Today’s British University Students Looking at Years of Debt

Recent word has come that those young people from middle income families could well be priced out of a university education after the Government decided to back a sharp rise in fees associated with student tuition. Some in the press are seeing this as a real blow to middle income families who are simply trying to help their kids get ahead in the UK, but others say that these increases are needed in order to help keep higher education operational during tough economic times. As it is right now, many who achieve university degrees end up having to make use of a debt management plan straight out of the starting gates right after graduation.

This is a harsh reality, but in many ways, not a new one. Students in countries such as Canada, the United States and, of course, the UK, have been paying extremely high fees for higher education for a number of years. The change now is that the recent economic down turn has made things a bit more harsh for those without a bit of a financial buffer. The ministers have accepted proposals that will end the annual cap applied to charges related to higher education and also the amount that repayments can be hiked. This, according to economic experts, means that graduates with an average income will end up repaying the most. Since the cost of a degree each year in course fees alone is set to rise by as much as £12,000 that means students will be leaving the university setting with debts in the neighborhood of £36,000 in addition to the living expenses while they were getting their education.

London has proven to have the highest cost of living and here students that face face the highest annual fees at £12,000 will end up leaving with a debt of around £90,000. Experts have also stated that British parents on an average annual income will be looking at around £50,000 per child to send them to university.

Those graduates are not going to be expected to pay right off the bat because they are allowed to begin repayment once their income reaches £21,000 a year and even at £25,000 the repayment would be around £7 each week. However, those earning a more realistic £60,000 needed for a modern life will need to pay £68 each weak that means they will most likely have the debt for their education throughout the majority of their working years. This, critics of the fees hikes say, is making a university education out of reach for the vast majority of middle income earning families.

The proposed changes were put forth by Lord Brow, a former BP chief who received his appointment from the previous Labour government who wanted to restructure the funding for higher education. While some concessions are being made to support low income family students via grants and a lack of repayments demanded from graduates who earn £21,000 or less, the issue ends up being that middle class grads will end up struggling due to their average income. Over time, the interest on these repayment plans will have them paying significantly more for their educations due to the repayment schedule they will most likely need to opt for. Wealthier students should be able to pay back their loans at a far faster rate.

Lloyds Banking Group Not Complying with Regulations on PPI Complaints

The biggest Government-backed bank in the UK, which consists of Lloyds TSB, Bank of Scotland and Halifax, is causing an uproar and receiving serious backlash from its own trade organisation, as well as the Financial Services Authority (FSA). The backlash comes in response to a recent move made by Lloyds to put all Payment Protection Insurance (PPI) complaints on hold. Already, the British Banker’s Association (BBA) had announced that it will seek a judicial review to put a stop to the FSA being able to force lenders to review PPI sales which experts say are well into the millions at this point. If the BBA’s members had to meet the demands of the FSA they would end up paying possibly up to 3 million victims of mis-sold PPI and the overall expense is estimated to be nearly £2 billion to those victims.

On Friday, the FSA said that banks must process complaints until the entire legal process has been completed. The BBA which represents these banks has even stated that the banks are not allowed to select which complaints they would like to place on hold. In spite of this, www.1ppi.co.uk are dealing with large amounts of PPI claims quickly and successfully.

It turns out that Lloyds Banking Group may not end up being the only dissenter among banks. In fact, Barclays has also publicly stated that it will review its own processes for handling PPI complaints. HSBC has said it will handle the complaints, but wants to liasion with the FSA in order to find a way to handle the complains. Santander will hear PPI complaints, but the Royal Bank of Scotland has not come forth with word on its own policy. This leads some banking industry observes to speculate that they believe more banks may try to dodge compensating for mis-sold PPI if they believe they can get away with it.

The UK media has been abuzz recently with the news that banks and other lenders have been mis-selling the so-called ‘protections’ which are intended to cover credit card and loan payments for those unable to work, known as PPI. This process has been going on for a number of years and in the last half decade alone, more than 1 million complaints have been lodged against firms that have mis-sold PPI. So far, the FSA has gone against 24 companies and been very vocal about warning companies against mis-selling this insurance.

According to a spokesperson for Lloyds, the banking group intends to let those settlements that they have already made with victims stand, but that they will try to wait out the court case by putting PPI complaints on hold. Lloyds has stated that the BBA knew what they intended to do. However, the FSA regulatory body has stated that the banks must do otherwise and continue to follow the rules for paying back victims of mis-sold PPI. The FSA represents UK consumers and expects the banks to follow official guidelines despite any complaints they may have about that process. The regulators may end up taking action against those banks which refuse to comply. According to the FSA, putting the processing of PPI complaints on hold is only allowed to be authorized by the FSA, the courts or an Ombudsman.

