Bridging Finance News

By Stephanie Baxter

An estate agent in Essex has been banned from using a prize promotions advert, after the Advertising Standards Agency ruled that  it breached the Code.

However, the ASA has been unable to get in contact with Churchills Estate Agents Ltd, who did not respond to their enquiries.

The case against Churchills Estate Agents was decided last  week by the advertising watchdog, which upheld the complaint made by a member of public.

The disgruntled viewer challenged whether the ad was in breach of the Code of Practice because it  failed to give the terms and conditions of the prize promotion.

Churchills’ press ad stated: “by appointing Churchills as your trusted Estate Agent in the sale of your property you will also give yourself an excellent opportunity of winning a beautiful car worth £7,000 plus! … for further details about how simple it is to win a car, please contact your local branch as below.”

ASA judged that the ad breached the clauses 34.1 and 35.9 of the Code by not stating the closing date, how customers could take part in the promotion and how to determine if they were eligible.

Churchills Estate Agents Ltd also breached clause 2.6 of the Code that required them to respond promptly to ASA’s enquiry. ASA said it was “concerned” by the estate agents’ lack of response and apparent disregard for the Code and reminded them of their responsibility to respond swiftly to enquiries.

An ASA representative said: “Most businesses do respond to our enquiries and take it seriously, so it is concerning that Churchills didn’t respond.”

“We’ve notified both parties of the decision and we hope that Churchills will ensure their future promotions stick to the T’s and C’s of the Code.”

The FSA has fined the former finance director of Northern Rock, David Jones, £320,000 for publishing false mortgage arrears figures in the bank’s 2006 annual accounts.

He has also been prohibited from performing any function in relation to any regulated activity.

Jones’s misconduct started in mid January 2007 when he agreed, along with David Baker – the former Northern Rock Deputy CEO – to allow false mortgage arrears figures to appear in explanatory text published with the 2006 annual accounts.

It has emerged that reporting correct figures would have either increased arrears by over 50% or possessions figures by approximately 300%.

For nearly a year, Jones was responsible for the continued misreporting of arrears and possessions figures on a monthly basis to Northern Rock’s assets & liabilities committee (ALCO) and, on a quarterly basis, to the Council of Mortgage Lenders (CML).

From 2005, Northern Rock staff were under pressure to report arrears figures at half the CML average. To achieve this, a series of improper actions were taken which were outside the bank’s stated policy.

For example, cases where a possession order had been made against a property, but where physical possession had not yet been taken (pending possessions cases) were excluded from all arrears and possessions figures.

Although Jones was not involved in the actions that gave rise to their existence, by January 2007 1,917 such cases had been omitted.

Jones was the lender’s finance director (designate) between 10 January 2007 and 1 February 2007. During this time, David Baker informed him of the existence of the pending possessions and asked whether they impacted the firm’s stated provisions for bad debts. Jones assured himself that the provisions were correct and agreed not to reveal the pending possession cases.

As finance director from 1 February 2007 to 22 February 2008, Jones was responsible for the debt management unit (DMU) and the credit management information unit (CMIU) at Northern Rock. Amongst other things, these units were responsible for reporting arrears.

Margaret Cole, FSA director of enforcement and financial crime, said: “Even though other senior directors within the firm were involved in the misreporting of arrears and possessions figures, as a senior director himself and as an FSA authorised person, Jones had a duty to reveal the true position to the public and to important internal committees. He had numerous opportunities to put things right, but failed to do so.

“This is a message to all FSA approved persons, that they must take their individual responsibilities seriously at all times, or suffer the consequences.”

Jones received a 20% discount for settling in Stage 2 of the FSA’s executive settlement procedures. Were it not for this discount, Jones would have been fined £400,000.

Consumer credit providers could be about to see some huge changes, as the Treasury reveals it may move the regulation of the industry from the Office of Fair Trading (OFT) to a brand new body.

The proposed changes to the UK’s financial regulation system were publicised in the Treasury’s consultation paper, released yesterday,  which outlines the coalition government’s aim to restore trust and confidence in the sector.

In consultations over a major reshuffle of the system, the Treasury will look at whether the responsibility for consumer credit, which is currently regulated by the OFT, should be moved to a new body called the Consumer Protection and Markets Authority (CPMA).

The CPMA, described by the Treasury as a “strong consumer champion”, will have a dedicated focus on the importance of proper conduct to ensure greater clarity and confidence in the financial markets.

The conduct regulator, which will focus on the  two aspects of consumer protection and market integrity, will be responsible for a wide range of firms from small high street businesses to wide-scale investment banks.

This is part of the Treasury’s aim to bring consumer credit under a single regime, after it admitted  that the overlap of the FSA and OFT can cause ‘confusion and irregularities’.

