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Money and Our Emotions
The US has its debt downgraded, UK inflation suddenly falls, the Eurozone interest rate rises and China’s growth rate stabilises. Ordinary people across the world are faced with a wealth of economic news, but are their decisions on money really governed by emotion?
Money is emotional. Debt sparks worry. A windfall is exciting. And many people dose up on retail therapy, shopping to feel better.
“Ask people what emotions are most frequently associated with money, and this is the rank-ordered list: anxiety, depression, anger, helplessness, happiness, excitement, envy, resentment,” says psychologist Adrian Furnham.
He is co-creator of BBC Lab UK’s new Big Money Test, which explores links between personality and money behaviour. Furnham believes that even financially astute people have bad money habits, and that there are five archetypes for spending behaviour:
• Misers fear becoming penniless and have trouble enjoying the benefits of their money
• Spenders shop in an often uncontrolled manner, particularly when feeling low – and get a short-lived high, often followed by guilt
• Tycoons see money as a route to power and approval, and believe wealth will make them happy
• Bargain hunters feel superior when they get discounts, and feel angry if expected to pay full price
• Gamblers feel exhilarated when taking chances, and find it hard to stop – even when losing – as a win brings a sense of power
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Free Debt Help Advice
We are providers of Free Debt help and Advice for people with Debt, Bad Credit, Bankrupcy, Insolvency problems.
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Bankruptcy Advice
Bankruptcy is a legally declared inability or impairment of ability, of an individual or organization to pay its creditors” – in other words being unable to pay your debts. We can help you with essential bankruptcy advice, if you feel that your debts are unmanageable and you will not be able to pay them off in the near future with an alternative debt management plan.
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Triple-dip recession would lose UK AAA rating, says Moody’s
The ratings agency Moody’s has served notice to chancellor George Osborne, informing him that it would be carefully monitoring how he managed the difficult balancing act between growth and deficit reduction over the coming months.
Moody’s, one of the world’s three biggest rating agencies, warned Mr Osborne on Wednesday night that the UK stands to lose its prized AAA credit status if the UK further sinks into a triple-dip recession this winter.
The ratings firm went on to say that it had not yet decided whether to cut Britain’s credit rating, but that it could act in the new year either if growth prospects worsened or if Osborne failed to stick to a demanding timetable for reducing national debt. A spokesman for Moody’s said: “The UK government’s most significant policy challenge is balancing the need for fiscal consolidation against the need for economic stimulus.”
The bleak forecast came on the same day that the Bank of England claimed that the boost that accompanied the Olympics during the summer looked set to be a one-off, halving its growth forecast for 2013 to 1%.
The rating agency added that it will consider whether the UK should lose its AAA status in the new year once it had assessed Mr Osborne’s strategies for the growth-deficit reduction dilemma in the Autumn Statement.
It also said the coalition’s attempts to reduce Britain’s record peacetime budget deficit were being hampered by “weaker economic prospects as well as by the risks posed by the ongoing euro area sovereign debt crisis.”
Three factors will govern its assessment: the likely speed of deficit reduction, the growth outlook and the likelihood that debt as a share of national income would not stabilise and start to come down over the next 3-4 years.
Meanwhile speculation is growing that Osborne can no longer meet his original aim of bringing down the debt to GDP ratio by 2015-16 without further austerity measures that would cut the economy’s already sluggish growth rate.
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Loan firms warned over reckless lending
The payday loan industry has been warned to improve the way it lends money and collects debts, or face fines or possible closure.
In an interim report the Office of Fair Trading (OFT) has said that most of the 50 big firms under inspection do not operate fully by its rules, and that reckless lending and aggressive debt collection are a real cause for concern.
Now formal investigations into several payday lenders over aggressive debt collection practices are underway.
The OFT publishes its full report in the new year, at the culmination of an investigation which it started in February 2012.
Updated rules
The OFT is worried about the “poor practices” which its enquiries have been uncovering, and which resonates with many of the criticisms that consumer groups have been making of payday lenders.
