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If a company makes a mistake, that doesn’t make it a monster…

If a company makes a mistake, that doesn't make it a monster…

If a company makes a mistake, that doesn't make it a monster…

If a company makes a mistake, that doesn’t make it a monster…

As it says at the top of the page, MoneySavingExpert.com is here to cut your bills and fight your corner, and we do our best to live up to that promise. As part of that, our forum, Twitter, Facebook and News pages are often filled with individuals who feel they have been horribly mistreated by companies both big and small.

I wanted to take a few minutes to explain my view on these issues. I often hear people who mistakenly believe that we’re here to ‘take down’ companies at any occurrence (sometimes this is said as a compliment, other times by businesses as an insult). Yet that simply isn’t true. I’ve always explained my stance as ‘the adversarial consumer society’ – in other words, a company’s job is to make money, as consumers, our job is to stop them. Yet I don’t believe companies are wrong to do so.

The best analogy I have for this is that as a Man City fan, when we play Man United, I desperately don’t want them to score, but I don’t believe they are wrong for trying to do so.

Looking at what happens when companies have mistreated a consumer is a subset of this. Things fall roughly into one of two bags…

  • When we’re all guns a blazing. If you look through the reclaims section of the site you will see articles about when businesses have systemically, deliberately and occasionally, maliciously mistreated customers. Here they’ve overstepped the line as to what is acceptable, and often the law.

    When that happens we are ‘all guns a blazing’, using all the firepower of our 15 million unique users, combined with media appearances to help people help themselves to get redress from those companies and the money they should never have had to pay out, back into their pocket.

  • When it’s just human error. Most problems with businesses actually tend to happen due to simple human error, or unexpected consequences. When people contact us about those, provided the firm says: "Oh, we are very sorry that was the individual operator" (and we can’t see any systemic problems). Or they say: "We didn’t realise that happened but we will put it right immediately, sorry about that". For me, that is usually it.

    I instruct my editorial and news teams that the latter isn’t really a story (with the odd exception of something that’s genuinely interesting in its own right). Providing the company puts it right, stops it happening again, and puts the individual back into the position they should’ve been in, we don’t cover it. You’d be amazed at how many stories like this we drop.

    I do occasionally note stories in broadcast or print media where you can see it was just an error but they go to town on it anyway, and I always find it uncomfortable so I don’t particularly want MSE to follow that line.

PS. Just to say, this isn’t a blog requesting you to send us your individual complaints. I’m afraid if you do we are nowhere near resourced enough to deal with them from millions of users, so most remain untouched. The main job of MSE is to aim to try and help you do it right in the first place. We aim at prevention more than cure.

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Why Wonga should pay £34,334,929,158 to everyone it sent false letters to

Why Wonga should be paying everyone it sent false lawyers' letters to £34,344,929,158 each

Why Wonga should be paying everyone it sent false lawyers' letters to £34,344,929,158 each

This week we’ve had the disgusting news that Wonga, in 2008 – 2010, thuggishly sent letters from fake law firms to scare people who’d defaulted into repaying. The FCA has ordered it to pay £2.6m in compensation, which equates to £50 for each customer affected. Sadly, there was no fine, as at the time these acts were committed, the FCA wasn’t regulating consumer credit.

For full details on this and what to do if you’re affected see the Wonga to pay £2.6m after threatening borrowers with fake lawyers news story and Is it just Wonga? Send us other fake letters campaign.

However, I don’t believe that penalty is enough, so I’ve tried to come up with a back-of-an-envelope formula for it.

It’s worth remembering who the people they threatened with these letters are:

a) They took a payday loan, which while not always, can be an indication of financial desperation.

b) They couldn’t pay that payday loan back, which is an even stronger indication of financial problems.

It’s worth remembering too the rigid and unbreakable link between mental health and debt. Those who have mental health problems are five times more likely to be in crisis debt.

Therefore, I think it’s fair to assume a significant number of the 45,556 people who were bullied in this way may have been vulnerable. They will have had their problems exacerbated and been caused fear or distress; which for me, means this compensation for near-fraudulent misrepresentation is small at £50.

Yet let’s set that as a benchmark.

