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By Reno Charlton
News Editor, 28 April 2008
Banks lose landmark test case
EARLIER this week Justice Andrew Smith, the judge presiding in this year's High Court test case into bank charges, ruled in favour of the Office of Fair Trading, which brought the case against the banks.
The verdict, which was delivered earlier this week, means that the Office of Fair Trading will now have the power to assess banks' terms and conditions for fairness, and this includes the issue of how much banks charge for unauthorised overdrafts, returned direct debits, and bounced cheques.
The loss of the case for banks means that they could end up paying billions of pounds in past charges back to consumers. The banks have been given until 22nd May to appeal against the decision.
First Plus advertisement receives criticism
SECURED lender, First Plus, has been criticised over a new loan product, which industry officials claim is actually a debt trap that could result in borrowers getting into real financial trouble.
The lender, which has television star Carol Vorderman in its advertisements, is offering a loan that boasts interest rates starting from 4.9% for the first ninety days. However, after this period the loan rate doubles for the rest of the term.
One official said: "The initial rate is low enough to attract borrowers desperate for credit and who may be struggling to find it elsewhere. Yet 90 days offers negligible benefits and many people may not understand fully that the rate will soar in a very short time. This is a debt trap."
Lenders need to carry out more thorough checks on applicants
ACCORDING to a recent report many lenders are still failing to carry out adequate checks on personal loan applicants, despite the increased wariness that many lenders are exercising as a result of the global credit crunch.
Experts state that there are many lenders handing out personal loans to applicants without checking their proof of income.
One industry official said: "We see far too much evidence of people having been lent money where it was clear from the start that they would not be in a position to repay it. We have repeatedly called on lenders to carry out thorough checks and it is imperative that this is done."
Consolidation soars as consumers try to cope with debts
THE number of borrowers that have decided to consolidate their debts has soared, as consumers struggle to try and keep on top of their financial commitments in an increasingly turbulent financial climate.
In the past three years around six and a half million consumers have consolidated their debts.
One official said: "Anyone who is juggling a range of debts with money owed on credit cards, store cards and loans should be acting to get their debts under control. It is encouraging that so many people have taken action as you can make significant savings by moving all your debts to one place."
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