Middle Income Earners Resorting To Payday Loans

Soaring living costs have led middle-income earners to turn to payday loan providers to make ends meet.

These providers give loans to customers who run out of money to pay for their daily expenses, and will be paid back once their borrowers receive their next paycheck. On average, customers borrow £300, according to one leading firm, Instant Loans Direct.

To qualify, an applicant must first have a job and a bank account. Once successful, the money will be transferred to the customer’s account within minutes.

However, customers should be forewarned of its enormous rates if they pay late. These kinds of loans make big money through exorbitant fees, so paying on time is recommended to avoid any charges from rolling over to the next month. Payday loans must be paid back within a couple of days to a month.

Most of these customers are earning well above the average income, which is between £25,000 and £50,000, but, because of punishing costs in food, gas, electricity and petrol, customers are often cash strapped – leaving them with no other option but to seek help from payday loan providers.

Payday loan companies are certainly benefiting from the financial crisis, as the industry is growing. The business is estimated to have a £1.2billion value.

According to the Consumer Finance Association (CFA), people between the ages of 25 to 45, make up 70% of their clients, mostly single, and about a quarter are married.

Giles Scouts from Instant Loans Direct tells, that “It’s actually the middle-earners whose budgets are being bust and who need the cash most desperately to cover them, usually for ten days until payday.”

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RBS Bans Basic Account Customers From Using Rival ATMs

Royal Bank of Scotland (RBS) has barred its basic bank account customers from using competitor ATMs.  RBS and Natwest customers will only be allowed to withdraw from the bank’s own machines, Tesco’s and Post Office machines because the cash-strapped bank can no longer afford to pay for interchange fees charged at 20 or 30 percent “It is unsustainable for us to offer free access to other bank ATMs for basic accounts as we face a charge per bank transaction, which needs to be recovered elsewhere” said an RBS spokesperson.

Which? Policy adviser, Dominic Lindley, states, “If other banks follow RBS’s lead, we could end up with a scenario where some free-to- use machines are under threat.”

This “cash machine war” has raised concerns that loss of access to free ATMS may increase the number of fee-charging machines in areas where people have low incomes, like hospitals and universities. A recent report revealed that some of these ATMS have been placed in deprived areas.

Fears have heightened that these basic accounts, which were a forced movement by banks in 2004 to aid “unbanked” customers, would become increasingly unappealing, and would push customers to go back to cash-based transactions.

Previously, RBS initiated free ATMS in 300 communities who have no access to them. The bank declared its “commitment to offering free basic accounts for people who may otherwise struggle to access banking services” and promising account holders “continued free access to one of the biggest cash machine networks.”

However, the bailed-out bank had made a U-turn because of its huge hit from payment protection insurance (PPI), and its latest exposure to the Greek financial crisis.

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UK Economy Slowest Among G7 Countries

New reports released on Tuesday reveal that the UK’s economic growth remains the slowest among other members of industrialized G7 countries.

The Organization for Economic Cooperation and Development (OECD) showed 0.7 percent growth in the second quarter of 2011, placing it almost at the bottom of the rank.

The country is also joined by tsunami-striken Japan whose economy was reduced by 0.9%. By contrast, Germany’s economy is fast growing at 2.7 percent.

The report points to unrelenting inflation and weak pay growth as causes for the weak economy. Consumers are cutting down heavily on their costs.

Recent news shows that the country is facing the hardest budget squeeze than the recession in 2009. Continued soaring of prices, along with record-high debt levels, led to nearly 40 percent of families to suffer a decline in their finances.

This is bad news, considering consumer spending was just on its way to recovery last year.

Growth remains destabilized across the 34 developed countries, which are part of the organization. For the fourth consecutive time, growth went down from 0.3 percent to 0.2 percent.

The think tank stated that the Eurozone countries that were badly hit by the slow growth of 0.2 percent, compared to 0.8 percent in the previous three months.

The dreadful news only adds up to fears about the global economy as an increasing number of countries struggle to manage their mounting debt.

The international organization did not include a report for the BRIC nations comprised of Brazil, Russia, India, and China, which are outpacing most developed countries with their economic growth.

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How Much Tax Do We Really Pay?

A study revealing the truth about taxation shows that taxpayers are actually paying more than how much the headline rates say. The headline rates actually conceal the real quantity that taxpayers contribute to the government.

