Two Pennies Worth

Is your PIN safe: Who's looking over your shoulder?

Sam Dunn says that taking security precautions with your financial details is nothing to be ashamed of.

“Her face reddened slowly as a flush grew on the back of her neck and a faintly audible stammered excuse tumbled forth from her lips.”

Sadly this isn’t the intro to a lascivious yet lucrative airport bonk-buster but a minor humiliation in a supermarket checkout queue last month. 

The catalyst was a youngish woman’s efforts to cover her personal identification number (PIN) pad as she tapped in her four-digit security code to pay for a few groceries.

Her awkward hunch over the counter had first sparked a loud titter or two from a fellow queuing shopper in front of me, especially when she appeared to forget the number and had to start again.

Yet it was only the booming boorish comment from a man behind her, a snidey “Don’t worry, my love, I’m not going to rob you!”, followed by the checkout assistant’s rolling eyes that made me realise how uncomfortable the woman was and how unwarranted – and unwelcome – this attention was.

Improved security

The chip and PIN system rolled out in 2005 is designed to reduce card fraud by doing away with easily-forged signatures. By issuing everyone with special plastic and PINs, it’s much harder for criminals to sneakily solicit your details for a spending splurge.

However, while banks and retailers have done their bit to upgrade technology, we also have to play our part to make it work – and too many card users remain churlishly ignorant, impassive or simply don’t give a fig for the risks.

Last year, some £47.6m was withdrawn from ATMs by fraudsters using cloned or skimmed credit and debit cards and, on top, £44.4m spent on stolen or lost and mislaid cards.

This is no chicken feed, but the toe-curling supermarket scene – an embarrassed shopper unjustly ridiculed for being alert to the security risks from simple “shoulder-surfers” (fraudsters who note an uncovered PIN and later steal or copy the card), as well as the possibility of more elaborate scams involving gangs and tampered handsets, staff or CCTV – suggests many have an attitude that believes otherwise.

Safety first

Falling victim to card fraud isn’t just a major inconvenience, with cancelled plastic and a frustrating need to rely on cash for everything.

It also usually requires you to prove your innocence and although consumer law states very clearly that banks must refund fraudulent chip and PIN transactions, banks have become particularly adept at rebutting such claims.

Increasingly, they argue that the customer must have been “grossly negligent” to have let it happen, and refuse to pay out. (If this does ever happen, complain vehemently to the Financial Ombudsman Service which can demand evidence to the contrary.)

Avoiding such a hassle at all cost should be a key priority for any bank customer – yet plenty of shoppers steamroller on with a blithe disregard for PIN security.

A quick check

Last week, for research purposes of course, I determined to see how many PINs I could pick up simply by shoulder-surfing in cash point queues and at store tills.

During 30 minutes inside a busy shopping centre, I made out the four-digit code in eight out of 10 such situations without any special effort; in most cases, absolutely no attempt was made to cover the key pad when punching in their PIN.

Personal security lapses aren't confined to just chip and PIN; on two separate occasions recently, I listened without much difficulty to a stranger's mobile phone conversation.

In each case, I was able to pick up the key details needed to commit fraud: his name, address, card number, expiry date AND the three-digit security number on the reverse.

Of course, the probability of a fraudster eavesdropping at exactly the moment he openly gave away the keys to his credit card account was pretty low, but such indifference can sadly only boost the odds of falling victim to crime.

This kind of recklessness remains the exception rather than the rule, but it's an unhappy state of affairs that so many are so slapdash with their personal financial data.

How much do you love your partner?

Confused.com columnist Sam Dunn says couples should tread carefully when considering a financial union.

I don’t pry out of excessive prurience, of course, rather from genuine concern for your cash.

When any couple make a commitment to each other, it’s not too long before their finances draw closer together too – a joint credit card often pops up first, followed by savings, then a current account and mortgage.

Naturally, two wallets are better than one: a step-up in spending firepower; more generous savings for a smarter car; a bigger mortgage for a larger property.   

Yet your heavenly match could also leave your money in hell if it all turns sour.

