Credit firms hit debt victims with extra fees

CREDIT card firms have come under fire for hitting their customers with extra fees when they get into financial trouble.

If customers pay late or go over their credit limit it could be a warning sign that they are struggling to repay their debts, said the Financial Conduct Authority.

And the City watchdog has now written to all British card firms telling them to treat borrowers more sensitively to avoid making their problems worse.

Credit card companies typically charge a fee if a customer pays their bill late, or goes over an agreed spending limit.

But the FCA said that this kind of behaviour can indicate that borrowers are facing money trouble. And it warned these charges can snowball alarmingly and make the situation even worse.

For example, customers with a direct debit to cover their card bill might be hit with a fee if it bounced back due to insufficient cash in the bank, the FCA said.

If they then missed their minimum card payment as a result, they could be charged a late payment fee. In turn, this might push their credit card over its limit – leading to another charge on top.

Jonathan Davidson, director of supervision at the FCA, said: ‘It is unacceptable for firms to ignore signs of customers struggling financially and continue to charge them fees for missed payments which they likely can’t afford.

‘Our research showed a large number of customers were often missing payments but continuing to be charged fees.’

LAST December, Britain was debating who should grace the new £50 note, with some claiming the honour should go to Stephen Hawking, others plumping for Crimean War nurse Mary Seacole. How quaint that seems now.

As has been made clear by the former financial ombudsman, Natalie Ceeney, who published her Access To Cash Review yesterday, the real concern is not whose face appears on our banknotes — it is whether we will soon have any banknotes at all.

The network of cashpoints and other infrastructure which allows retailers to accept cash payments, she says, is in danger of falling apart.

According to Which?, 488 cashpoints closed every month during the second half of last year. At the current rate of decline, the last banknote will be dispensed by a British cashpoint machine in about 2026 — leaving many unable to make straightforward payments.

Conspiring

Among those being frozen out of the everyday economy are elderly and disabled people who struggle to use smartphones or remember the PINs for their cards, as well as people in remote areas where there is no broadband connection to handle cashless payments.

It may come as a surprise to many of the young, but one in ten Britons today has never used the internet, and only one in five over-65s owns a smartphone. What will these people do when the cash runs out?

The Government is doing almost nothing to stand up for them. Sometimes it seems as if they’re actually conspiring against them.

Four years ago David Cameron’s oh- so-progressive policy unit even seriously considered making Britain the world’s first cashless society. The idea has had support from the Bank of England’s chief economist, Andy Haldane.

I am no Luddite: I regularly pay by card or by bank transfer over the internet. Often, it is the most convenient way to pay. But we should all stand up for the right to use cash. Because we will regret it if that right is taken away from us.

Partly, this is for reasons of practicality. Last week I was walking in the Highlands. I don’t know how isolated shops or B&Bs could function without cash or cheques.

Even if they can get a broadband connection, it costs a lot for a very small business to hire a terminal for handling card payments. Inevitably, there would be a further loss of small rural businesses as they struggled to take payments.

The abolition of cash could cost the rest of us dearly, too. In contrast to some countries — such as Australia — we do not pay fees to use debit cards. But you can be sure that would change if cash disappeared.

The only thing that stops card companies charging us is knowing that they are in open competition with cash.

It isn’t just fees, however. There is a huge industry dedicated to collecting data on our spending habits — information which is used to target us with direct marketing.

This is why the payments industry has been so keen to push contactless cards at us: so it can profit from selling the data it collects from our spending habits.

It can’t collect this data when we use cash, but when we use a contactless card our regular spending habits can be analysed in great detail.

It’s for this reason — as well as the fundamental lack of security involved (at least half of all card fraud is contactless) — that I have held out against having one of these cards.

The move to drive cash out of the economy is not coming from public demand — even if many of us do often choose cashless methods of payment.

There is a cold, calculated campaign led by the financial technology — or ‘ fintech’ – industry developing software and hardware such as contactless payments to computerise money transfers.

To give an idea of the money that is at stake, the U. S. Department of Commerce published a report revealing that $19 billion of investment was pumped into the country’s fintech sector in 2016. Naturally, investors are expecting a good return on that money.

In 2016, the U.S. Department of Commerce went on, the payments industry worldwide extracted $ 1 trillion in fees from consumers using cashless payment methods. By 2023, the industry is counting on that doubling to $2 trillion.

War

The fintech industry’s campaign to turn us all cashless is revealed in a document by management consultants McKinsey, called Roadmap For A National Payments Strategy.

In the first phase to turning an economy cashless, it says, governments should conduct a ‘war on cash’ — making it more and more difficult for citizens to pay for goods and services in notes and coins.

You can see this happening everywhere. Until four years ago, motorists using the Dartford Crossing between Kent and Essex could pay the toll in coins. Then, suddenly, they were forced to pay online, with big fines if they missed the 48hour deadline — and the Government has been raking in millions in those fines.

There are government policymakers who support abolishing cash in the false belief that it will cut crime and tax evasion. But that ignores the explosion in online and bank card fraud.

Already, British consumers are losing far more to online criminals — £755 million in 2015 alone — than they are in fraudulent cash transactions.

Figures from the Office for National Statistics reveal that in 2015, 0.7 per cent of us had physical goods ( including cash) stolen from us. In the same year, by contrast, 4.6 per cent of us lost money in online or bank card fraud. As for tax evasion, the real problem is with huge corporations shifting profits out of Britain — not with householders slipping a few banknotes to cleaners or builders.

There is another reason why we would abhor the abolition of cash — it would allow central banks to impose negative interest rates on savers. The past decade has not been a good one for savers, who have earned pitiful rates of interest. Yet in a cashless world, banks could start actually nibbling away at our capital.

They can’t do this yet because they know we would withdraw our cash and stash it under the mattress. But if there was no such thing as actual cash, we’d be forced to keep our credit with a bank, so they could take advantage of us by imposing negative interest rates.

Indeed, this is exactly the outrageous argument the Bank of England’s Andy Haldane, as well as a number of other economists and central bankers, have made: abolish cash and they would have more freedom to manipulate the economy at savers’ expense.

Government ministers forever go on about ‘social injustice’. Yet when it comes to protecting the interests of the poor, the elderly and the homeless by ensuring the continued use of cash, their sense of injustice seems to go out the window.

Injustice

What we need is a commitment from government that cash will remain part of the economy for the indefinite future. If banks won’t provide cashpoints in some areas, then the Post Office should step in to fill the gap.

Better still, we should have a law such as that which has been proposed in New York: where all retail outlets are obliged to accept cash payments.

One thing above all else irritates me about the campaign to turn the economy cashless — being told it is all for convenience. Often, yes, paying by card is the best way. But will decide what is most convenient for me.

I don’t see why we should be forced to go cashless by commercial interests out to enrich themselves at our expense.