Now, many UK consumers are left wondering what they could do to try and get their PPI complaint dealt with by the banks. One route that consumers have is to speak with the independent arbitrator called the Financial Ombudsmen Service that typically needs consumers to wait 8 weeks or get a rejection from the Bank before they will get involved in a case. However, in this current situation, the Ombudsman will treat having one’s PPI put on hold as reason enough to investigate without making consumers wait. Since 81% of those who have complained to the Ombudsmen about a PPI case have ended up winning, it is a sound move for consumers. However, only a mere 5% of those who have their case rejected ever take the next step and contact the arbitrator.

Financial experts state the 81% of those taking their rejected cases to the Ombudsmen as proof that the banks are not only mis-selling PPI, but doing so in systemic fashion. That kind of epidemic means consumers have got to be on their guard and fight for their rights if they don’t wish to be taken advantage of by big banks.

Struggle Over Spending Cuts in UK Public Sector Worries Many

The Energy Secretary Chris Huhne recently told the media in the United Kingdom that there could be some changes to the proposed public sector spending cuts. Huhne expressed an opinion that the government should not try to make guesses about the worldwide economy outside of a Budget. According to Huhne, these public sector cuts many in the UK today are leery over could be reduced. Conditions which improve or deteriorate could change the game plan, and that the reduced spending set to be laid out on October 20th is not necessarily yet set in stone.

The Government, said the cabinet member, would need to be sure that it remained flexible if the global economic situation were to change in the near future. The cuts proposed by the coalition will be eased in over between now and 2014, Chancellor George Osborne was quick to point out. The hope for those in favour of the spending cuts is to get the UK economy back on track to deal with a global financial situation that has seen drastic changes since the credit crisis that started in 2008.

These cuts to the public sector could have a strong affect on major cities in the UK, especially, warn top economic experts. Economists have said that the £83 billion in cuts could strike hard at the lowest reaches of a debt weary society that is struggling to rebound. While the spending review is not yet available for public viewing, it would go through all of the prospective changes in what is funded and how it is funded. This means a recession, if it were to arrive again, would knock many right into needing those services since so many British consumers today are looking at less than stable job conditions and higher prices for goods and services in the private sector.

If the harsh talk over the absolute necessity of the cuts could be softened, many hope that it may buy time for a debt weary society, but without pursuit of the proper avenues like a debt management plan, many consumers could still find themselves in hot water as austerity continues to be the word of the day in current times. The reason that a long term solution could work is because there are still 4 remaining years until the full brunt of the proposed cuts would be felt by most. If these cuts happen, the danger is that a deteriorating economy could put many at risk who would need more services from the public sector and if the economy improves then the cuts would be unnecessary. So the argument, it seems, comes down to politics, according to many analysts.

The dreaded Double Dip recession could really put things on the rocks for many UK residents and the Budget, argues Huhne, must remain flexible with an eye towards potential changes. If it does not, things could get very difficult for a growing number of people already battling economic distress.

Pimco Reverses Criticism to Urge British Economic Recovery

In a move that comes as a surprise to many in the United Kingdom today, the 2nd largest bond house in the world has changed its stance towards the Government and how it is handling the national debt. Pimco has stepped forward to issue a far less harsh tone and is encouraging the clients it serves to consider taking a chance on the recovery of the nation.

In the recent past, Pimco has been quite vocal in advising against UK gilts and has said publicly that the company does not believe they would be anything close to a good idea in terms of an investment option for its clients. However, recent news has shown that now the tune is definitely changing and there are a number of reasons that investors should consider purchasing gilts because Pimco no longer believes that the UK will fail to meet its obligations. More savvy investors were advised to get in on the credit default swap market as a way to earn a great deal of money for their efforts.

These comments came from the executive vice president of Pimco, Mike Amey and are definitely a great deal different than what was heard in the past from Bill Gross, the managing director of the company. He claimed that the gilts were themselves “resting on a bed of nitroglycerin” due to the fact that the UK’s debt level was so high. Even as late as April 2010, Gross could be heard sticking to his guns and saying that the UK was part of his list of countries that should absolutely be avoided by investors, including the nation of Greece, much ballyhooed around the world for their debt predicament.

The position that Pimco had taken caused a great deal of public shame for Labour since Andrew balls is the head of the Europe based bond house and is the brother of Ed Balls, a candidate for leadership in the Labour party. Amey, however has come out in favour of the coalition Government and stated that he believes it has shown its intent to take the deficit by the horns and face down the challenge – something he believes is good news. This means, he went on to say, that the a double dip recession does not look to be such a high risk as it appeared that it might be only a short while ago.

Still, Amey remained realistic about gilts and said that he would only go so far due to the risk that the pound sterling now faces, along with inflation. Long term UK bonds, he said, do not appear to him to be of great value. Instead, the CDSs were where Pimco decided to point, showing investors that the market priced the risk of a sovereign debt default by the British Governement too high, in their opinion, and that these would make a far better investment choice when it comes to the UK.

