PPI Claims Figures Released by the Financial Ombudsman

According to recent figures released by the Financial Ombusdman Service (FOS), Barclays was the most complained about bank in the last six months of 2011, with nearly 12,000 complaints brought by it’s customers. The bank, also topped the FOS’s list for the highest number of payment protection insurance (PPI) complaints, 99% of which were found in claimants favour.

Latest figures released by the FOS show that 84% of cases brought against Barclays generally were upheld by the ombudsman - compared with an average of 72%from the other banks.

Barclays, which agreed to set aside £1 billion to cover mis sold ppi claims, issued figures last week showing a 67% increase in the total number of complaints received by its general insurance and protection business in the second half of last year (2011).

The bank previously has previously stated that excluding the PPI claims figures, the total number of complaints actually dropped by 29% in yer on year compared with 2010 and has said that tackling complaints has become a “top priority”.

Some of the other banks did not fair much better, as a huge 99% of PPI complaints involving MBNA Europe Bank and Lloyds TSB Bank were also upheld in favour of the customers, while the uphold rates for Lloyds Banking Group divisions Black Horse and Bank of Scotland were almost as high at 98%.

There were however, some large disparities between the banks in terms of the percentage of PPI claims upheld, with only 7% involving the Nationwide Building Society being resolved in customers’ favour.

The ombudsman has said it generally sees large a volume of complaints when banks either do not have the resources in place to deal with the complaints or when they are not handling the complaints properly.

10 most complained about banks according to the FOS, with the number of complaints and the uphold rate:

1. Barclays Bank, 11,524, 84%

2. MBNA Europe Bank Limited, 9,185, 94%

3. Lloyds TSB Bank 7,467, 87%

4. Bank of Scotland, 6,082, 76%

5. Santander, 5,439, 55%

6. Capital One (Europe), 5,375, 12%

7. Black Horse, 5,252, 93%

8. HSBC Bank, 4,430, 80%

9. Nat West Bank, 2,737, 85%

10. Nationwide Building Society, 2,513, 12%

10 complained about banks for PPI according to FOS figures, with the uphold rate:

1. Barclays Bank, 6,975, 99%

2. MBNA Europe Bank, 5,377, 99%

3. Capital One (Europe), 5,057, 11%

4. Black Horse, 4,999, 98%

5. Lloyds TSB Bank, 4,257, 99%

6. HSBC Bank, 2,813, 87%

7. Bank of Scotland, 1,954, 98%

8. Nationwide Building Society, 1,778, 7%

9. Clydesdale Bank, 1,336, 57%

10. HFC Bank, 1,078, 93%

Most complained about banks with the number of complaints made to the FOS:

1. Lloyds, 20,310

2. Barclays, 12,273

3. MBNA, 9,903

4. Royal Bank of Scotland, 6,553

5. Santander UK, 6,202

6. HSBC, 6,190

7. Capital One, 5,375

8. Nationwide, 2,513

9. National Australia Group, 1,829

10. Citibank, 1,572

Increased Tax Rate Fails to Improve Revenues

As the government faced greater spending cuts, David Cameron’s predecessor decided to increase the marginal tax rate. In theory, this was supposed to help the government substantially improve revenues so that they wouldn’t have to implement austerity measures to the same degree.

To Cameron’s disappointment, the increased marginal tax rate is unlikely to create the rebound in revenues that many people were expecting. In fact, it appears that the increased tax rate has actually decreased revenues by about 5%. The filings that were initiated on January 31 show that revenue is down almost half a billion pounds.

This months reports are the first indicator that Cameron and the Inland Revenue Service have to decide how effective the tax increase will be. The tax year will end on April, but the self assessment is due by the end of January report. Therefore, the first month of the year is the first time that the Inland Revenue Service can see what impact tax increases hold.

These figures indicate that Gordon Brown’s decision to implement these taxes has not yielded the promising results many hoped for. However, Cameron may face criticism from his own party for choosing to keep them in place.

The government doesn’t have many historical indicators to suggest that increasing taxes are going to have a major impact on revenues. Former Chancellor Lawson agreed to cut the tax rate from 60% to 40% nearly 30 years ago. The rate has not been increased since.

The biggest reason for the tax increase was to make sure the bankers paid for the damage they caused during the financial crisis. Cameron himself made a more unbiased statement, but many people insinuated that he felt the same way. Although the financial crisis initially originated on Wall Street by larger American banks, UK citizens haven’t felt any less animosity to their own bankers or held them any less accountable for their own mistakes.