For starters, your credit rating could collapse.

Or you could end up forking out for your partner’s profligacy and bad card debts.

And how about paying every penny of a joint home loan because your ex-partner is either bad-tempered enough to refuse to pay or has fallen on hard times and can no longer keep up?

Double trouble

The problems are twofold. First, very few of the lovestruck bother to stop and carefully question the risks of hitching their personal finances to those of another.

Second, and rather more delicately, even fewer would ever dare suggest a solution to the risks of bigger joint financial decisions such as a mortgage or pension: a neat legal document detailing what would ever happen in the event of a split.

Unfortunately, passion killers don’t get any bigger than two sets of lawyers’ bills so to spare you such humiliation, here are crucial pointers about knowing when to best pool your finances - and when you’re better off pulling apart.

Home is where the heart is

Doubling up has its greatest impact with a mortgage as you can usually borrow a larger sum than when going alone by adding your salaries together; an income multiple of three or four times a combined £60,000 tends to buy you a swankier pad than one with a solo £30,000.

Yet make no mistake, when you sign the mortgage forms, you become jointly and severally liable for that monthly sum; if the relationship heads south and either you or your ex can’t – or won’t – pay, the bank or building society can legitimately hound either or both of you for the money.

This same principle can sour joint credit cards or loans (and even utility bills) too: if your personal circumstances deteriorate, the debts must be settled. And if one party defaults or is unable to pay, the other half remains liable.

Banking issues

What about a joint current account? While it at least relieves a couple’s administrative burden by corralling payments for all bills, it also poses a credit rating risk by creating a financial “link” between the two of you noted by credit reference agencies (a joint mortgage will alert them too).

So if you or your other half hit the skids financially, the poor money management can be contagious if it damages your joint account and make it harder to obtain fresh credit.

A joint life insurance policy might sound like a simple money saver – a £500,000 payout for less than the price of two separate £250,000 policies – but carries particular risks all on its own.

If you were to split years down the line, that joint cover would need an instant junking in favour of a likely very expensive replacement (to pay for dependent kids, say) since you’ll be older with less robust health.

Similarly, even if still together and one half sadly dies, the survivor will benefit from the larger payout but any new subsequent life cover would likely cost more if many years have passed.

Get saving and avoid tax

At least joint savings offer a brighter vision of financial unity: two incomes channelling spare cash into an emergency fund will generate a bigger savings pot much more swiftly than one.

You’ll also qualify for double the usual £85,000 guaranteed protection in the event of a bank crash – cash in joint accounts counts as a half each, so together you can save £170,000 without fear of loss.

And if one partner earns significantly less than the other – or nothing at all – they can cannily avoid higher tax bills.

By parking as much in the way of joint savings in the name of the lower-earning partner, they can make use of the £7,475 tax-free personal income allowance (if under 65) and lower savings tax rates to legitimately keep as much interest as possible. 

Rip-off Britain is here to stay

Consumer champion, Sam Dunn tells Confused.com warns us that the most common day to day rip-offs are here to stay.

If you took the reins of a major UK company, would you instinctively hustle your customers?

I only wonder because every month or so, another swathe of the British public falls victim to hucksterish rip-offs.

Last week, Consumer organisation Which? filed a so-called “super complaint” with the Office of Fair Trading (OFT) in a bid to kibosh "rip off" surcharges levied by companies on debit and credit card transactions.

Teams of Which? researchers discovered that, while the cost to companies for processing a payment by debit card hovers around 20p and is no more than 2 per cent of the transaction value for a credit card,  companies regularly charge far higher fees.

Egregious examples included train-ticket booking site the Trainline slapping on a £3.50 charge for credit card payments while Eurostar laid it on extra thick at £4.

Naturally, the retailers themselves contend that they’re trying to recoup the cost of charges levied to them by banks and card issuers.

The Which? salvo is just the latest in a frankly ludicrous litany of criminal charges and rapacious rip-offs that continue to leave the average UK punter blinking in a state of incomprehension.