It also goes to show that even Pimco has to admit that they can be wrong from time to time, something that has shown they continue to hold a realistic view even when that view does not particularly set them in a good light. They added that the sovereign debt risk for the UK is an ongoing issue since the levels of debt are staying quite high, but that growth should return in the future, though it will be a great deal less potent than it has been in the past.

Second Round of Global Economic Meltdown May Be on the Way

Things are looking extremely rough and dangerous for the global financial markets as it turns out that a new wave of the recession which started shaking the world in 2008 may be headed back around for another shot at what many economists are referring to as a second Great Depression. With the yield on 2 year United States Treasuries falling to a new low on the records in hopes of some solid ground, 0.61 per cent to be precise, experts are stating that this is as low as the Great Depression that struck during the 1930’s. Just as some were beginning to say that Wall Street was looking good and possibly about to pick up a 3 per cent growth for the 2nd half of 2010, more foul news comes. The bond market happens to be one of the key economic indicators and its performance this year is showing that any kind of global economic recovery may well be dead in the water. According to a Deutsche Bank strategist in credit matters, the issues of credit have given economists and political officials indicators of what would take place throughout the first round of the economic meltdown that now looks to have begun critical velocity during 2007.

The credit strategist went on to say that deflation has now become the most potent risk for the West and is likely going to force the central banks to start easing up in the qualitative sense once again. The Europeans will likely not do this until they have no other choice, but the Americans, says the strategist, will do it pre-emptively. The crisis in banking that Spain is not experiencing, a drop in important economic indicators for the Chinese and the steady erosion of confidence in the US markets are all working together to create something of a perfect storm for this meltdown. Paul Krugman, a winner of the Nobel prize, has warned along with other important global economist thinkers, that not only is the current recovery in danger of failing outright, but that if the North Atlantic region (which includes the United Kingdom) tightens their purses, then things could get even worse far more quickly. According to Krugman, this is the beginning phase of a 3rd depression that is the direct result of failed financial policies. He went on to say that both Europe and the US face striking deflation at the same level as Japan is well known for – and, Krugman says, the Fed is doing not a thing about these potential pitfalls.

China, meanwhile, is having their own set of problems and this is crucial since the Asian giant controls so much of the Western world’s manufacturing. With the Shanghai composite equities index falling a full 4 per cent to be 55 per cent below the peak it had at the end of 2008, Chinese authorities will work to tighten their hold over the economy and curb not only property speculation, but inflation, as well. Already, prices for homes in both Shanghai and Beijing are more than 12 times the average income, a fact which may be hard for even the savvy Chinese leadership with all its methods of control to fix in a meaningful way. Instead, the banks that are owned by the state now have a large amount of hidden debt to deal with.

Freight rate measuring tool for the shipping of bulk goods, The Baltic Dry Index, has dropped 40 per cent in May of 2010 alone and this is unnerving to many economists since it is a measurement of the flow of goods across international waters and a key indicator of global economic health. Top this off with the fact that the European Central Bank is going to shut off £361 billion in emergency single year loans, the largest amount a central bank has ever made available, and it is easy to see why economists are extremely edgy about the future. Spanish banks are unable to get their loans extended and this will mean awful things for the European nation, but a great many banks are said to be facing tragedy beyond the borders of Spain, as well.

Sources say it is only a matter of time before the 3rd largest holder of debt beneath the United States and Japan – Italy – reaches the tipping point and once debt settles there it will be a matter of time before everything hits collapse phase for monetary union.

Housing Debt Won’t Be Cancelled for High Council

According to recent word from the chief secretary to the Treasury, the government of the United Kingdom will not be able to write off £146 million in housing debt for Scotland’s Highland Council in the short term. As it turns out the MP for Iverness, Nairn, Badenoch and Straspey, Danny Alexander, is actually known for having campaigned to have that debt be written off in his earlier campaigns. While it does not surprise political observers that government officials would be caught reversing their positions once in office, it does come as a shock to the Highland Council that had high hopes for a solution to debt woes.

The visit by Alexander to the Scottish Parliament led him to make a statement that the importance of the overall financial situation in the UK trumped that of the Highland Council’s debt troubles for housing. Right now, Highland is having to spend £15 million per year on loan charges simply to keep the debt at bay. With the situation being so serious, debt at the consumer level is also getting tougher, so many Scottish citizens who also face tough times are entering into a Scottish trust deed to try to find their way back to financial freedom. A clear indication of what economists commonly refer to when they mention that the higher levels of government are often engaging in financial behaviours that are reflective of their citizenry – no matter which government one is referring to.

Highland maintains that if the debt were cancelled so that the burden were removed, it would be able to commit more money towards the goal of improved housing stock. Alexander has assured the Council that he can not offer any hope for the situation at this time. He claims that the UK must solve overall debt woes before helping out any specific part of the country.

