Martin Lewis' Personal Blog

Forgive me slipping straight into a football analogy for the economy, yet as a Man City fan we’re quite used to tragedy so it lends itself nicely.

This season, even though City has new owners and a strong new team, I’m still focused on us hitting 40 points. Once that’s done it means we’re safe from relegation, and we can concentrate on aiming for the Champions League or at least UEFA.

Part of me wonders whether the economy too has just this “no relegation” mark. Signs point to economic decline slowing; this week’s unemployment figures, while bad, show a slower fall than previously.

A year ago, if someone told us the real economy would’ve escaped as lightly as it has, with a short and severe fall in growth and unemployment rather than a prolonged fall, many people would’ve doubted it.

While there’s always a chance of a double-dip recession and things getting worse again, maybe it’s possible to hope the risk of cataclysm is now over?

I’d love your thoughts.

Comment and Discuss

Unlike many, I’m sympathetic towards MPs this morning. Many are in the following awful position:

• They made an expenses claim.
• They told the official body what they were doing and had it approved
• Now retrospectively they are being told they got too much money and need to find the cash to pay it back.

To me there’s an argument this is against natural justice. If they acted within the rules, even if some now consider those rules to be flawed, to demand money back doesn’t seem to flow.

Yet before there’s too much sympathy, lets look at what happens with tax credit overpayments to a MILLION people a year every year (see the tax credit overpayment help guide).

• They are given £100s or £1,000s in tax credits.
• The amount is calculated by the state and approved.
• Then retrospectively they’re told they got too much money and need to find the cash to pay it back.

Another awful scenario, except here the people involved are likely to struggle to pay the cash back, or will have their current credits taken off them instead, leaving them struggling on the breadline.

Worse still, we’re discovering many of them are still facing overpayments even though they followed the golden rule and “told them of every change”

I hope MPs will see the similarity – it may make them change this appalling system.

Comment and Discuss

Q. How many TV experts does it take to make a coffee?

A. Two.

GMTV green room this morning. There’s a new tap which gives either boiling water for coffee or cold water.

Dr. Hilary and I went to grab a coffee. Sadly the tap defeated us. It had two tabbed flaps and a button. It took four cold cups of coffee before we finally worked it out.

Nuff said.

Comment and Discuss

PS. Though the morning wasn’t all bad– I broke my rule and asked for a pic from Alexandra Burke (only the second time I’ve ever done it) as I was passing. Hoorah!

I stooze, you stooze, they stooze, he’s a stoozer, she’s got a stoozepot, we’re all stoozing.

While the practice of stoozing – making money from earning high interest on 0% debt – is less profitable than it used to be, I’ve discovered the Oxford English Corpus (the 2 billion word research body behind the Oxford English Dictionary) has an open file on it.

While other lexicons have included or nodded at the word, the OED is the bastion of language legitimacy, so to get it in there is the true test.

Countdown to inclusion?

This all came about while I was recording a week’s stint as the guest in the dictionary corner on Channel 4’s Countdown; one of the treats of doing the show (‘specially for a Scrabble player like me) is you get to sit next to the lovely Suzie Dent, the permananent lexicographer there, and can therefore fire word questions at her all day.

Note to self: If on again, I must remember to ask her why being full of awe (awful) is bad, but having some awe (awesome) is good?

While there the presenter Jeff Stelling asked me about stoozing, which led to a discussion with Suzie. She promised to follow it up with the OED who she’s affiliated with, and I received this email.

“It’s confirmed that they have a file on it which means that it will be considered for inclusion each time a new edition of any of their current English dictionaries is being prepared. At the moment (because of low interest rates?) it has slightly slipped from view in the Oxford corpus – a database of current English which includes thousands of texts,web pages, newspapers, chat room and forum posts, etc. That doesn’t however militate against it coming back into view more prominently.

In short, it is on the active consideration list. So keep at it!”

Can you still stooze?

Of course it’s true the return on interest rates and the introduction of balance transfer fees mean Stoozing is less profitable than it used to be, it can still make those who are debt free money.

The easiest way is simply to get the longest 0% for spending credit card possible, which is roughly for a year. Then spend on it rather than using your bank account (though do ensure you make the card’s minimum repayments). This way your unspent cash builds in your bank account and you can save it in a high interest savings account or cash ISA

Those with decent credit limits can easily make £100s a year (though do it carefully, see the full stoozing guide) for more info.

Comment and Discuss

Which works best, campaigning in the full glare of publicity, or working through official channels to lobby, push and get things done?

MSE’s traditional campaigning style

The perception of MoneySavingExpert.com has changed over the past few years. Even as recently as 2007, when calling the Treasury to get answers about the Northern Rock crisis, we were virtually ignored (see the Wake Up Treasury blog). Then, getting an influential politician to react on any issue was near impossible.

The closed door to official channels left two main routes for the site and I to campaign on issues we believe to be important.

• Media Attention.