One of the problems with the new tax system is that the richest citizens seem to have been able to shift their money overseas to avoid paying their taxes. This could be an indication to the government that they would need a new policy if they intended to make sure they could increase their tax revenue to any meaningful degree.

Unemployment Rate Among College Grads and GCSE Holders Equal

Traditionally, most people have gone to college with the expectation that it would improve their chances of getting a job afterwards. That perspective has been accurate for a long time. However, citizens who based their decisions on that data seem to be sorely disappointed.

New surveys from the Office of National Statistics have shown that the unemployment rate among college graduates and high school drop outs is now the same. Data from 2011 said that 20% of 18 year-olds who left school at the top of their class were unemployed, while the unemployment rate for all university graduates was 25%. The unemployment rate for those students who received a graduate certificate of secondary education was 26%.

These figures point a concerning perspective for the younger generation. Studies released last month found that the younger generation was forced to start their career later in life than previous years due to the financial challenges they have undergone.

However, the figures are significantly more encouraging for graduates who are 24 years of age or older. Also, college graduates in that age group have a little higher than their peers. About five percent of college graduates over 24 were unemployed, compared with seven percent who finished high school in the top of their class. About 13% of those with a GCSE were unemployed.

A spokesperson from the Higher Education Careers Services Unit said that the statistics need to be taken in their appropriate context. The number of students who left their high school at the top of their class was significantly smaller than the number who attended college. Also, even though the jobs market is struggling just as much as it was before the recession, most graduates are able to find work within six months.

Although there are some defining features in the report, these statistics foreshadow a number of challenges for the rising workforce. A new economic infrastructure will be needed to get them back to the pre-recession levels. However, the unemployment situation still isn’t as bad as it had been during the recession of the 1980s.

Stephen Isherwood stated his position on the importance of younger workers clearly deciding whether or not they should attend university. Rather than succumb to the idea that attending college is the best approach to take, they should try to understand the importance of creating a future for themselves that they are going to be able to be comfortable with.

Greece May Be About to Receive Second Bailout

The economic community is becoming even more concerned over the developments taking place in the Eurozone. Greece’s ability to avoid default depends on its ability to receive a second round of bailouts from the International Monetary Fund and the European Financial Stability Fund. A decision on the new round of bailouts is expected to be delivered on Monday.

According to Christine Lagarde, the new chief of the IMF, Greece has made very significant progress in putting itself back on the road to recovery and paying down its debt. However, she argued that more progress is needed and Greece will need another round of bailouts to recover from the financial burdens it is now facing.

Greek officials will have to meet later on Monday evening to decide what measures they will need to take for the banks to accept a voluntary haircut on their loans. This is one of the requirements before Greece will be able to receive another bailout. The new arrangement between the banks and Greece will involve a 100 billion euro cut on Greek debt.

The countries that are instituting the bailouts are also insisting on having more control over Greece’s budget. Although Greece has raised objections over being forced to implement new austerity measures, other countries argue that they are going to have to accept the terms if they have any expectation of receiving any more bailouts.

Despite its objections over some of the new measures, Germany said that Greece is willing to allow the money to be placed in a separate account rather than being handed directly the country’s treasury. This would give lender countries the ability to control when Greece received disbursements.

Greece has already begun to implement the austerity measures demanded by the IMF, EFSF and the lending nations. They made 325 million euros in additional spending cuts. This has proven to be highly unpopular for Greek citizens, who have already begun protesting on the streets of Athens. Regardless of how unpopular these austerity measures are becoming, they are a necessary part of the bailout package. They may prolong the depression Greece is currently undergoing, but without them Greece would have to deal with calamity of its first sovereign default.

What is the New Student Loan Repayment Plan and How Will it Affect Consumers?

The new regulations over student loan reform have created a number of challenges to both current and aspiring students. Many students were concerned over a new repayment plan that was proposed by Vince Cable, David Cameron’s Business Secretary. Cable’s plan called for a 5% penalty on all students attempting to repay their student loans before the end of the term of their loan. This idea was implemented with the intention of preventing wealthier students from escaping the interest payments they would otherwise be forced to make on 30-year loans.

That repayment scheme has since been killed. According to Guardian sources, Cameron has apparently negotiated a new arrangement with Cable whereby Cable will be able to decide who to appoint to be the University admissions tsar. However, it is also possible that the tens of thousands of people who protested the idea are also responsible for creating the support needed to strike down the bill.