Among the OFT’s concerns are that
- lenders do not check properly if their borrowers can afford to repay the money they have borrowed
- too many loans are not repaid on time
- the loans are then extended too often
- lenders are too aggressive when borrowers fail to repay promptly
The regulator has become especially worried about the way payday loan firms use a type of repayment agreement called a continuous payment authority (CPA), using a credit or debit card to ensure they are repaid automatically.
The OFT has updated its rules for the industry to make it clear that if borrowers sign up for a CPA, it must be with their explicit agreement and that borrowers are told fully how the CPA works and how to end one.
Lenders must not keep on trying to drain cash from their borrowers’ accounts if there is not enough money available to meet the debt.
The revised guidance makes it absolutely clear to lenders what is expect from them when using continuous payment authority to recover debts, and send a clear message about its misuse.
The UK’s most high profile payday lender, Wonga, said it welcomed the OFT report and its recommendations, which add to a new industry code of practice that was announced in the summer and which comes into effect next week.
“Regarding continuous payment authority, which is also used by a broad range of businesses outside of consumer credit, we believe it is an important method of collection and we share the OFT’s concerns that it must not be misused,” said a Wonga spokeswoman.
The Financial Ombudsman Service (FOS) has found a small but increasing number of people complaining to it about payday loans and that payday loans had a habit of making a bad situation worse.
A spokesman said the main reason for people complaining was that the loan had been unaffordable and should never have been granted in the first place.
“In the first half of this financial year – April to September 2012 – we received 271 new complaints; this compares to the 296 complaints brought to our service during the whole of last year (2011-12) – and we are currently upholding eight out of 10 cases in favour of the consumer,” said an FOS spokesman.
(source – http://www.bbc.co.uk/news/business-20406659 )
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Increase PPI provisions
Barclays increases PPI provisions to £1bn
Barclays has increased the provisions to cover two mis-selling scandals by another £1bn.
It relates to the mis-selling of interest rate hedging products sold to small firms, and payment protection insurance (PPI) schemes.
Following a review, the bank said total provisions for the scandal involving interest rate swaps were now £850m, and £2.6bn for the PPI schemes.
The figure comes ahead of the bank’s full-year results due on 12 February.
The Financial Services Authority (FSA) last week ordered the UK’s major banks – Barclays, Royal Bank of Scotland, Lloyds, and HSBC – to review all their sales of interest rate hedging products, and provide redress where mis-selling occurred.
The products were offered to thousands of small firms – including pub owners, haulage firms, care-home operators and vets – when they asked their bank for a loan.
The borrowers were told that the product would provide an “insurance” or “hedge” against the risk of interest rates rising. But with interest rates having instead fallen since 2008 to historic lows, many of these businesses discovered they were sitting on tens of thousands of pounds in losses.
The FSA said that around 40,000 interest rate hedging products were sold since December 2001 to “non-sophisticated” customers, to protect against interest rate rises or limit interest rate fluctuations.
In its review of 173 such sales across the four banks, the FSA said it found that more than 90% did not comply with one or more of its regulatory requirements.
Barclays increased its provision by £400m, nearly doubling the total amount it has set aside for compensation.
Barclays chief executive Antony Jenkins later told the parliamentary committee on banking standards that compensation would be paid as quickly as possible. He said that this would be an easier process than redress for PPI, as more information about those affected was available.
He also said that the payments meant staff would get smaller bonuses as a result.
The FSA has called on banks to deal with the issue within six months, although some cases could take longer.
The bank has increased its PPI provision by £600m. The total amount of £2.6bn was still well below the £5.3bn set aside by Lloyds Banking Group.
What is PPI
Payment protection insurance was designed to cover loan repayments if the policyholder became ill, had an accident or lost their job.
However, the policies were mis-sold on a huge scale to those who did not want or need it, or would have been unable to make a claim.
Financial institutions sold PPI alongside loans, credit cards and mortgages. It was supposed to cover loan repayments if policyholders were ill, had an accident, or lost their job. However, the policies were mis-sold to large numbers of people who would never have qualified for or needed to make a claim. Some did not even know they were paying for PPI.
For more information on Payment Protection Insurance Reclaims or any other debt matters, visit http://www.1stopmoney.com.
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