  The nature of our work as journalists, and my own broadcasting role, means generating publicity is something we can do well. Even just putting an article in the weekly email means it’s under millions of people’s noses, and then with my range of other outlets, it’s possible to get info into the wide spread public domain at speed – plus with the right issues the papers will often join in.

• Mass Action.

  Married directly to media attention is mass action – and perhaps that’s the site’s campaigning speciality – mainstream activism – getting people to do things.

  Take PPI reclaiming. Which hurts more, the smallish fines imposed on lenders by the FSA, or hundreds of thousands of people asking and getting their money back?

Together, the two are powerful weapons for change, and have had real impact. Both bank charges and council tax rebanding are stories that’ve been on the front pages of many papers, and had millions of people engaging in them.

Yet the problem with campaigning this way is while it highlights the issue, and brings resolution for those who choose to get involved, it’s often slow to bring official change – and more importantly change for those people who often need the most help and protection, and who don’t help themselves.

MSE’s new campaigning style…

Over the last year or so things have moved on: the scale and profile of the site means it’s now taken far more seriously by opinion leaders and people in positions of authority. Perhaps we’ve even become a touch institutional.

In many ways the old style campaigning has brought us to this point. The ability to generate mass action – even if of a virtual nature – is an important one.

So now I suspect we’re entering a new phase, where we can start with old style campaigning, and by correctly picking the right topics, get our foot in the door to official channels.

This week’s there’s been a prime example. You may be surprised to hear it’s not the PM’s letter on bank charges. Whilst that’s hugely important, in many ways it’s a result of our traditional campaigning; it’s not that dissimilar from past work on the childcare tax credit black hole, or Nick Clegg on debt.

The Prime Example…

Actually the more radical switch is the “Why don’t we have a right to know the rate before applications go on credit files” campaign (see my credit rating campaign blog from last week).

Let’s be honest, there’s no way this story would generate front page newspaper coverage, and there’s little organising mass action can do to this one.

In the past we’d simply not allocated any time to working on the issue (other than trying to help people avoid problems), as what it needs is political or regulatory impact.

Yet instead of a people power campaign first, we teamed up with the official watchdog Consumer Focus to lobby the industry and met with the Treasury Select Committee. It has now launched an inquiry this low profile but high importance issue, putting it firmly on the agenda.

How much of this type of thing we’ll do or be able to do in the future I’m not sure, but my fingers are crossed. Certainly Setting Off is an issue I think needs addressing at speed, as is the problem with Recurring Payments.

Yet for me having these as potential extra weapons in the arsenal should broaden the scope of financial justice issues we can look at – though where the time’ll come from to do it I’ve no clue.

Comment and Discuss

Forget pop svengali Simon Cowell, ignore music maestro Jo Whiley, take no notice of the Mercury awards, as I’ve discovered the real predictor behind the musical throne.

It’s GMTV’s Glen, and other sound operators there…

At the back of the studio is a serious mixing desk and graphic equaliser. Each band which comes in to play usually requires its own specific set up. Now, this chunk of tech has a memory of over 100 different settings.

So, when a band comes in a lot the sound guys can simply save and recall their settings on the memory to save time. Of course, regular hit makers like Westlife are on there, but the key is who else they include.

My top tip for musical success now (and my credentials are hardcore – see this blog for proof) is the artist VV Brown, as when playing last week Glen saved her in the machine as ‘she’d be back’. Watch this space!

Comment and Discuss

Apply for a product and it puts a search on your credit file, which hits your credit score. Yet many products are rate-for-risk, so without applying you can’t know the rate.

This means many people apply for products, get accepted on a higher rate than expected, and then find it more difficult to go elsewhere because of the credit application.

A couple of weeks ago I wrote about how we were going to start campaigning on this, and things have already moved on with rocket speed.

• Treasury Select Committee Enquiry.

  Last Tuesday the powerful Treasury Select Committee of MPs announced it was going to take up our suggestion to investigate this problem. As part of it, I’ve offered them space in the MSE forums to get feedback.

  This is great news, as the committee actually has the power to compel people to attend it and give evidence, meaning we can expect a thorough run-through of the problems, and hopefully a result that’ll help force the debt industry into change.

• Reply from SCOR to our letter.

  I teamed up with Ed Mayo from Consumer focus to write a letter to the ‘credit data sharing committee’ (see the credit sharing letter).

  The chair of the committee has written back saying he thinks the issues raised are important. He’ll be putting it to his senior colleagues in the industry over the next few weeks, and will put it to the full committee when it next meets.

It’s my hope that these two, alongside the publicity generated from their actions, will make it clear to the industry that this type of behaviour is no longer acceptable.

People have a right to fair and transparent products – to know exactly what they’re signing up for – and it’s about time the financial services industry delivered that.

Comment and Discuss

MSE towers is in the same office complex as Gu Puds, and the following message came around by email…

“Hello Gü lovers

Anyone who wants a box of free brownies or Chocs please come up to Unit 1.2 in the next 30 minutes – first come, first serve!

