Yambo

Weathering the current credit storm for individuals seeking personal loans or mortgages may hinge on their swiftness to act before Christmas. (more…)

In its Precious Plastic 2008 report, PricewaterhouseCoopers (PwC) states that credit card providers are realizing declines in profits due to the increasing number of consumers being unable to make repayments, as well as increased competition in the saturated business sector.

Richard Thompson of PwC recently stated, “Banks are continuing to take action in response to the rise in consumer debt by tightening their credit acceptance policies. Many consumers will find it increasingly difficult to obtain credit in the run-up to Christmas.”

Nearly £4 billion has already been lost by the credit companies as a result, according to PwC, leading to potentially “thousands” of consumer plastic hopefuls being flatly rejected this upcoming holiday season.

Moreover, the UK’s debt problem is deteriorating, with PwC figures reflecting that the average British adult now owes £33,000 in unsecured loans – which has doubled since the year 2000’s figure.

At the pace Britons are piling on debt, the year 2014 is looking mighty grim. Perhaps it’s time to put Santa on sugar-free cookies, and tighten that big, wide black belt – before it gets laid across our backsides.

The ongoing global financial crisis is tightening the limits on the amount consumers are being allowed to charge on their credit cards.

Borrowing limits for historically good paying customers aren’t being spared either, and many are being “slashed” by providers, according to the Daily Telegraph.

Joining the mix of frightened lenders, credit card provider Goldfish admitted to the newspaper that it had cut limits for a “small number” of card users.

This rolling calamity began with the collapse of the sub-prime mortgage sector in the US – causing many socio-economically challenged mortgage holders to default on their monthly payments.

As lenders swiftly foreclosed on thousands upon thousands of homes and properties, it quickly emerged that many major financial institutions had previously purchased some of these sub-prime debts; and would subsequently face great losses with the sector’s collapse.

As a result, banks raised the rates at which they were willing to lend to each other, in a credit squeeze which is now being felt at the highest levels of the street.

Further credit turbulence is highly anticipated in the future, with the volatile behaviour of the global stock markets yesterday demonstrating that the fallout from the ongoing crisis will continue for some time.

London’s FTSE index experienced its biggest drop since August after investment bank Goldman Sachs predicted big losses for rival Citigroup as a result of the sub-prime collapse.

Citigroup, whose shares dropped 6% yesterday as a result of the forecast, had been highly exposed to the US sub-prime market.

In direct response to the ongoing credit crises and according to debt consultancy Thomas Charles in conjunction with pollsters YouGov, one in four Britons now intend to “avoid” using their credit cards this Christmas season.

The crunch in global financial markets, ignited by the US sub-prime meltdown this summer, led to the bank run on Northern Rock earlier this fall, further deteriorating consumer confidence.

“The research that has been done clearly shows that people are thinking about how much they are spending and they are thinking about spending within their budget,” stated James Falla Director of Thomas Charles.

However, Mr. Falla expressed uncertainty as to whether consumers would actually wean themselves from excessive credit card expenditure during the heaviest spending time of year.

“I think that around this time of year it’s easy to almost make a resolution to do something, but it’s a very difficult time of year to do it - particularly when the natural instinct is to go out and spend more,” he said.

According to Thomas Charles’ research, some 15% of Britons are currently in debt of greater than £10,000. Overall, men were found to be more indebted than women.

Debt consultancy Thomas Charles polled nearly 2,000 consumers in advance of the traditionally busiest time of year for department stores and found that nearly one quarter planned to reject spending on their credit cards this Christmas season.

Additionally, 10% of those polled stated they would avoid making any large transactions on credit for the next six months.

These indicators released today, point to a likely financial slump for providers and retailers alike.
The findings also signified a separate result of the poll, which indicated that 15% of pollsters already held unsecured debts from cards and loans in excess of £10,000.

“Interest rate rises and subsequent mortgage hikes mean that people have been relying on credit for their everyday expenditure - credit they can often ill afford,” said Managing Director of Thomas Charles James Falla.

Adding, “These results show that Britons are finally making positive steps towards confronting the amount of debt they are carrying. This is good news for the man on the street, but may signify bad news for retailers who have come to rely upon the vast amounts of credit spent at Christmas time.”

The total amount of debt among Britons is currently estimated at roughly £1.5 trillion.

Credit card firms must now refund customers who purchase goods and services abroad, according to a recent ruling by House of Lords.

The news came as a welcomed relief to USwitch yesterday, as an appeal by Lloyds TSB and Tesco Personal Finance against the Consumer Credit Act was also justly dismissed.

Personal Finance Expert, Mike Naylor at uSwitch described the ruling as “great news for consumers.”

The ruling ensures that credit card purchases between £100 and £30,000 made abroad will be insured by credit card companies under Section 75 of the Consumer Credit Act 1974.

Mr. Naylor further expressed, “This landmark decision has finally laid to rest the issue over credit card protection for overseas transactions which has been rumbling on with credit card purveyors for several years.”

“The decision to uphold it means that wherever in the world consumers use their credit card, they can enjoy the same protection as they do in the UK. This is especially important with the growth of internet shopping where goods are often shipped to the UK from sites based overseas,” he added.

UK consumers spent £16.4 billion abroad last year on credit and debit card transactions, according to the latest reported data. An amount certainly too significant to allow credit issuers slack practices in insuring purchases made through their organizations.