What could go wrong with council tax band valuations? Easy: estate agents drove down streets in second gear and wrongly valued some 400,000+ homes leaving many overpaying thousands since the early 1990s.

Or how about the sale of over-priced payment protection insurance on credit cards and personal loans?

And don’t forget monstrous personal pension mis-selling in the late 1980s where providers creamed the fattest of commissions for their own pay packets while convincing retirement savers to swap a secure final salary scheme for the vagaries of the stock markets.

Then there’s endowment mortgages (cheap interest-only home loans were an easier selling point than complex stock market-related endowments), high-risk precipice bonds for elderly savers, door-step selling, split cap investment trusts….

It would all seem to suggest that being a modern-day mountebank is either too lucrative to ignore – hang the inevitable penalty fines that ultimately come with it! - or that it doesn’t take much to swindle the ordinary British customer.

But I wonder how much of it is vanquished victims and the rest middling mugs?

Part of the problem is that enough of us, when faced with outrageous card charge hikes or preposterous sales pitches, still plough ahead and buy anyway.

In worst-case scenarios, many won’t have a choice because of lack of income or poor knowledge – especially among the vulnerable and elderly – and that’s a nasty exploitative situation we can all do without.

However, it’s also the case that many more who do have a choice will be complacent and won’t think to cast even a fleeting glance at small print; won’t blink at a spiralling credit card charge because they can afford it; or are simply too trusting to ever balk at a particular charge and say ‘Excuse me, did you just say that would cost me X? I’ll have to think again.’

Of course, there’s greed too: barrelling headlong into a financial arrangement – take your pick from store finance to hire purchase or credit card promotion – simply to get your hands on favoured goods is nobody’s fault but our own.

Unfortunately, all these flaws favour those with money over those without: and if enough of the former carry on with their daily financial routines like this, it’ll simply get worse for the latter.

Rip-offs thrive in such adverse conditions as, when consumers don’t all pull in the same direction, their overall protection remains stunted.

Until this changes, all manner of snake oil salesmen, profiteers and traders seeking to make a fast buck – whether dressed up in corporate suits or flogging fakes in back streets - will continue to creep into our lives.

So look lively: the rip-off is here to stay for a long while yet.

Are we getting tough enough on payday lenders?

Just a couple of weeks after Confused.com took a look into the practices of payday lenders, the Office of Fair Trading (OFT) published their own report on high-cost credit. Stephen Jones examines the results and calls for greater action to protect consumers.

The OFT this week published a report covering the areas of high-cost lenders such as pawnbrokers, home credit providers and, significantly, payday lenders. Anyone who keeps tabs on this blog may remember that only a couple of weeks ago I took a look into the lending practices of the latter, to find that many were failing to provide sufficient information to customers.

The investigation contained a number of recommendations aimed at better regulating the high-cost credit industry, but stopped short of calling for price controls; despite many people’s claims concern at annual percentage rates (APR) that often reach into the thousands.

While most of the press predictably raged at the OFT’s decision not to cap these huge interest rates, I tended to take an entirely different view. Enforcing a cap would simply mean the payday loan companies place charges elsewhere, making it more expensive for customers that use them sensibly in the short term and potentially pushing people into the arms of decidedly more sinister loan sharks; something which surely no-one wants.

But that’s not to say I was entirely satisfied with the recommendations put forward by the OFT. In particular, I was concerned that they didn’t take any strong stance on the deferral process and forbearance. Many readers have contacted me to complain about the way some of these companies have dealt with them when they are struggling to pay off their debts. Indeed it seems that you are offering a very different picture to that of the OFT; who simply claim that “some” lenders show forbearance with repayment difficulties.

Not only that, but there is also the issue of clarity. As I mentioned in my previous blog on payday lenders, the majority of sites I went to offered insufficient information about the cost of deferring payment, something which is clearly out of line with the OFT’s own guidelines. One reader that emailed me complained that, when she couldn’t pay in full, two companies took interest payments from her account without telling her beforehand. Yet, in spite of this, the OFT seems not to be concerned about this issue at all, going on this week’s report.