Over 16,000 firms are jointly regulated by the two bodies, while the FSA is responsible for 29,000 and the OFT has 99,000 firms under its arm.

Kevin Still, debt expert and director of debt solutions provider, EuroDebt, owned by The Pentagon Group, said: “There is a high degree of overlap, but many businesses have diversified to offer a wider range of services which not only includes the provision of consumer credit, but also a range of ancillary and specialist services.”

Mr Still added: “The Pentagon Group, which incorporates Atlantic Finance Management, is jointly regulated because it offers debt solution services, and also Accident, Sickness and Unemployment insurance to indebted customers wishing to protect their income.”

The Treasury’s paper also reveals that the FSA will eventually be broken up and replaced by the CPMA and another new body, the Prudential Regulation Authority (PRA), which will both be overseen by the Bank of England.

The Treasury said that the FSA has too much work on its hands, being entirely responsible for all financial regulation. It currently deals with both prudential health and conduct of business regulation, which require very different approaches.

The Bank of England will also be given the tools to carry out more responsibility through a Financial Policy Committee which will be in charge of macro-prudential regulation.

In a speech at the London Stock Exchange yesterday, Financial Secretary to the Treasury, Mark Hoban, reiterated the need for strong regulation to act as the “bedrock that prevents the ground from caving in.”

He said: “The Coalition Government is delivering on its commitment to reform the financial system, to avoid repeating the mistakes of the recent financial crisis and to ensure that taxpayers are protected.

“Today is a crucial milestone in our program of reform.”

The Treasury is welcoming input from people involved in the financial services industry before the consultation closes on 18 October.

Often the most unlikely signs can point towards the end of a recession, with divorce being touted as the new mark of economic prosperity.

That’s right, in the last quarter there has been an apparent resurgence in the number of British couples heading for the divorce courts, which has been taken to mean that some warring husbands and wives have now taken control of their finances and are stumping up the funds to obtain the decree nisi.

Manchester-based family law firm, Pannone, has reported a six per cent rise in couples pressing ahead with marriage splits in the last three months.

Partner Andrew Newbury said family law colleagues elsewhere around the country were indicating similar increases, suggesting five years of consecutive falls in divorce numbers could be at an end.

Mr Newbury added that many separations featured spouses who had put their break-ups on hold because of recent bleak economic conditions.

“Husbands and wives have been telling us that they felt they simply couldn’t afford to break up during the last two years and were often living under the same roof both knowing that their marriages had no future in the medium-term, let alone well into the future,” he said.

“Some of those couples had come to us before the recession really bit to initiate proceedings but then decided not to continue as the economic picture worsened. They now believe the upturn in their financial circumstances has provided what they believe to be the right moment

for them to make a break.”

The most recent available figures, released by the Office of National Statistics earlier this year, revealed that the number of divorces in England and Wales in 2008 had fallen by five per cent – the fifth successive drop.

But Pannone believes that some spouses have been relying on an upswing in the economy to enhance the value of their possible share of marital assets.

The firm has the largest family department of any outside London and handles in excess of 800 divorces a year.

Mr Newbury said that question marks about the continued recovery might spur couples into rushing ahead with divorces in case economic prospects worsened in the months to come.

“There are couples with doubts about whether their marriages will last, wondering whether they should speed up the process of separation to take advantage of any economic improvements.

“Just as the loss of jobs and drop in salaries undoubtedly contributed to tensions between spouses, there is every indication that relationships which are already under stress are suffering even more as husbands or wives deliberate about whether or not to file for divorce.”

A recent study by debt solutions provider Atlantic Financial Management showed that 10% of Britons seeking debt help stated that divorce or separation was the reason why they had fallen into debt.

Clients going through a divorce or separation often face a substantial upheaval of their finances, and can even be left with an unmanageable debt spiral to cope with, especially if existing debts that have been taken out in one name, but were previously paid jointly, fall to the person whose name is attached to it.

There are additional factors that make divorcing couples particularly vulnerable to debt problems, such as the cost of divorce proceedings, which can reach, on average, £13,000. Few can say that they have that amount lying spare, and many people seeking a quick divorce will turn to credit to cover it.

Sub-Prime Lender Provident Financial has released an assessment of the UK Economy, which reports a profit of £54 million instead of £57 million as projected by analysts. Normally one would assume that companies such as Provident Financial would profit during an economic crisis such as the one faced by UK. But these companies are taking a more conservative view of the situation and very few companies are stepping forward to take debt at this stage.

The present economic crisis and its impact on the job market has worried the UK population and companies such as Provident Financial. People of the low income group are also worried about how to make both ends meet in such a situation, where jobs are less and the pay is going through budget cuts.

At the moment, many mainstream banks and large financial companies are profiting from the lows hits during the recession. But they are equally concerned about the potential of the UK economy in the short and medium terms.

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