Thanks“

I hadn’t seen the email, all I saw is a sudden mass exodus of MSE team-members, it was like a stampede of wildebeest (though slightly more graceful)… you don’t want to get in the way of a MoneySaver and a freebie.

So I followed suit and everyone managed to pick up four or five boxes each – all with best before until next Tuesday.

Sorry this tip doesn’t apply further out though Gu does have a Gu Pud Freebies page where some stuff is available.

Ta Gu.

Comment and Discuss

It was submitted in 2007, the then-largest petition on the number 10 website without a reply from the PM, with over 70,000 recipients.

Yesterday that changed: finally there was an answer to the the Bank Charges Consumer Charter. Now admittedly it was simply a cut and paste of the reply Gordon Brown sent in response to our open letter, but better late than never. (See full MSE news coverage of the PM on bank charges).

The hope now is that with bank charges having been a huge bubble in a political vacuum, politicians will finally pull their fingers out and smooth the flow of financial justice.

Comment and Discuss

Many people see one main aim of the work of this site as opposing the banks, and with guides like bank charges, fight rate jacking, and ppi reclaiming, that’s understandable.

Yet actually I’ve no problem with banks; often they do good work, there are some great products, and they provide a crucial service in our society.

My problem is they’re usually much better at their job – making money for their shareholders – than we are as customers. Their marketers devise ways to charge people too much with hidden fees or extreme penalties that push the boundaries of acceptability.

However, we must recognise the difference between the banks as institutions and the individuals who work for them. I received this e-mail (name changed) as a suggested question of the week….

“My name is Jane and I am a current employee of the RBS Group. I actually get quite upset at the amount of media attention within the banking sector at the moment that focuses on the customers.

Obviously the customers are the most important given the current climate and they need help and protection from guys like you. But where is the help for the staff?

We are facing pay cuts and a reduced final salary pension, we are all under immense stress but we have no support from the media at all when we as people are not personally responsible for the failings of the bank.

What I would like to know is if you think the RBS final salary pension is now worth staying in or should we all as staff pull out and look after ourselves?

I think I speak on behalf of all the RBS staff when I say a response will be an invaluable help! Thank you.”

While it’s easy to rail at the ‘masters of the universe’ at investment banks, we need to remember the many bank staff in branches and call centres across the UK on more modest salaries.

Occasionally I do public talks (e.g. MoneySaving Live) and one of the things I often talk about is the dual roles many people play, using this analogy:

As a Manchester City supporter when they play United I want City to score and hate the thought of United doing so. Yet that doesn’t mean I think United are wrong for trying to – that’s their job. And when a player is transferred (like Tevez) and he changes shirt then I’ll cheer loudly.

Equally while in their role for the bank the staff can be the opposition, when they change into their consumer shirts, this site should support them.

Of course, our modern culture of finger-pointing and thinking the worst of people can make that difficult. We’re all often guilty of unfairly castigating individuals based on their role: politicians bad; bankers bad; nurses good; journalists bad; charity workers good; benefits recipients bad, yet it’s important to try and stay blind to it, and MSE will try to.

Sadly the minutiae of the question itself is beyond the scope of this site, or my own knowledge. I don’t cover final salary pension schemes and don’t know anywhere near enough about the situation with RBS to be able to give an appropriate answer. A good solid final salary scheme is usually worth its weight in gold, but sadly these days they’re also about as scarce.

Comment and Discuss

I’ve got an ITV1 Tonight programme on Friday night 8pm called “To fix or not to fix?” It’s one of those difficult ones for me as due to a bit of a crash production process (ie turning round in a short space of time), I haven’t seen the programme or the final script yet (I’m writing this at 19.40 on Thursday).

In fact I won’t see the programme at all until it goes out – never the most comfortable scenario. Essentially, it was a day where we introduced a group of mortgage holders, savers and energy customers to experts, who decided whether or not they should fix their tariffs. It was a full day and they got presentations and Q&A sessions with the experts.

Of course, in a 23-minute programme only a tiny taster of this can actually come across, so it’ll be interesting to see exactly what is picked out. I will get my script this evening and am able to alter some of the voice over lines, but the choice of clips is already completely fixed.

Sadly, one of the main stunts where I was in the city doing a coin toss gamble has had to be cut out. The premise was simple; offering people a bet on a coin toss that if they win I give them £10 but if I win they give me 10p, to show that sometimes even if you lose it doesn’t mean it was a bad decision. Bit of a pity as it was great fun to do and the people’s faces when they couldn’t believe their luck on the bet was fab.

Fingers crossed it’ll be a great watch – I know the producers are working very hard on putting it all together in time – and they normally pull the cat out of the bag superbly.

Comment and Discuss

A few months ago we launched the Improve Money Rules In 50 words campaign asking for must-change suggestions. I led with my four big bugbears, one of which was…

The “right to know the rate you’ll get before applications go on credit files.

Apply for a product and it puts a search on your credit file which hits your credit score, yet many products are rate-for-risk, without applying you can’t know the rate. This vicious circle thats hurts comparing products should be stopped. See Credit Rating guide.”