Under the new plan, students will be eligible to receive £9,000 a year for tuition. They will also be given maintenance loans for housing, which will be higher for students living in London. Students coming from families earning less than £25,000 a year will also be eligible for a non-repayment grant of £2,906.

Students taking out loans between September 2012 and September 2016 will be charged 3% interest. However, they will not need to repay their loans until they have started to earn an annual salary of £21,000. After that point, students will be repaying their loans based on their salary.

Many parents are asking how to manage the finances most appropriately. They have been informed that it is best to apply for these loans first rather than taking out a personal loan for their children. The interest will be much lower on the student loans. Also, students are discouraged from investing their maintenance loans, because the interest they will be paying on them is likely more than what they will earn after putting that money into savings.

Most families are happy to hear that the repayment plan Cable proposed had been killed. Although Cable stated that the loan was intended to go after wealthier families, lower and middle class families were going to be hit hard by it as well.

However, it is unclear whether or not this arrangement worked out for the best, because Cameron will now give Cable the discretion to appoint Les Ebdon to the Office of Fair Access. Many people are concerned that Ebdon could be a serious liability to the country.

U.S. House Passes Insider Trading Ban

The United States House of Representatives has recently passed a new bill that is going to curb insider trading among lawmakers. The bill originated in the United States Senate and was signed a week before the House of Representatives approved it. The bill is now headed to the desk of President Obama, who has promised to sign it as quickly as possible.

The Stop Trading on Congressional Knowledge Act is intended to stop cases of financial fraud by individuals who have access to Congressional materials. However, the bill has been somewhat limited in its scope after some criticisms. Congress has removed a few words that stipulate that insiders in Washington will not be barred from selling information. Clearly, this creates loophole for many people who are interested in buying and selling information on Wall Street, but the bill is expected to be changed in coming months. At the very least, most people say it is a step in the right direction.

A provision is added into the bill which encourages Congress to impose new regulations on reporters and others who are closely tied to the ins and outs of Congress each day. A lot of controversy took place over the past few months after it became widely available that members of Congress were legally allowed to engage in insider trading. The theory was that because Congressional hearings are considered public then any information in such a hearing isn’t covered under the provisions by the Securities and Exchange Commission.

Republican House Majority Leader Eric Cantor is responsible for dropping a few of the provisions that were set forth in the Stop Trading on Congressional Knowledge Act. Many advocates of the bill assailed Cantor with accusations that he gave into the whims of bankers and large corporations on Wall Street. However, Cantor said such allegations were false. He said that his only concern was ensuring that they would avoid the possibility that they would create unnecessary impositions against people’s civil liberties.

A few other provisions in the bill also limited the type of information that Congress would have immediate access to. For example, lawmakers would be barred from having preferential access to information on new offerings and IPOs. The provision is named the Pelosi provision after the Senate leader. Pelosi’s husband had access to Congressional data and used it to engage in an IPO based on information that was not publicly available. However, Pelosi herself supported this provision.

Cameron Considers Tax Breaks to Hire Cleaners

Prime Minister Cameron has stated that he is considering offering tax breaks to people who hire cleaners. Although this may sound like an unconventional reform proposal to many people, he intends to use it to create jobs.

Cameron said that such a measure would encourage more women to enter the workforce and would create a new jobs for cleaners. In the long run, these tax breaks would add many more jobs to Britain’s struggling work force.

Cameron said that he got the idea while visiting Sweden, which had created a similar policy. According to Cameron, Sweden had improved their economy and built its workforce with the use of cheap labor.

However, the tax break in Sweden has been highly criticized. Many people have argued that it exists to provide tax breaks to the wealthiest figures in society.

The Swedish government argues that the new process has created about 5,000 new jobs. However, those figures don’t stand up to the voice of all critics. The issue they have is that far more wealthy citizens are likely to take advantage of the services than poorer citizens. In fact, the group that is by far the most likely to use these services is those who are earning about £5,000 or more a month.

In addition, it is unclear how many UK citizens would really benefit from the policies Cameron is proposing. According to the findings at the summit, most of the people who have benefited from the tax break in Sweden have been immigrants.

However, Cameron stated that his real goal was to create a more flexible working style for women so that they would be able to work alongside men in the workforce. This is important, because organizations seem to benefit more when they have men and women working together in the workforce.

Fredrik Reinfeld, Sweden’s Prime Minister, has had a profound influence on Cameron’s ideas in this summit. Reinfeld said that he felt encouraging more women to join the workforce would reduce the risk levels in a number of different fields such as finance. These feelings are likely to be supported by many feminists who have stated that the lack of women in the workforce played a role in the financial downfall of 2008.

