Son Died from Payday Loans

I read this in the Sun and felt it required read by all.

THE devastated parents of a teenager who committed suicide have said the 18-year-old took his life because of the spiralling debts he owed payday loan companies.

Now Geoff and Dawn Scott are calling for a cap on sky-high interest rates charged by lenders such as Wonga.

Bright IT apprentice Oliver — known as Ollie to his mates — committed suicide in September, seven months after admitting to his family he had become addicted to gambling at bingo halls.

To fund his habit, Ollie used his smartphone to access a series of quick-fix loans — some with interest as high as 4,214 per cent — with the money in his account in less than 30 minutes.

His mum Dawn said: “I think you’re not mature enough at 18 to borrow. Kids with computers and iPhones can just touch a button. It’s not real.

“When I wanted a loan for a car when I was starting off I went and saw a bank manager.”

Ollie — who was a popular and exceptionally clever lad, passing at least 14 GCSEs — took loans out with payday loan providers Wonga, Cash Genie and Toothfairy Finance.

But tragically the repayments became too much and he was killed after being hit by a train.

Interest accumulated so fast that Geoff and Dawn, of North Stifford, Essex, still don’t know the true extent of Ollie’s debt, although Geoff paid off almost £4,000 while his son was alive and demands totalling more than £2,500 have arrived since his death.

Payday lenders offer anything up to £1,000 a time without the need for a full credit check. The recession has led to a boom in the sector as Brits struggle to meet day-to-day living costs.

Geoff, who works as a chauffeur in London, said: “I could not believe someone with his intelligence would do this.

“Oliver was not an idiot. This is someone who could explain everything about APR and interest rates to you.

“All he used to say to me was: ‘It’s just like pressing a button. It’s not real money.’ When you fall into that trap there is no way out.”

After Oliver’s tragic death letters addressed to him arrived from different payday lenders and debt collection agencies. They included a bill from Toothfairy Finance, dated September 17, totalling £866, and a demand from Cash Genie for £125.

Geoff had to then fax a copy of the coroner’s statement to these companies.

The couple, who have two younger children, believe Ollie’s death highlights the dangers that these loan companies pose to a computer-savvy generation where cash is just a touch-screen away. Both believe the Government should insist on capping interest rates.

Geoff said: “The Bank of England base rate is just 0.5 per cent, a mortgage could be up to five per cent and a credit card 19 per cent.

“So how did someone come up with 4,200 per cent and authorities agree it legally? That’s what I’m annoyed at.”

Childminder Dawn added: “Ollie was on a computer from an early age. He found it so easy and was very intelligent. The kids of today, it’s not real to them.”

Last week we reported that Wonga have been told to clean up their act after being slammed by the Office of Fair Trading for harassing borrowers.

When asked about Ollie’s death, Wonga said: “We were greatly saddened to hear of Oliver’s passing and our hearts go out to his family.

“We don’t know the full circumstances surrounding this tragedy, but we can confirm he was a customer and that all loans were settled.

“The last loan repayment has since been refunded and we closed the account as soon as we were made aware of the situation.”

Peter Tuvey, managing director of Cash Genie, said: “Cash Genie adheres to a lending policy which includes strict lending criteria such as detailed credit reference checks and financial assessments. We also have a dedicated financial solutions team should any client fall into financial difficulty.”

Lloyds Recent Debt Report

As we approach the Queen’s Diamond Jubilee, new research by Lloyds TSB has looked at the key developments in the UK savings market over the past 60 years. The analysis starts a year before the coronation of Queen Elizabeth II at a time when the country was recovering from World War II and some rationing was still in place.

Key headlines: 

• 464% rise in the real value of UK household savings over the past 60 years.
• Savings now stand at an average of over £150,000 per household, including pensions, investments and deposit savings, compared with just below £50,000 in 1951 (at today's prices).
• Many, however, have little or no savings.
• Household savings recorded their biggest rise in value in the 1980s. Whilst savings fell in the 1970s in inflation adjusted terms.
• Deposit savings' share of total savings has fallen from 42% to 29% since 1951. Pensions and life insurance's share has more than doubled from 24% to 53%.
• Households have saved an average of 6% of their net income since the 1950s.
• The gross interest rate offered on no notice accounts has averaged 6.01% over the past 60 years. In real terms, savings rates averaged 0.29%.
• Savers clubs to investments funds: there have been significant changes in the UK’s savings habits.

Suren Thiru, economist at Lloyds TSB, said:
"The UK savings market has undergone some extraordinary changes over the past 60 years, reflecting the changing way we live our lives. Today, the typical saver is very different compared to the 1950s with the vast majority of savers now viewing their nest egg as an investment rather than as something for a rainy day. This change in attitude is partly as a result of the substantial growth in personal wealth over the period.