Well I’ve decided to do something about that, so joining with Ed Mayo, the head of the official watchdog Consumer Focus, we’ve today sent this open letter to the industry body that looks after data sharing; the rather sexily named ’standing committee on reciprocity’. Here it is:

“Dear Chris

Data sharing by financial companies is becoming a more public issue of concern, in particular there is a worry people’s data is used for the benefit of companies rather than consumers and potentially penalises people for trying to get cheaper products.

We are writing an open email to you as Chair of the Standing Committee on Reciprocity (SCOR) to ask you to look at how to improve consumer representation in the work of the committee.

Data sharing, with proper consent and proper handling, can be good for competition and innovation and a way to help prevent irresponsible lending.

Yet given the sensitivity of the issue, present industry systems and industry solutions don’t seem to place a premium on assurance to the public about the integrity of the process.

Consumers need to have the guarantee that sharing more of their data does not mean they are scored down because they behave well and are thus less profitable.

An example is the way in which multiple searches by consumers may affect people’s credit ratings. This is an issue highlighted over time by MoneySavingExpert.com and evidenced over some time by contributors to its forums as detrimental.

The rate for risk pricing model means, consumers may only know the true price of a loan if they apply. Yet if the rate offered is poor and worse than the typical rate advertised, and they then choose to apply elsewhere they are potentially penalised due to footprints on their credit file. This means consumers are worse off by shopping around, this is surely unacceptable.

Moving to quotation searches, which don’t leave a footprint, as a default across the industry rather than as a rarely exercised option is an obvious solution – though we recognise this may be more than SCOR can insist on.

Even so, it needs to be moved forward much faster and given that this is, after all, shared data, it is something SCOR will have some leverage over. At heart, this is an issue that has dragged on for far too long and is affecting public trust in the data sharing, based on the principles of reciprocity.

SCOR was founded with a worthy aim to limit irresponsible lending, but those involved should not expect to trade off this past if they are not seen to address contemporary consumer concerns on the use of data.

Given that the governance at SCOR seems to be focused on industry interests, we would ask that SCOR gives consideration to bringing on board and resourcing some level of consumer representation at governance level, so that consumer issues can be integrated more effectively into your work in future.

We look forward to hearing from you on this.

Yours,

Ed Mayo, Consumer Focus
Martin Lewis, MoneySavingExpert.com”

This is just a toe in the water, in this current credit crunch climate, while we all need to manage our credit history better, we also need the industry to play fair. Expect more.

Comment and Discuss

I missed the start due to zipping home from working on the weekly email to try and catch it. I always hate watching myself and rarely do (do I sound like that? Talk that quick? Gabble that much? Sit like that?), but as the programme was recorded six months ago (see original millionaire blog) I wanted to see how it looked.

The main difference is how much is edited out – it showed about 40 minutes, but we were actually doing it for double that. There’s no time limit on answering in the studio.

Thought I would note down a few things that jarred with my memory as I watched…

• Angela and phone a friend. While it was hinted at, when discussing which phone a friend to use on the ‘Kangaroo Island’ question, it was a good few minutes before I said “none of yours are Australian are they?” and Angela then realised one of hers was.

  The reason was we’d split up our phone a friend by subject and so her friend was actually a Doctor and there as our medical person; it took a context shift for her to remember he was Australian too.

• The last question took 20 minutes. We literally spent 20 minutes going through every minor angle of the final “what’s Greek for pebble worm” question – at one point we almost went for Anaconda, but then we pulled back from it. The pressure was quite intense, as you don’t want the experience to end, and you’re desperate to get more from the charity.

  It was remembering a comment someone had written on the forum warning about getting carried away for personal glory which is what made me say “I’m worried we want to carry on for glory but need to think about the charity” – and we pulled back.

• Angela knew the violinist. It made it look a touch like the violin question was a guess, though actually Angela – as a former chair of the English national ballet – has great classical knowledge and knew it instantly.
• Why did Angela whisper? If you watched you’d see I asked Angela to whisper me her thoughts on the Poldark question. That was because I suspected we may need to ask the audience… I then explained to Chris that I asked her to whisper so we didn’t lead the audience as often that skews the voting – which means it’s not a reasonable result

  In fact what Angela whispered, very correctly, was that Poldark was Cornish and Ross was a Cornish name – I was just concerned that was too much to gamble on at that point.

So there are my trivial notes, but thought you may enjoy it.

Comment and Discuss

I recently received an e-mail from Marc Gander, one of the founders of our fellow bank charge reclaiming campaigning website the Consumer Action Group.

While MSE and I tend to focus on the mainstream and mass elements of reclaiming, CAG tends to be more radical (our different approaches have been a good fit, hence why we jointly founded the bank charges fighting fund.

As he raised some interesting, though challenging, points, I thought they were well worth sharing – so with his kind permission I’ve reproduced some of the note below.

• Reclaiming for a much longer period.