Although many people find these proposals to either be interesting solutions or highly controversial, the policy will likely not be implemented for some time. Cameron is just giving some feedback on possible ideas and it is unlikely he will commit to anything right away.

Social Market Foundation Proposes Childcare Loan Program

One growing economic concern is that many parents are unable to return to work due to their inability to find dependable child care. As the government tries to get more people back on the payrolls, they are looking for solutions to any issue that could potentially keep them out of work.

Social Market Foundation has proposed a new solution. They argue that they should be able to borrow up to £10,000 pounds for childcare. As they earn more money, those wages would be deducted from their weekly paycheck.

This solution would not only make it easier to get parents back to work. Additionally, these loans would be a long-term investment in children’s development. The thinktank argues that this is the only existing solution to both problems. Also, this idea wouldn’t cost the government anything.

The report emphasized that many parents could not afford to pay for childcare. With this system, the payments they would make would be made according to their income. However, they are going to be making payments over long periods of time. For families with smaller incomes, that could mean a couple of decades.

Although these costs could still create a long-term burden for some families, they could potentially spare them the much more devastating burden of being forced into unemployment. According to one poll, about 25% of families living in the highest levels of poverty stated that they quit their jobs because they couldn’t afford the cost of child-care.

These loans would charge an interest rate of 3% above the rate of inflation. This would be more manageable to consumers than many of the other loans they could receive.

The study’s coauthor said that they do not feel this is ideal for families by any means, but argues that it is the best solution available. The government has been forced to make significant budget cuts and will not be able to afford more budget cuts in the coming years. Loans may be the only way many families can possibly find childcare, even if they come with an interest rate premium.

The SMF authors pride themselves on the fact that they have created a potential solution that will help families in a time when the government can’t lend the same helping hand it was able to give them in previous years.

Fred Goodwin Loses Knighthood and Causes More Turmoil for Banking Industry

The Honours Forfeiture Committee stripped Fred Goodwin of his knighthood on January 31, 2012. Goodwin led the Royal Bank of Scotland to financial turmoil which resulted in a massive bailout. However, his firm allowed a culture where extreme executive bonuses were allowed, even amid the banks facing serious losses.

Goodwin losing his honour is possibly the greatest shame he can face in his career. He now has to face the humiliation of other ousted knights such as Anthony Blunt, who lost his knighthood in 1979 after being ousted as a Soviet Spy. Blunt died four years later and was able to escape the fate of the hangman’s noose.

Although Goodwin may not as hated as Anthony Blunt, he is clearly not on anyone’s favorite person’s list. He was the chief executive officer of the Royal Bank of Scotland and his critics should that he disgraced the company with his leadership styles. The bank was founded in 1727 and has one of the most glorious histories of any bank in England. However, after Goodwin took over, the bank eventually needed the largest bank bailout in the nation’s history. The ire over the bonuses paid to executives has created even more controversy.

Goodwin attempted to expand the size of the bank through a variety of buyouts. However, his decisions didn’t pan out as well as he had hoped. In the end, the bank’s balance sheet amounted to nearly twice that of the entire British economy.

According to affidavits from the Financial Services Authority, Goodwin conducted deals of nearly 100 billion pounds without doing his due diligence. Some of the buyouts he engaged in consisted of data that consisted of a few folders and a CD. Investors and the FSA have gleaned this to be gross negligence. The buyout of ABN Holding NV forced Royal Bank of Scotland to face the largest loss any corporation ever experienced in the history of the UK.

Since the problems Goodwin caused, the government has taken a stake of over 80% in the bank. Stephen Hester has since been appointed to replace Goodwin as the head of Royal Bank of Scotland. Hester has also faced criticism for the role he has played in the crisis. However, he has made good on a few of his promises for reform thus far, including refusing a bonus of nearly 1 million pounds that was offered to him.

Goodwin and his colleagues still have some supporters. In a recent edition from the Economist, one writer described the situation as a witch hunt. The author (who’s name was not published on the article) stated that it was appalling that Goodwin was forced to surrender his knighthood while Hester has been condemned for corruption for merely trying to his best with a tough job.

Regardless of what position one may take on the issue, it is clear that the government is working even harder than ever to create new banking regulations to fight corruption. Whether or not it was necessary to strip Goodwin of his knighthood or not is beside the point. These efforts may be an indication that the government is ready to start taking a hard crack on banking reform and limiting the power banks hold.

Financial Reform

Monthly Archives: February 2012