Looking forward, savings levels are likely to continue to increase as households look to improve their finances. Furthermore, an increasingly ageing population is expected to save more in the future due to the need to put more aside for retirement."

Total household savings
The value of household savings – including pensions, shares and deposit savings – in the UK has risen by 464% in real terms1 over the past 60 years. This is equivalent to an average annual rate of growth of 2.9%, comfortably outpacing the 1.6% per annum average rise in real earnings over the period.

UK household savings now stand at £4,177 billion, representing a nearly six-fold increase from £741 billion in 1951. In per household terms, average savings have increased more than three-fold from £49,511 to £153,529 (in 2011 prices).

There are, however, considerable differences in the value of savings with some UK households holding little or no savings. Almost one in three (30%) UK households have no savings (accounts and investments) and a further 19% hold savings of less than £1,5002. Household savings recorded their biggest rise in value in the 1980s with a real increase of 115% between 1981 and 1991. The substantial rise in the value of pensions and life insurance held by households, caused in part by the changes to private pension provisions, was a key driver behind the strong erformance of household savings during the decade.

In contrast, the worst performing decade for real household savings was the 1970s when there was a 12% fall as high inflation eroded the value of savings.

Over the ten years to 2011, real household savings rose by 7%; the second worst performing decade over the past 60 years.

From Christmas clubs to investment funds: our changing savings habits In the 1950s, savings activity by UK households was mainly focused on saving for a special occasion as evidenced by the popularity of savers clubs, such as Christmas clubs and holiday clubs, and the greater use of organisations such as National Savings Committees.

Although these clubs offered no interest, households saved an average of 2 shillings and 11 pence a week in savers clubs in 19573, more than a fifth (21%) higher than the 2 shillings and 5 pence of savings made through the purchase of savings certificates and sums deposited in savings banks.

Today, most households view savings as an investment in order to smooth future consumption with funds now most commonly held in financial institutions. This is reflected in the increasing popularity of ISAs . Since their introduction in April 1999, the number of cash ISAs has risen by 160% to reach 11.9 million in 2010/11. There have also been marked changes in how we save with a large share of savings transactions taking place remotely (i.e. online, by phone or by post).

The rise of the single saver 60 years ago, savings was very much a family affair with men, typically seen as the main breadwinner, contributing most to household savings. The rise in both one-person households4 from less than one in five households (19%) in 1971 to one in three (33%) in 2011 and greater personal wealth has led to greater independence when making savings
decisions.

Women now save more
In the 1950s, women earned significantly less than their male counterparts therefore limiting
their ability to contribute to the family savings pot. Today, female savers in the UK have an average savings balance equivalent to 40% of their gross annual earnings, almost double the proportion of earnings saved by men (23%).

Savings instruments
The value of deposit based savings6 has nearly quadrupled (up by 290%) in real terms over the past 60 years; from £312 billion in 1951 to £1,218 billion in 2011 (in 2011 prices).

However, deposit savings' share of the value of total household savings in 2011, at 29%, was nearly one-third lower than its 42% share in 1951.

The 1980s saw deposit savings decline as a proportion of total household savings, falling from 40% in 1981 to 29% in 1989. This decline continued into the 1990s as interest rates started to fall, so that by the end of the millennium, deposit based savings accounted for less than a fifth (19%) of total household savings.

However, over the past decade, deposit savings' share of total household savings has rebounded, reaching 29% in 2011. The popularity of ISAs and the significant decline in equity prices have contributed to the rising share of deposit based savings over the past ten years.

Among the non-deposit savings instruments, pensions and life insurance assets' share of total household savings has more than doubled over the past 60 years from 24% in 1951 to 53% in 2011. The changes to private pension provisions in the 1980s was a key driver of the rise, helping to lift pensions and life insurance's share of total household savings from 33% in 1979 to 48% in 1989.

In contrast, the poor performance of equity markets over recent years has shrunk the value of equity savings. As a consequence, equities have fallen as a proportion of total household savings from 23% in 2000 to 13% in 2011.

Proportion of income saved
Households have saved an average of 6.2%8 of their net income over the past 60 years. The household saving ratio was highest in the 1970s – at an average of 8.9% between 1971 and 1981 – and lowest during the 1950s (average of 1.2%).

In 1951, the household saving ratio was negative, at -2.0%, and remained below 2% for the remainder of the decade. The proportion of income saved by households grew strongly through the 1960s and 1970s as interest rates increased to combat high inflation, reaching a 60 year high of 12.2% in 1980 with official interest rates at 14%.