The general wisdom is you can claim back six years of charges, though since the FSA hold this is now six years from the date the hold was imposed (ie eight years now)… However, CAG believe there’s an argument for going further…

“New limitation period – 1995

There is an important new element which affects the refund period very seriously. Bank charges are probably recoverable back to 1995.

The basis of the 1995 limitation period is as follows: –

The banks say that they are entitled to charge what they like, because their charges are not subject to the Unfair Terms in Consumer Contracts Regulations. They also say that their charges are fair.

We all say CAG, MSE, the whole world, — and the OFT says — that the banks are mistaken. So far the courts are agreeing with us. If it is finally established that the charges are susceptible to UTCCR (ML – the laws that say fairness count) and that they are unfair, then the banks’ mistake will have been confirmed.

The contractual term which requires payment of the charges will have been invalidated. It will then be clear that all the bank charges which have been paid over by customers will have been paid over on the basis of their mistaken belief that they were obliged to pay it and on the basis of the banks’ mistaken belief that they were entitled to levy the charges at this excessive rate.

In law money paid over in this way is described as “money paid under a mistake”. The limitation period for a legal action to recover money paid under a mistake is six years (the same as a normal contract limitation). However in the case of mistake, the limitation period begins from the time that the mistake could reasonably have been discovered. In the case of bank charges, the limitation period has not even yet begun to run.

It will only begin to run from the time that the OFT litigation is concluded, the charges are declared to be unfair, and the banks have accepted the situation. That date will be the date upon which the mistake has been discovered.

Why back to 1995? Although The Unfair Terms in Consumer Contracts Regulations were introduced in 1999, they actually gave retrospective effect to a European directive which came into force on 1 January 1995. This means that if a contractual term is invalid under UTCCR, it is invalid all the way back to 1 January 1995. UTCCR affect any contracts which were entered into after 1 January 1995.

This may seem quite extraordinary but it is not at all fanciful. It is completely settled and very basic law. I don’t know if you noticed that the during the House of Lords hearing in June, Jonathan Sumption QC acting for the banks actually told their Lordships that if the banks lost the case that there was a possibility that their customers might start claiming back into the 1990s.

He didn’t say anything more about this, (I think that he didn’t want to alert the public too much) but the limitation period and the 1995 liability period is what he was referring to. I think that it is our job to alert the public.

You might think that your viewers and listeners should know about this when you talk about bank charges.”

This is a fascinating argument, due careful consideration – though it is of course unproven. In the MSE guides we suggest people ask for charges back at least as far back as six years before the hold on charges starting – I decided not to add these arguments in for the time being.

For our ‘everyman’ guides this adds a level of complexity that is as yet unnecessary – while it would allow people to claim more – it is a tougher argument and most MSE users are looking for a straightforward route (evidenced as we sadly know by issues such as people sending unaltered template letters).

My own view is while this is an important legal principle, the core aim is to get a formalised system of reclaim recompensive (I hope for automatic payback– see the Nick Clegg letter – but suspect it will need application). I doubt that will go back as far as Marc’s hoped 1995, meaning people may have to take further court action to test that. Therefore for the moment I think a wait-and-see situation is best for MSE (though if you want to go for it – the template letters are available on CAG).

• Restitutionary Damages

The second concept is further along the revolutionary spectrum…

“The extent of the banks liability in respect of the amount which they should refund to their customers is far greater than is generally thought.

At the moment, when customers begin court actions for the refund of their charges, they expect to recover their charges plus a statutory 8% interest.

As I have already suggested, UTCCR operates to invalidate an unfair term. This means that there is no longer an action for breach of contract. Instead bank customers must sue for the recovery of money paid under a mistake.

Where money has been paid over mistakenly, the courts take the view that the beneficiary of a mistake has been unjustly enriched. The idea of unjust enrichment applies whether or not the beneficiary deliberately took advantage of the claimant or whether it was entirely innocent mistake.

The action which is brought to recover money paid under a mistake is the action for restitution. People tend to think that this only means getting your money back. It means far more than that. Where a litigant is successful in a claim for restitution, they are entitled to restitutionary damages.

This means that they are entitled to receive compensation. However the compensation award is not calculated on the basis of the claimant’s loss but instead it is calculated according to the defendant’s gain. It is sometimes known as “gain stripping”. The idea is that the defendant is to be divested of their unfair gains. Any profits which they have made out of the mistake are to be disgorged and handed over to the claimant.

The way this works is that the court will order the unsuccessful defendant to disclose all the profits which they have made on the back of their customer’s unlawful charges. The court then orders that those profits are paid over to the customer. The customer is not required to make any representations as to how much profits the bank may or may not have made. This obligation falls upon the bank.

I don’t know what your view is of this but I find it is breathtaking and frankly rather frightening because the full-scale of the banks’ liability is stupefyingly large. Going back to 1995 I can imagine a bill for restitutionary damages well over £150 billion — but who knows.

However, if the banks manage to get away with merely handing out refunds and 8% interest, then they will have done very well from their customers’ money because I’m quite sure that they have been able to lend out their bank charges money at the very high commercial rates of interest. I think it would be very unfair if they were permitted to keep this money — especially in view of all the hardship, misery, broken homes, broken families, broken businesses, broken homes and broken dreams that they have caused by their greed. I think that their customers are entitled to a proper recompense.