The report, entitled, “How Much Tax Do You Really Pay,” is headed by one of Britain’s leading think tanks, the Center for Policy Studies. The organization had been calling the Chancellor to get rid of the 50% top income tax rate, and unify the tax and National Insurance, in the interests of transparency.

A spokesman stated, “We should stop talking about a 20, 40 or 50 per cent tax band and accept that the real marginal rates are much higher.”

According to the study, when basic rate payers put in money to National Insurance, they actually pay a real tax rate of 32%. Higher tax rate payers are charged with 42%, while those who receive between £100,000 and £114,950 would pay more with 62% and top rate taxpayers will give 52%.

What a big rip off!

All the money collected goes to the National Insurance to cover pensions and the National Health Service, but it is time they now for greater transparency in as families residual incomes are becoming more and more stretched.


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Unemployment Figures Continue To Rise

Economic recovery is gloomy, as the National Statistics Office (NSO) revealed unemployment grew by 38,000 to 2.49 million in the first quarter, according to official figures.

Among the gender group, women were badly hit, with 21,000 reaching to 1.05 million, who were unemployed during March to June. In total, redundancies among females increased by 32,000 to 154,000 in the first quarter.

The number of jobless youth, on the other hand, rose over the first quarter by 15,000 to 949,000 (20.2% aged 16-24). Job site Totaljobs.com director, John Salt, is concerned for the fresh wave of graduates and school leavers who will enter the jobs market for the first time, but is accepting the event as an inevitable consequence of the “recent decline in output in the UK manufacturing industry.”

The data also shows a growth of redundancy benefit claims in the last month from 37,100 to 1.56 million, the biggest since May 2009. The data also shows a rise of employment by 25,000 reaching 2.97 million, however, through part-time jobs. More and more people are finding it hard to look for a full time job, and will have no other options but to do part-time work, which reached 1.26 million in the first quarter.

Meanwhile, the number of job vacancies went down by 22,000 to 449,000 over the quarter, the lowest record since the previous three months to November.

Pay also rose by 2.2 percent, mainly from the private sector, the study shows. Last year, total wages plus which includes bonuses, grew to 2.6 percent from 2.3 percent in the last quarter.

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Household Budgets Continue to be Stretched

This week’s Inflation data is predicted to reveal that household budgets will continue to be stretched as sustained inflation, muted wages and high unemployment show very little sign of recovery.

Salaries are still expected to lag behind soaring living costs, and the labor market will further decline.

Earlier this month, Sir Mervyn King, the Governor of the Bank of England, had warned of a “long and deep squeeze in real living standards” that will stretch further into 2012.

Wages dropped in 2010 for the first time since the largest budget squeeze in 1982, and is threatening to plunge again this year.

Inflation is overtaking pay rises, while the deteriorating demand for labour is limiting the workforce’s bargaining power.

Professional Auditory Services firm, KMPG, states that Britain’s economy is “getting gloomier,” and that “There was no real reason to think that earnings are going up” because “they are still pretty well stuck.”

Meanwhile, unemployment is rising. The claimant count of jobless people rose by 24,500 to reach 1.52 million, while the broader labor force poll dropped by 26,000 within the months of February, March, April to May.

The figures for the average weekly earnings, also predicted to show gloomy reading, are soon to be released on Wednesday.

Europe’s growth data, is predicted to show an extreme slowdown in the currency.

Analysts predict only a 0.3 percent growth in the embattled eurozone economies for the second quarter. Capital Economics, an Independent consultancy firm, states, “the recovery is faltering.”

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Nationwide Offers PPI Alternative

Nationwide Building Society is the latest financial firm to offer an insurance alternative to payment protection insurance (PPI).

Known as the Lifestyle Protector, the product offers short-term protection to consumers in the event of unemployment, accident, or sickness. The maximum redundancy cover is £2,000. Customers are directly paid the benefits, which includes a £30,000 life cover.

Underwritten by Pinnacle Insurance, Policy holders are covered their mortgage, rental and utility bills as well as gym membership fees.

Customers are given the option to choose a waiting period of 14, 30, 60, 90, or 180 days and can stretch the amount when necessary.

Freshly launched last week, the Lifestyle Protector is offered under two terms; a six and 12-month term, and allows a maximum monthly benefit of £2,500 (an equivalent to 60% gross monthly earnings).

For one to be eligible to apply, He or She must be a resident of the UK, aged between 18 to 65, and must have worked, for a continuous term of six months, during the beginning of the policy, for the same employer, for at least 16 hours a week.