The tenants of the local authority voted in 2006 to not transfer ownership of over 14,000 homes to a privatized housing association (the Highland Housing Association) by a vote of 60 per cent having the majority say against the plan. This went against the ministers and leaders of the Highland Council who had encouraged the tenants to support the transfer of ownership. That move would have yielded not only a clearing of £160 million in debt, but more than 1,000 new houses constructed.

Bank Customers Stunned by Supreme Court Ruling on Unfair Overdraft Charges

After fighting what it believed to be unfair overdraft charges from banks, the UK’s Office of Fair Trading (OFT) has lost its two year court battle against seven major banks and one building society. The case had begun in lower courts, but after appeals by the financial giants, landed in the Supreme Court where the five most senior judges in Britain ruled that the OFT does not have the power nor authority to monitor banks for unfair charges. As a result, many customers expecting refunds of wrongly applied and excessive charges will get nothing back, the bad news coming at a time when many had been looking forward to having their money returned in time for the upcoming holiday season. A large percentage of those expecting the return of these fees will be turning to Individual Voluntary Arrangements and Debt Management Programmes as a way to get back on their feet financially.

The ruling stunned both legal and financial experts who had no doubt that the Supreme Court would rule in favour of the OFT rather than the banks. In fact, in a previous ruling, the banks had been told not to bother taking their appeal to the Supreme Court because there was almost no chance that they would succeed due to widespread disapproval from consumer advocacy groups working to help a huge number of UK consumers already struggling under massive loads of debt.

The OFT had sought to monitor these charges after customers began reporting fees ranging from £20 to £50 for each accidental overcharge to their accounts, even if those accidents were only a few pounds more than their account’s balance. In particular, consumer advocates felt that the fees were designed to target lower income customers who are already financially at risk and that this made the bank’s practice look eerily similar to predatory lending, a greatly disapproved of practice in Britain. Prior to taking the case all the way to the UK’s highest court, the OFT had won two cases in both the High Court and the Court of Appeal, exactly as experts had predicted.

The OFT had expressed concerns that the flagrantly high overdraft charges were unfair and could be considered unauthorised charges since they were subject to changes in price, without written or verbal customer consent, at the whims of the banks themselves. However, the banks considered the terms to be part of the contract customers signed when opening an account and alleged that the overdraft charges were needed to avoid having to charge fees for other services given to customers with more money in their accounts.

Financial and legal experts remain greatly puzzled as to why the judges of the highest court in the land ruled in the manner that they did after the previous rulings by the lower courts. The judges did issue a brief statement that the OFT has interpreted to mean that the grounds of their case was too narrow in scope to be effective at allowing them the power to monitor the banks fees to its customers. In other words, the Supreme Court feels the OFT, an official government body, does not have the right to monitor banks in an effort to protect financially vulnerable consumers from large lending institutions – at this time. The OFT had intended to investigate the fairness of the charges under the Unfair Terms in Consumer Contracts Regulations 1999, but have been told that this will not be considered possible under the law as it stands now. The OFT was also told not to pursue the case in the courts of Europe and to keep it within the UK.

The defendants in the case that the OFT brought were one building society and seven banks, including HSBC, Lloyds TSB, Nationwide, Clydesdale Bank, HBOS, Barclays, Abbey, and the Royal Bank of Scotland Group. All of these lenders had claims pending against them by a staggering number of customers, but all of those claims were frozen by the Financial Services Authority pending the Supreme Court’s verdict.

This means that customers waiting to get their fees refunded will now likely never see a penny returned to them. Had the ruling gone in favour of the OFT, the banks were facing nearly £20 billion in presumably unfair overdraft charges that they would have had to give back to customers. This would have been quite a blow struck to an already teetering financial sector, but also a major boon for consumers struggling with historically high levels of debt themselves.

The Treasury has promised to more aggressively pursue lending institutions that insist on excessive charges, going so far as to state that they intend to push forward legislation to cap overdraft charges if the banks and building societies will not limit the charges on their own. While this may help future customers of the lenders, it will unfortunately leave all those who have been overcharged up until now with zero compensation.

Many people are curious about what has happened during the past twelve months that could possibly have led to this Supreme Court decision. Over the past two years, despite the appeals by the banking institution, legal experts had been positive that the OFT would be clear to return the overdraft charges to customers, especially if the case made it to Britain’s highest court. However, during this time the government has bought up 43% of HOBOS and 84% of the Royal Bank of Scotland, two powerful UK banks. Adding to this the fact that the government recently announced that it secretly injected 62 billion pounds into both of these banks, could there be a conspiracy in play or is it simply coincidence that the government was facing a 20 billion pound loss if the OFT had gotten its way?