If you are struck by the enormity of what I am saying — then you may feel incredulous about it, as I do as well. However I have been juggling this legal logic in my mind for a considerable time and I come to no other conclusion.

What finally confirmed it to me was that in his arguments to the House of Lords, Jonathan Sumption QC also warned their Lordships that if they found against the banks that there was a danger that they might be faced with claims for restitution. He actually said this! Once again, he didn’t go on to detail what he meant. However I’m sure that their Lordships understood his dire warning very clearly and I recognised it immediately as an indication that the banks themselves are fully aware of the true scale of their liability and that they are very frightened about it.

On the Consumer Action Group we have already published template Particulars of Claim which include restitutionary damages as part of the claim. We have played it safe though and the templates also asked for 8% statutory interest in the alternative.”

Again a fascinating option but not one to encourage in the mainstream as yet. The Tom Brennan case (see my old blog on it) was one of the more difficult moments in bank charges history. By asking for punitive damages risked both losing the sympathy of the general public and as it eventually lost – sadly it meant some lost faith in reclaiming.

Given the current state of play, my view is it’s best to focus on the bigger issue of getting people to get their claims in quickly and en masse, rather than pushing. However I wanted to bring it to the site for discussion and so people can see the options.

Comment and Discuss

Yestesrday I spent my day in Granada TV studios Manchester, sitting in dictionary corner filming five episodes of Countdown, to be broadcast at the beginning of October.

Unlike last time I didn’t suffer from getting stiffies, though to paint an interesting picture, fogies and orgies did come up together.

It’s strange what you notice differently each time you do a programme. This time I was slightly obsessed with watching the countdown clock do something you never normally see on the TV.

Once it’s hit the thirty seconds, it then reverts itself to zero by continuing round the clock face (as opposed to going backwards). There’s something bizarre about watching the second hand being on the other side – having for all these years watched it only on the initial 30s.

Yet again though, having done it for the second time, the entire process was highly enjoyable – there’s a really friendly team there – so it’s quite easy to sit down (next to Suzie) and get on with it.

Comment and discuss

A number of recent media reports suggest Which? is going to launch its own product range. I must admit the concept fills me with fear for an organisation I admire.

The work Which? does is often complementary to MSE – though from a different angle. Where it takes a stance, we link to it – as with its great work on endowment misselling – and recently we’ve discussed joining forces on some projects.

Yet of course that doesn’t mean I always agree. I still think the rebranding of campaigning arm The Consumer Association to the same name as its paid-for magazines, Which?, wasn’t necessarily the best move and risked a reputational impact – and I have similar worries if it launches its own product range.

Currently details are scant, and the idea seems nebulous, but I think the impact depends on exactly what the products are…

• The Nightmare: Active products e.g. credit cards, insurance, washing machines.

  The best way I can explain my worry here is the fact that in the past I’ve been asked if we wanted to launch an Martin Lewis/MSE credit card and even an Martin Lewis mortgage. The first I simply turned down, and the second – during the mortgage height – the company asked ‘just tell us how you’d like it to be structured?’ and my reply was roughly as follows…

  “I would love to set up a Martin Lewis mortgage product, providing the interest rate is 0% and it comes with 100% cashback. Do that and I’ll be confident it can’t be beaten, if not then I won’t put my name on it.”

  And that’s my worry for Which? It is impossible for it to be the best buy on every product, so what will it recommend if other products are better? How will it deal with that clash? This would be the major nightmare and I hope and presume it’ll stay very clear.

• Not bad at all: Advice services.

  If the products are services building on Which?’s campaigning reputation and expertise the worry is diminished. For example it already has a legal hotline. Things such as will writing or even claims handling, that were reliable and competitively priced, aren’t such a bad idea.

• A strong concern: Which? comparison services.

  This for me is the halfway house, still quite a substantial cause for concern, but not as bad as actual products. Which? has been highly critical of many comparison sites itself and the way they operate – yet these are big money companies with resources that easily outgun its own. They can be rapid and technologically advanced in their development.

  Can it truly compete and be better? In some of the less complex areas with fewer providers, such as energy, this is less of a problem and it may succeed, but then let me rephrase the question…

  Can it truly compete with and be better than ALL THE OTHERS COMBINED? And that is the nub – often combining comparison services is the best result – it’s what we suggest people do for car insurance and home insurance for example. Is Which? going to be better? Perhaps even more importantly, if it isn’t the best will it tell people – will it recommend others alongside itself?

There is a great deal of murky water here and I think it needs to be very careful.

While of course innovation is always important and I know these ideas stem from Chief Executive Peter Vickery-Smith, a man with a great reputation who once worked for high-end managment consultants McKinsey, I think it is important to urge caution. Trying new things can be good, but once you let the genie out of the bottle…

Comment and discuss

A couple of weeks ago, MSE Wendy and I went to the Treasury to meet the Financial Secretary Stephen Timms MP (the man in charge of all things tax) to deal with what I think is a major problem with childcare finance. As I know there’s been huge interest in this (thanks for all the e-mails) I wanted to report back on how it went.