If you were sent these letters in 2009, that’s when you were due the compensation. As you didn’t get it then, you’ve effectively lent Wonga the money.

So what rate shall we use to calculate what you should be owed now? Surely Wonga’s own representative APR of 5,853% is appropriate.

Here are my calculations…

How £50 compounds at 5,853% APR

After 1 year

£2,926

After 2 years

£171,288

After 3 years

£10,025,489

After 4 years

£586,791,887

After 5 years

£34,344,929,158

This shows after compounding that over five years, on average, people are owed £34,344,929,158 each (ie, £34 billion).  

Of course, if you got your letter in 2010 it wouldn’t have compounded anywhere near as much. You could be owed just a few hundred million quid.

Wonga – stop spending money on marketing yourself as righteous, and be righteous.

Before Wonga tries to pick holes in this, let me say I acknowledge this calculation is not how Wonga actually works.

Their loans are short-term and have set amounts that mean this type of compounding wouldn’t happen – the figure is meaningless. 

Yet my calculation is still correct, based on its official APR. And I don’t feel like being fair to Wonga after the way it’s treated people.

The real point is it may have co-operated with the FCA on this, but £50 isn’t very much for the distress many may have felt.

Wonga – you’ve spent millions on marketing, advertising and lobbying to try to pretend you’re good guys in a bad industry. 

A couple of weeks ago, rather conveniently, your founder and chairman – the man in charge when this all happened – left the company. So in the media interviews yesterday your new MD was able to say "this isn’t about people".  

So instead of paying money to pretend to be righteous, why not actually be righteous? Give these vulnerable people you lied to a far bigger slice of cash.


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I predict the first ‘car insurance marketplaces’ will start in September

I predict the first 'car insurance marketplaces' will start in September

I predict the first 'car insurance marketplaces' will start in September

The Competition and Markets Authority has been investigating the insurance market, and within its 12 June proposals – likely to be enacted in September – is a seemingly innocuous clause that could signal a huge change to how people find cheap car and home insurance. It could also signal the death knell for some car insurance cashback.

So let me bash out a quick analysis on what I expect to happen. The key recommendation I am focusing on is this one…

A ban on price parity agreements between price comparison websites and insurers which stop insurers from making their products available to consumers elsewhere more cheaply.”

The mischief this aims to solve is where some big comparison sites have agreed with insurers that their rivals won’t get cheaper prices.

It seems Compare The Market has been the main mover behind this. It’s become the market leader, not on the back of winning the "cheapest prices" game, but because of its marketing, and especially its remarkably successful meerkat toys.

It can keep full margins without price competition between comparison sites. As full margins benefit it, its interest is in keeping all prices homogenous.

What this means for price comparison sites

If this new rule is enacted, as seems almost certain, it’s likely to mean we will see comparison sites negotiating bespoke pricing with individual insurers. So different comparison sites will have different prices – and there will no longer be the relative homogeneity on pricing.

If this happens at the scale I anticipate, it means the big sites will no longer be comparisons in the strictest sense. Instead, they’ll be insurance marketplaces, with their own pricing plans.

In our Cheap Car Insurance and Cheap Home Insurance guides, we already suggest using more than one comparison site. That’s done mainly to broaden coverage (as different comparison sites cover some different insurers at the margins), but from September this is likely to be even stronger, as the insurance marketplaces will need checking in their own right as they’ll have different tariff plans for each insurer.

Of course there’s also the potential that some insurers will decide to offer cheaper pricing "direct" – though the might of the comparison sites will likely stop all but the biggest brands, which are willing to push their marketing hard, from doing this.

The impact on cashback sites

Currently the last element of our car and home insurance solution is, once you’ve found the cheapest provider, to check cashback sites to see if you can get money back.

This is based on the fact that the prices are the same through cashback sites as through comparison sites and going direct. We’ve heard some saying they’ve seen different prices, but when we’ve investigated, we’ve struggled to back this up.

Under the new system, it’s likely the comparison sites will be undercutting cashback sites because of their bigger negotiating power and the fact that cashback site users tend to churn more.

Therefore while you may still get the cashback, the gap between getting the cashback and just getting the cheaper price is likely to narrow.

