  

Our major concern is that the small business community will inevitably be the first to see a large ‘shake-out’, as banks actively seek assets, which they can liquidate in order to lower the bank’s own exposure to debt, whilst also providing additional liquidity for the bank.

The Business Banking Code will not protect your business from being asset stripped by a bank, nor will it assist you in any repossession hearing when your family home is pledged to the bank and the bank then demands immediate repayment of all business borrowings.

Business borrowers are contacting IBAS because there is now more pressure on them from their bank and those with personal guarantee problems are citing pressures on overdraft borrowings. Both show that Banks have started to re-evaluate their loans and lending portfolios for small businesses.

Banks will continue to assess their lending against assets already pledged for business lending and will be making internal decisions on whether bank support will continue to be provided, if not, when demand will be made for repayment. The bank may request more and bigger assets to be pledged, whilst they decide (internally) if the bank will allow a business to continue, over the short term and at what cost.

When banks targeted small businesses and their assets relentlessly to bolster their own balance sheets in the early 90’s the catch phrase often used was ‘Cash is King’. It is likely that the same phrase will be repeated again and many times over, from now on.

In the last recession IBAS gathered a great deal of banking information and knowledge of banking systems which taught us a great deal about banks and their ability to protect themselves. We also found that some banks were much more likely to act early, to use small businesses as a ‘cash cow’ for their bank’s own purposes. But, from what we are now seeing the bank ‘shake-out’ or ‘shake-down’ of small businesses has already started. - 17th February 2008 by Eddy Weatherill - Chief executive, Independent Banking Advisory Service (IBAS).