More Mis-selling Scandals by UK Banks

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Over the past few years, there have been a record number of claims regarding scandals involving UK banks, causing the public to view them in a negative light. At the moment, the interest rate swap, the Libor scandal and the payment protection insurance scandals are all prominent, meaning that the banks are having to put increasing funds aside in order to compensate those who have fallen victim to mis-selling.

The newest scandal is that of mis-sold interest rate swaps, involving the mis-selling of derivative products to small businesses. Interest rate derivatives have the purpose of protecting small business against rising interest rates as the underlying asset is the ability to pay a set amount of money at a set interest rate. However, the concept is complex and as a result small businesses were unlikely to comprehend the implications of the products they had signed up for. There are requirements in place in order to regulate the selling of derivative products however, up to 80% of the sales of these products fail to meet the requirements. The result is that businesses have paid out more money to banks, without realising what they were signing up to or without giving permission to swap interest rates. UK banks have now set aside more than £2billion to deal with the expected influx of interest rate swap claims.

mis sold ppi

The PPI scandal has also escalated recently. Customers were given an option to insure themselves against an inability to repay loans, mortgages and the like, meaning that if redundancy occurred, repayments would still be made. Unfortunately, this too has also been mis-sold meaning that people have been paying for PPI when in actual fact they cannot claim on the insurance, or pressuring has occurred meaning that people have purchased PPI unnecessarily.

The Libor fixing scandal has been ongoing since 2005. Libor is the most crucial interest rate in finance as it underpins the majority of loans and financial contracts. In 2005 it as discovered that certain banks were trying to regulate the rate, by manipulating the rate it gave an inflated impression of the ability to raise funds. This has led to people losing money either through having to pay back more than required on loan or increasing bank fees as bank try to minimize their losses.

The recent scandals, which are causing banks to put aside millions of pounds in compensation, has dented the credibility of banks as well as escalated the economic crisis being felt worldwide.

Get Hold of Your Finances by Curtailing Impulse Spending

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Think about how much money we could save if there weren’t so many nice things staring at us from the store displays or even our television or computer displays. Retailers know how to real us in and separate us from our hard earned money. But if you want to gain control of your financial situation, you will have to learn to resist those impulse shopping tendencies so you can put some money aside for when you really need it.

Here are some tips to help you overcome the impulse shopping urges and keep your money where in your pockets.

window shopping

Shop but don’t buy

The most effective tool against impulse shopping is to make a point of not buying anything that you did not specifically go into a store to buy.

- Make a list before you go into the store. Not only does this help you remember to get everything you need, but you also don’t want to succumb to the impulse purchase and not have money left for more important things.

- Browse the things that you enjoy, but force yourself to wait until next time. Then if you decide to get it, you’ll be following the “buy what you came for” rule. This gives you time to decide how you are going to pay for it and if it really is a good time.

Consider how bad you want that new thing

One of the fundamental aspects of impulse sales is that the effects often wear off once a customer is no longer under the influence of the sales pitch. If you hold off on buying something until another time, very often you will discover that you don’t really want to buy the thing after all, if you even remember that you wanted it in the first place.

What does your budget allow?

The key to ultimately deciding whether you are going to make a purchase that is not part of your monthly, weekly or daily requirements boils down to how much spare money you have to spend. And that means that you should keep a budget. This is not as scary as it sounds. You just need a realistic and detailed list of everything you absolutely have to spend on each month, such as food, bills, etc. and subtract it from how much money you take in. That extra money, allowing some cushion for emergencies, is your disposable cash.

You see, it is not that hard to avoid impulse spending after all. You can save money and still enjoy the things you want in life by hanging onto your money until you are sure you really want and can afford to buy something.