The consumer debt boom and relatively low interest rates that characterised the 'noughties' saw the household saving ratio decline during the 2000s to a low of 2.6% in 2007. The saving ratio has recovered since 2007 to reach 7.4% in 2011 as households have sought to bring their finances onto a sounder footing.

Households save more during recessions
The historical peaks in the saving ratio have been during, or very close to, periods of recession. The household saving ratio reached a 60 year high of 12.2% in 1980 when the UK economy was in recession.

Landlords Told to Minimise Risk for Students

As research reveals that the number of tenants seeking help with rent arrears, affordable property developer FreshStart Living reveal 10 steps for landlords and buy to let property investors to take to lower the risks involved with late rental payment.

Debt charity, the Consumer Credit Counselling Service recently revealed that more than 10,000 people asked the charity for help with rent arrears in 2011 – a 27% increase on 2010.

According to a recent buy to let index, in March 8.7% of all rent was late or unpaid and an average of 94,400 tenants were more than 2 months behind with their rent payments.

Affordable property developer FreshStart Living is urging landlords and buy to let property investors to take actions to minimise the risks to avoid the problems that late rental payments can cause.

FreshStart Living has compiled a list of ten steps for landlords and buy to let investors to take in order to lower the risk of having to take legal action against tenants.

1. Keep on track of tenants’ financial situations – If they have a habit of missing payments, ensure that your arrange a date each month when they are guaranteed to have the money ready. This could be the day after pay day.

2. Chasing the rent arrears – Establish a firm rent chasing timetable including letters before legal action, telephone scripts, serving notices etc, and make sure that that all staff are aware of these procedures.

3. Get the right tenant – Work with a good tenant referencing partner and don’t cut corners in the checking procedures.

4. Is the Tenancy Deposit correctly placed? The changes in legislation under the Localism Bill took effect in April, and we have heard of solicitors acting for tenants on a no win-no fee basis to catch out landlords and agents if they haven’t complied with the regulations.

5. Guarantors agreements – Buy to let investors need to ensure that they maintain up-to-date contact details for Guarantors so that they can copy them in on all correspondence you send to the tenants regarding their late/overdue rent. This helps apply additional pressure to the tenants to pay.

6. Is your procedure for serving Section 21 notices compliant? Last year it was reported that 70 per cent of notices were thrown out of court because they were wrong. More landlords are relying on the accelerated procedure to regain possession. If the notices are incorrectly served, there will be delays and additional costs that the landlord may seek to recoup from their agent.

7. Make sure tenants know the landlord – Tell them if there are any mortgage or other outgoings at the start of the tenancy and your attitude to risk if the tenant was to default. It takes approximately eight weeks from a possession claim being issued to an order being made – as a landlord can you afford this situation? A Legal Expenses and Rent insurance policy from a specialist supplier may be the solution.

8. Know your tenant – landlords should maintain contact with the tenant, to establish why the rent is late or unpaid. It will improve the landlords chances of a successful outcome.

9. Making an insurance claim – contact the insurers at the earliest opportunity and follow their claims procedures.

10. Keep a record of all payments, transactions and missed payments – If a case does go to court landlords will need to have all the paperwork to prove that rental payments are not being made, or if they are not being made on time. This will act as vital evidence in your case against a tenant.

FreshStart Living specialise in developing affordable residential and student properties in the UK which are sold on as buy-to-let property investments to investors all over the world.

The company offers property investment opportunities starting at just £29,950 with guaranteed rental yields for up to ten years.

Paris Top Spot for Student Property

Paris has narrowly beaten London to be ranked as the top spot for investors in student property.

Knight Frank has compiled a report looking at the investment potential of European cities popular with students.

London missed out on the top spot for student housing due to the high cost of living, according to the Knight Frank research; it is followed by Vienna, Dublin and Barcelona.

James Pullan, head of student property, Knight Frank, commented: “Student accommodation in the UK has delivered solid and consistent returns throughout every year of the economic downturn, thereby attracting significant volumes of international equity and institutional debt into the sector.”

The number of students travelling overseas to attend university has been rising steadily in recent decades, and this trend is set to continue. Just as the world’s economies have become more globalised, with the relaxation of trade barriers, education has also become a global commodity.

Students now seek out the best educational institutions across the globe. The factors that lie behind this trend are: 

• the rise of the middle classes in emerging economies, especially Asia;
• the growing acceptance of international higher education qualifications across the world;
• a new ‘internet generation’ of globally connected and well-informed student consumers

James Pullan commented: “The rise in global student mobility has created an excellent opportunity for investment in key European cities and is a long-term trend that is set to continue. This structural shift in the make-up of student populations has significant consequences for cities that play host to the world’s best universities, and throws up key opportunities for developers and operators.”