I’d love your thoughts on this.

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Dear Chancellor – stop fighting the regulator, or make it stop fighting you!

Dear Chancellor – stop fighting the regulator, or make it stop fighting you!

Dear Chancellor – stop fighting the regulator, or make it stop fighting you!

My suspicion is there’s internecine warfare going on right now between the Government and the regulators.  If true, it’s damaging for Britain and makes me wish I could bang their heads together.

On the one hand, the Chancellor and the Government are proposing a raft of ideas to liberalise the financial services market and attempting to stimulate action. Whereas the regulators the Financial Conduct Authority (FCA) and the Bank of England are trying to restrict risk.

That means as a nation, we are expending effort, energies and money to take two steps forward, then two steps back.  All these conflicting policies do is leave us frothed up in a lather.

A few months ago, I blogged on the energy policy paradox. In that sector, both the Government and the opposition are trying to encourage switching. But their policies to decrease the differential between the costliest and cheapest tariff, and to effectively freeze prices, take away two of the main drivers for switching.

They need to make up their mind about what they want – fixed prices or a switching market.

Now we’re seeing a form of financial friction. I’m going to bash this out at speed, but hope you’ll get my point…

  1. Help To Buy 2 vs Mortgage affordability

    The Government is pumping money into Help To Buy 2, an insurance policy to encourage mortgage firms to lend to people who have limited deposits as part of its ‘Britain is a nation of home owners’ stance. While I personally have concerns about it pumping the housing market when mortgage margins are so high – SVRs are about 4% above base, compared to 1% pre-crunch – that isn’t my problem here (for more on that, see The UK’s mortgage ticking time bomb).

    At the same time the Chancellor is trying to pump people to buy houses, we have the regulator, the FCA, introducing its MMR criteria, which is cutting down on the availability and size of mortgages. Its big focus is putting the burden on lenders to ensure their customers’ mortgages are affordable.

    They want lenders to only lend to people who pass a stress test showing they could afford to borrow at 6% or 7%.  The net result of this – both because many lenders’ systems were not set up to do it and they’re therefore not so good at it, and because they are much more stringent criteria – is we are seeing multiples cut and borrowing becoming more difficult. 

    So what exactly are we trying to do? Pump the mortgage market and encourage people to buy? Or are we trying to restrict it? 

  2. Pension liberalisation vs financial services accountability

    The flagship announcement at the last Budget was the idea that from, 2015 anybody with a money purchase pension (a pension where you’ve built up a pot of cash) at the age of 55 will simply be able to take their money out (see my Pension changes are wonderful and horrid blog). The first 25% of the cash you take is a tax-free lump sum, the remainder will be taxed at your marginal income tax rate. 

    This is a radical change in pension policy and a real ‘freeing up’. It’s effectively the Chancellor saying it’s your money, you can do what you like with it so long as you pay tax on it. 

    Yet the regulator’s attitude says it’s all about responsibility, advice and information.  Pension companies will come under a huge burden in order to make sure people are doing what’s right for them.  The regulator, in a stance I have some sympathy with, wants to ensure that people don’t waste their cash, they don’t make bad decisions and they don’t leave themselves in the lurch. 

    One of the great concerns about this pension liberalisation isn’t the more highlighted fear that people will simply take their cash out and spend it on Porsches. It’s the concept that people will become so scared that they won’t have enough cash left in their later life that they will effectively live in penury in the early years –  not being willing to spend anything, living a cold baked bean pension even though they’ve got the money sitting there. 

    To truly work out how much you should be spending on the new system, you really need to know how long you are going to live for, and that’s a difficult question to answer. 

  3. Funding for Lending vs increased capital requirements

  4. For the last few years the Government has been pumping billions of pounds towards banks in order to try to get them to lend in the mortgage market and for small businesses.  The scheme, called Funding for Lending, has slashed savings interest rates because banks haven’t needed to get cash from savers, they’ve simply been dragging it in from huge Government coffers instead. 

    At the same time, both the FCA and the Bank of England have been requiring banks to keep more and more capital. This is far off my usual beaten track, and I don’t purport to be an expert in macroeconomic prudentiality, but in a nutshell, bigger reserves mean they can’t lend out the same amounts.