The Story So Far

There’s currently a black hole which means some people taking advantage of the government’s childcare voucher scheme, will actually lose money, because of their eligibility to tax credits.

As I blogged about in detail a few weeks ago… (see Ed Balls replies to my childcare agitation) having made this a political point in my News of the World column, Children’s Minister Ed Balls responded by setting up a meeting for me with the Treasury Minister in charge of tax, Stephen Timms MP.

To explain the issue, here’s a quick cut and paste from that earlier blog…

"Why childcare vouchers can cost people money

Before explaining the problem, a quick definition of each of these government schemes (operated by two separate departments – part of the reason for the problem I suspect):

• Childcare vouchers. These enable working people to pay for childcare from pre-tax income. Eg You give up £1,000 of salary, which means losing £700 in your pocket after tax and National Insurance. In return you get £1,000 of vouchers to pay for childcare, meaning you’re £300-per-thousand better off (see full Childcare Vouchers guide for more).

• Tax credits for childcare. Though the name’s confusing, tax credits are simply a payment you get into your bank account. Working families on incomes under roughly £40,000 can get these to help cover their childcare costs. The average payout is £68 a week or £3,500 a year, so this isn’t small potatoes (see Childcare Tax Credits guide for more).

So what’s the problem? Quite simply, for a substantial number of people with family incomes below £25,000 a year getting childcare vouchers REDUCES your eligibility for childcare tax credits; overall leaving you seriously out of pocket.

This happens primarily because the tax credits you get depend on the amount you pay out for childcare, yet paying in childcare vouchers doesn’t count towards that total.

So let me give you an over-simplified example…

Imagine a working family were entitled to 80% of their childcare costs in tax credits (ie the govt. pays that into their bank account). So if they pay £100 a week in cash, they get £80 back.

Now imagine it still costs £100 but they pay £60 in childcare vouchers (which of course they had to buy). So now, unbeknownst to them they’re only entitled to 80% of the remaining £40, just £32 a week.

This means the net result of this scheme can be a massive loss – and that simply shouldn’t be allowed. Worse still, it actually means many who the childcare voucher scheme is intended to help are losing out – leading it to be a benefit primarily for higher earners.

You may think "surely they’d know". Well, tax credits are only worked out once a year, and the system is so complex (think post-doctoral algebra), it’s virtually impenetrable for most people to understand why they get what they get.

Though at this point, let me say for many childcare vouchers make a massive saving so don’t automatically discount the scheme – read the full Childcare Vouchers guide."

The Meeting

We were met by the minister, two civil servants, his private secretary and the press team. The good news is that from the start, they seemed to want to try and tackle this and were genuinely interested in ideas.

We went in armed with a score of suggestions, both those outlined in my earlier blog and MoneySavers’ forum contributions which we’d printed out to distribute in the meeting. These divided into two main routes.

• Fix the problem itself. Sadly most of these were ruled out on cost grounds, or that to change the interaction between the schemes in any way means changing the schemes itself, and that’s not a quick solution. As a practical point I thought it best to accept that during the meeting – and keep them as longer term goals – and move on to the second step.

• Warning people about the problem. The biggest problem here isn’t the black hole itself, which is simply a by-product of the interaction of the two schemes, but the fact so few people know about it and so many are caught out. So it became clear this was what to focus on.

There are two obvious nodes where the issue is mis-communicated: when people sign up for tax credits or at tax credit renewal; and when people sign up for childcare vouchers. At both these points it is crucial people understand the possible risk of taking childcare vouchers if they’re eligible for tax credits.

The end result

After about an hour long discussion, we came up with the following potential action plans:

• Better indication of who’s impacted

  They had already worked on a revised rule of thumb for us to use in the place of ‘family income below £25,000′ being better off not getting vouchers if getting tax credits

  One child: family income under £22,000
  Two children: family income under £27,000
  Three (or more) kids: family income under £31,000

  Though in all cases if childcare costs over £175 a week for one child or £300 a week for two or more children and then vouchers will probably be better – but for the levels of income that we’re talking about, spending this much on childcare is relatively unlikely.

• A specific question on the renewal form

  This is the one we lobbied most strenuously for. Initially it was met by a little reticence, as the information is currently detailed somewhere in the depths of the detailed ancillary pack with the renewal form.

  Yet it seems to me, a question needs to be asked directly in the form itself, something like…

  "Do you pay for childcare using vouchers issued through your employer? If so please read guidance note XYZ as some people who do this will be missing out on a substantial amount of tax credits."

  This would indicate to people that there is a potentially substantive issue; which could then refer people on to the more detailed guidance section or better still the government website calculator.

  They promised to look at what the forms currently say and whether it’s possible to amend them. My fingers are crossed it is, as having rejected the substantive changes to the scheme itself, this communicative change is surely the most important.