Lifestyle Protector offers similar services to the (notoriously mis-sold) product, but with more flexibility, says the building society. Unlike PPI, the product “tailors the benefits of customers according to what they need,” and will only be offered in Nationwide branches instead of independent financial advisors.

It can also be availed on advise and non-advise basis which will be made through telephone.

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Chancellor Confident UK Banks Are Srong Enough to Survive Economic Turmoil

Chancellor George Osborne has said British banks are now strong enough to withstand what he called, “the most dangerous time for the global economy since 2008” as fears from the American and Eurozone debt crisis caused massive uncertainty in the global stock markets.

Osborne is confident the banking system is tough enough to survive the worst turmoil in the financial markets since the demise of global financial services firm, Lehman brothers, in 2008.

Mr. Osborne states, “British banks are sufficiently well capitalized and are holding enough liquidity to be able to cope with the current market turbulence.”

He also said European leaders should think of a solution to the crippling debt crisis that has already affected many European countries.

In addition, he states, “Individual countries must deal with their deficits, make their economies more competitive and strengthen their banking systems…Existing eurozone institutions need to do whatever necessary to maintain stability.”

He commended the European Central Bank for looking into the bond market in order to guard Italy and Spain from falling next to the debt crisis.

The chancellor requested “greater fiscal integration” and believed euro bonds and other guarantees should be taken into a more serious consideration and “must be matched by much more effective economic governance in the eurozone to ensure fiscal responsibility is hard wired into the system.”

The chancellor wants to protect its nation’s national interests. It will be dangerous for Britain if the euro will break up…which is why he urges need for a greater fiscal integration among European countries.

He also fears that unnecessary levels of debt around the world would make Britain’s economic recovery much “harder and longer.”

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London Riots – Will We All Pay The Cost?

What started as a ‘peaceful protest’ in a corner of Tottenham, has turned into mindless violence and anarchy across the whole country.  After a third night of rioting, looting and arson, the violence has spread to other cities across the UK, including Birmingham, Nottingham and Liverpool.

I’m failing to understand why this is happening… it’s a few opportunistic parasites that have taken what happened in Tottenham as an excuse for playing out some weird real life version of’ ‘State of Emergency’ or ‘Grand Theft Auto’…. all that destruction, and for what???

When the dust settles, what will be the cost of repairing the damage to property, repairing the damage to the reputation of British youths and repairing the psychological damage done to those who have become innocent victims of the violence?

Fortunately, most home and commercial insurance policies will cover the damage to property and loss of possessions, and will also cover the cost of accommodation or some loss of earnings. But we’ll all have to foot the bill as out insurance premiums will increase as the insurers try to recover the costs.

No matter how I look at it, there is no justification for the type of violence and destruction we’ve witnessed over the past few days. I saw an interview on BBC News this morning where a member of the public was stating that this is a result of the Met Police singling out black youth’s for spot checks… he likened that to harassment and said it’s why the youths are fighting back…. really… why are these people allowed on television?

There is no justification for this behaviour…. especially for those who are 200 miles from London.


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Lloyds and RBS Face Another Decade of State Ownership

City analysts have warned that Lloyds Banking Group (41% tax-payer owned) and Royal Bank of Scotland (83% tax-payer owned) could remain in state-ownership for another decade…. not sure how to take that – RBS is the 4th largest lender in the world so could yet prove to be a great asset but could also become a huge liability if it fails to collect on it’s outstanding loans.

Uncertainty with regulation plus diving stock markets have contributed to the downgrade of the two lenders’ shares, well below the point where taxpayers can see a return of their money through a sale of both banks’ assets.

Analysts are expecting the Independent Commission on Banking (ICB) will tell both lenders to separate their investment and retail arm, which could possibly heighten concerns about the banks’ profitability, considering the pressure being added by the global economic turmoil.

An economist stated, “There’s a lot of concern about exposure to Europe. It will be years before taxpayers get their money back. It’s a little pessimistic to say a decade, but you shouldn’t discount it.”

Earlier this month, RBS chief executive Stephen Hester blamed leaders in the US and Europe for not showing capacity in handling the financial crisis. European countries have all seemingly fallen into debt one by one (with Italy becoming the latest member).  Both banks’ exposure to the European crisis, particularly Greece’s big debt problem, has pushed them into the red as Lloyds posted a £3.3billion loss, and RBS declared a £1.4billion pre-tax loss.

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