    So effectively we have Funding for Lending pumping money to the banks to lend out, but in reality, it’s just gone to help build their capital requirements.

It’s not about which policy is right, but the fact they conflict

In most cases my sympathies tend to lie more with the regulators’ stance than Government policy.  Yet that’s irrelevant.  What we need is a clear direction and the two to act in concert to make the market work. 

Yet you can almost hear the silent seething going on from both parties about what the other is doing.  This type of internecine policy making doesn’t help anyone.  

That leaves a big question. What do we do? Do we get rid of independent regulators so that Government sets the policy (which is a rather scary thought)?  Or, if not, do we have regulators that can control the policy being made by the Government?  It’s a very difficult circle to square.  Views welcome.

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Buy Zara clothes at a fraction of the cost, and get a flight thrown in

If you’re one of the millions planning a trip to Spain at some point this summer, stop shopping at Zara right now. The giant Spanish fashion brand sells clothes in its native country far cheaper than here, so wait until you get there if you’re planning on buying something.

The price difference is enormous. The pound price is often higher than the euro price before you even convert the currency (which further cheapens the euro price).

And while you can’t get English delivery from its Spanish website, the big boon is it gives you the option to select ‘English’ as the language so you can browse in advance for pricing research purposes.

In fact, with budget airline prices as cheap as they are, if you were planning a Zara stock-up, it may be cheaper to find a dirt-cheap Spanish flight and go purchase an armload.

From the Spanish website (English language selected)

CHAMBRAY BLAZER WITH ELBOW PATCHES AND BADGE

99.95 EUR

From the UK website (at the same time)

CHAMBRAY BLAZER WITH ELBOW PATCHES AND BADGE

129.00 GBP

Using TravelMoneyMax to convert at the top card rate, this shows the pound cost of this jacket is currently £81. In other words, it’s £50 cheaper than the same jacket bought in the UK.

In some cases it’s cheaper to fly to Spain and buy there

Doing only a touch of research (see my Cheap Flights guide), I found a Ryanair flight to Santander in Spain (not the bank), for £42 return (hand luggage only). So it would actually be cheaper to jump on a plane to Spain and buy the jacket there.

Of course I’m using some journalistic licence here to prove a point. You’d obviously need to get to and from the airport and may want a hotel. Yet if you’re a Zara fetishist and are stocking up for yourself and your family (and perhaps taking orders for friends too), the economics could work.

This is especially powerful as Zara rarely gives out vouchers or discount codes. To get reductions you’re reliant on waiting for things to move into the sale – so there are only limited opportunities for reductions on full-price goods.

I did check if you could cut the cost at Zara by nipping over the Channel, yet rather interestingly there’s no homogenised euro price. On the Zara France site, for example, the same jacket is €139, not that much less than in the UK.

On average, Zara in Spain is 39% cheaper (at current exchange rates)

I chose four more items at random on Zara, all of them cost less in euros than the pound figure, and I checked the price on both the Spanish and UK sites at the same time.

  • (WOMENSWEAR) CROSSOVER STUDIO DRESS WITH BELT €60 (converts to £48.50). Price on UK site £79.95, so 40% cheaper in Spain.
  • (WOMENSWEAR) LEATHER CLUTCH WITH FRINGES €79.95 (converts to £64.70). Price on UK site £119.95, so almost half price (47% cheaper) in Spain.
  • (MENSWEAR) HAWAIIAN PRINT SHIRT €29.95 (converts to £25). Price on UK site £39.95, so 37% cheaper in Spain.
  • (GIRLS’) FAUX LEATHER JACKET €39.95  (converts to £32.30). Price on UK site £42.95, so 25% cheaper in Spain.

Overall, for the five items on the Spanish site, the price is £203; while the same items on the UK site are £331 – that means on average, it’s 39% cheaper in Spain, though of course it’s worth noting that not all stores carry all stock. So there is a chance that if you’re after something very specific, it won’t be in the store there.

I’d love to know which other big store chains are proven to be far cheaper, and are only a relatively short flight away.

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