• Improvements to the government calculator

  Currently the calculator is clunky, unhelpful and difficult to find. The problem stems from the fact that when the government builds a tool it has to be perfect and have every single caveat and variable included. Yet with a complex issue like this it simply makes it unwieldy – and government website tools are already not the most user-friendly.

  However it is a crucial tool to help with this issue, so we volunteered to help work with them to improve the tool. And at the same time will try and build our own ready reckoner version, which is much more simple but will then effectively tell you whether it’s worth bothering doing the government’s one or not.

• Better info from the voucher providers

  Having studied a number of voucher providers’ websites, the information about tax credits is there but it tends to be buried in a mass of information (though there are some examples of good practice) eg it’s hidden under a ’salary sacrifice’ section rather than ‘tax credit’ section so people are not inclined to read it. This isn’t that surprising as of course childcare voucher providers make their money out of people taking vouchers.

  HMRC are going to look at writing to voucher providers to try and make the information clearer. Hopefully the development of a better rule of thumb above should help this, and it would be great if all voucher providers would prominently display this information.

Even these small steps, should at least trigger a message in peoples’ minds, that if they’re using the two schemes they should check whether it is appropriate. Of course closing the black hole would be even better, but that requires a change in policy, and those things are never quick.

Comment and discuss

PS. Tax credits in general

While we were there, in passing, we did raise the issue of the ridiculous over complexity of the whole tax credit system and that we’d love to feedback on it, illustrated with comments from the forum.

As well as the obvious problems, such as the system being designed so overpayments are commonly unavoidable, we were actually more concerned with the simple procedural problems, as these are actually solvable relatively easily, rather than policy changes which are about as easy to impact as the passage of a supertanker.

Our examples included the fact that people must choose whether to fill out the dispute or appeal form if they think they’ve wrongly been overpaid (the difference between what the two is something even those in the meeting couldn’t instantly put their finger on). Why isn’t there just one form?

Another major problem is that while the correct thing to do to prevent overpayment is to tell the tax credit helpline every time you have any change in circumstances, often people calling up with the info are told it isn’t necessary to register that information (technically true, as some information it’s desirable to not compulsory to) and then end up with overpayments all the same.

I don’t envy Steven Timms the task of sorting this out, however I’m grateful they took it so seriously.

As regulars will know recently the site has had responses from David Cameron MP and Nick Clegg MP on Bank Charge Reclaiming, and more specifically the issue of whether payouts should be automatic.

That of course leaves only one UK-wide major party leader yet to lay out his stance, so as promised, I have written a letter to Gordon Brown MP asking for his view.

The letter is below, and will be simultaneously be emailed to Gordon Brown’s office after being posted here.

Dear Prime Minister,

You recently proposed the idea of a consumer advocate – someone who would fight over issues such as unfair bank charges.

We were delighted to see you take interest in this crucial issue, especially as the ‘Bank Charges Consumer Charter’ posted on the number 10 website in Summer 2007 held the undistinguished honour of being the largest ever petition you chose not to respond to.

Specifically I want to ask you to support an act of real political bravery… these unlawful bank charges were taken from peoples’ accounts without asking. No other companies have the power to take cash in this way; if an energy supplier has a dispute with you, it needs to go to court to get the money.

So surely once it’s finally legally decided that they’re unfair, the only right decision is for everyone who’s had bank charges to automatically be paid the money back without needing to ask for it?

This is a crucial issue, from my website alone over six million free template letters have been downloaded, over a million people are currently on hold, and many millions more eligible. Yet the need to apply for a refund favours those with broadband access, and who are financially literate.

The worry is that many who are most in need – the enormous numbers with financial phobias, mental health issues, or literacy or numeracy problems – won’t be able to reclaim. The banks have been blind to their issues and charged them regardless and we must help people get their unlawfully taken money back.

We’ve already received and published replies from the Tories and Lib Dems on this. Nick Clegg has pledged support for automatic payback, David Cameron that payback must be swift and he will look at automatic payback.

With the test case coming to an end surely it’s time we knew your plans.

Kind regards,

Martin Lewis
MoneySavingExpert.com

Of course any response will be published on the site and in the weekly e-mail.

Update: The PM replied to my letter on 22nd September. See news story

Comment and Discuss

A fortnight ago I got a new mobile handset (upgrade) and for the last couple of weeks people have been telling me “I get funny music instead of a ring when I call you”.

I’ve been too busy to check this out until today, but when I did my jaw dropped: instead of hearing ringing when they call, people hear the Knight Rider theme tune. Let me clarify this isn’t my ring tone; it’s what people calling hear before I pick up, and it happens to anyone who calls me.

When I was first testing its mobile web I saw a ‘free knight rider tune’. I clicked it as an experiment, but nothing happened, or so I thought. Instead, I unwittingly subjected every caller – no matter how serious or senior – to Kit’s theme…

Comment & Discuss.

PS. for readers of the last blog, hopefully the Gordon Brown letter’s coming next.