So, in response, we at Confused.com have put together a four point plan to protect consumers from unscrupulous payday lenders:

•    The introduction of a code of conduct which includes clear, easily available information about the deferral process and any charges involved.

•    Much more stringent checks to ensure forbearance across the industry for those with ongoing debt problems. While some currently offer support for those unable to pay off their debt, our feedback from customers indicates that this is not being offered across the board.

•    A push to make payday lenders offer or promote the use of free, impartial advice in the same way banks do;

•    Support and promotion for credit unions as a source of lower cost lending.

This is something we’re pretty passionate about, so keep your eyes peeled for more on this subject on our site and in our next newsletter. Until then, we want to hear from you.

If you have dealt with a payday lender, we want to hear your experiences – good or bad. Just comment below, email me at stephen.jones@confused.com or tweet them to us @confused_com.

Treating customers unfairly

By Confused.com's Stephen Jones

Ever feel like nothing ever gets done? I got that very feeling yesterday when an email dropped into my inbox from the Office of Fair Trading (OFT). Now, I get quite a few of these; usually something nondescript like today’s thriller – “OFT asks European Commission to investigate Procter & Gamble air freshener acquisition”. Was that as interesting as it sounds? I’ll never know, because I deleted it immediately.

But I digress – yesterday’s email was a significant one; not that you’d realise it at first. It was a press release outlining the OFT’s final report on retail banking – grazing (and I choose that word carefully) upon the controversial subject of overdraft fees.

Now, for anyone with a bit of an interest in personal finance, or indeed anyone with a bank account, this is something that we have all been waiting quite a long time for. Before I get to what it contained, let me give you a potted history of the bank charges saga:

Timeline of treating customers unfairly

2005: Several banks raise their charges for unauthorised overdrafts by around 50 per cent over the year, meaning that you can be charged as much as £38 for going 10p over your overdraft. Unsurprisingly, people get angry.

2006-2007: Complaints begin to gain in pace after widespread media coverage. Many receive full refunds of their charges, and banks largely cower in fear.  

July 2007 – As claims against banks begin to overwhelm the courts, the Office of Fair Trading steps in with its own case to clarify whether the charges are fair.

November 2009 – After three defeats against the OFT in the High Court, the banks finally gain a shock victory at the Supreme Court. Hope is given that an appeal can be made under different rules.

December 2009 – The OFT decides against making another challenge, and instead says it will publish a detailed report in March 2010 after discussing with a variety of parties.

Which brings us up to this week, when the long-awaited report was finally released. If you don’t already know the outcome, I apologise for having built this up quite so much – in truth it was little more than a token gesture and, frankly, calling it a total cop-out might be more pertinent.

Included are no fixed rules preventing banks from profiteering through unfair charges, and instead, it seems that the powers that be have effectively allowed the sector to, once again, regulate itself. Because, of course, it worked so well last time.

Giving up on consumers

The most disappointing thing about all of this is that it now feels like even an official body designed to protect consumers has given up, er, protecting consumers in the face of the stubborn, profit-hungry banking industry.

The Treasury have indicated that they would be willing to legislate if banks failed to follow the OFT’s flimsy recommendations, but, as they refuse to put a cap on charges, this is likely to be just a recycling of the same hot air that has been spouted on numerous occasions over the last two years.

In truth, it’s likely that banks will reduce their charges for competition’s sake, but that doesn’t mean consumers won’t be pinched elsewhere. It only took two hours after the OFT’s soggy announcement for HSBC to launch a new account with strictly no unarranged overdrafts – at the princely sum of £15 a month.

If the thunder doesn’t get you, the lightning will. You could be forgiven for thinking this is pretty depressing stuff, and for that I apologise; but bear with me for one quick rallying cry. Just because the OFT and the government look impotent in the face of a challenge with the banking sector, there’s no reason why we should. So, the question I want to ask is this; do you think this is an issue that needs resurrecting?

Let us know how you feel about it by posting a comment here.