Newsletter

Jersey Consumer Council

Banking Category

Banking is the business activity of accepting and safeguarding money owned by other individuals. In this section we share a range of tips and articles to help guide you around the complex and ever-changing world of banking and provide advice on how you can protect your money.

Looking to make an investment? Taking Financial Advice?

July 10, 2018 Banking, Budget No Comments

Remember it’s your money.

Never be afraid or embarrassed to ask questions or complain.

Don’t be too trusting, be wary of promises of a high rate of return with apparently little or no risk. All investments carry some degree of risk. Greater returns mean greater risk i.e. potential to lose some or all of the money you have invested.

  1. Double check everything, and don’t feel pressured into making an investment. Ensure you are given enough time to read through the product documentation and consider your options.
  2. Ask the independent financial adviser IFA [who should be registered with the Jersey Financial Services Commission {JFSC}] to explain in your language about their investment options and the risks. Licensed advisers are required to fully assess your attitude to risk, capacity for loss and ensure solutions are suitable. Ask for evidence of these key points.
  3. Do not sign any investment/product agreements that you do not fully understand. Always read the small print and any supplementary documentation. There may be hidden terms and conditions. Take the paperwork away and read it in your own time. If you don’t understand something ask for help.
  4. Consider spreading the risk between investments; Avoid ‘putting all your eggs in one basket’ – splitting your money between a few investments could help to reduce potential losses
  5. Know exactly what you want; duration of investment, do you need access to any of the money during the lifetime of the investment. How could this be changed by an unexpected change in your circumstances? Are there any penalties for withdrawing your money early?
  6.  Ask the IFA to explain how their recommendations meet your purpose; if what they say doesn’t match what they have provided in writing, be wary.
  7. Challenge the information, ask lots of questions. Make sure you fully understand the proposed investment and how much you could potentially lose. Only invest if you are completely informed, know the risks and how returns are generated.
  8. Do your research. Is the IFA licenced by the JFSC? What’s their feedback like – can anyone recommend them? Always research the person and the company selling you the investment, even if you know them personally and believe them to be trustworthy. You may have developed a good relationship but regard this as a business transaction and always ask yourself whether they are acting in your best interests – not their own
  9. Beware of putting money into “can’t miss”, “once in a lifetime” and “guaranteed return” opportunities or investments in which your adviser claims to have already invested their own money.
  10. Is there a choice of investments on offer or is your adviser just proposing a single product? And be wary if you are you being invited to cash in an existing investment such as your pension.
  11. Consider what compensation may or may not be available should the investment fail or the company selling it become insolvent. Jersey does not have an investor compensation scheme. What would a total loss scenario mean for you?
  12. Never be rushed; always be aware of pushy sales tactics. A professional adviser should never pressure you into making an immediate decision. If you are not given enough time, steer clear.
  13. Reflect, research and take advice. Consider talking to family or a third-party expert before you proceed. Perhaps have someone present when you meet with your adviser, particularly if you do not consider yourself an experienced investor
  14. Do not be fooled by cleverly worded marketing material on websites and in brochures – it could be misleading.
  15. When considering ‘alternative investments’ (e.g. wine, coins, stamps) rather than traditional financial services products, always do your research and understand the associated risks. These products, and usually the companies that sell or advise on them, are not regulated by the Jersey Financial Services Commission
  16. If you do invest, make sure you monitor the investment and ask for regular updates

You are the client – ask questions and make sure you get the answers so you are fully comfortable with your decision; how long will you be tied in for? Could you lose all your money?


When your bank writes to you.

July 6, 2018 Banking No Comments

If your bank writes to you requesting action on your behalf, here are our recommendations;

  • Do not ignore the request; if you are concerned that it may be a fraudulent letter contact your bank directly and ask. But be advised that potentially NO response from you can ultimately result in your account being closed.
  • Once you are sure that the bank contact is genuine follow the instructions or contact the bank if you are unable to provide the requested information by the deadline, explain the situation and ask for assistance as necessary. If this does not work, complain to the bank, then contact the Channel Islands Financial Services Ombudsman for guidance;

Channel Islands Financial Ombudsman (CIFO)
P O Box 114
Jersey, Channel Islands
JE4 9QG

01534 748610

enquiries@ci-fo.org

When responding to your bank’s requests for information – keep copies of your letters, notes of conversations, dates and bank responses.

  • Remember that a bank will never contact you by phone, email or letter to you to ask for your account passwords or your PIN number. If you get a call or email ‘out of the blue’ do not assume the telephone number or the email address, the caller may provide you to contact your bank is in fact your bank’s.  The safest approach is for you to call your bank back on their general number (shown on the back of your debit or credit cards or on your statements).  The bank’s call centre staff can transfer you to the appropriate bank department to resolve the matter.
  • Ensure the bank has your up-to-date address and contact details so that you do not miss any important correspondence.

Other banks can be understandably hesitant to open  a new account for you if they know your account at another bank has been closed.

Having your current account closed creates difficulties, for example with missed direct debits. Be mindful of course when setting up any new account to be vigilant that all your regular payments are set up and are not disrupted.

If your bank wants to close your account, they should give you sufficient time to make alternative arrangements. Be sure to ask for an extension, if you need more time.

 


Peer-to-Peer Lending Explained

September 6, 2017 Banking, Consumer Skills, Money Matters No Comments

Peer-to-peer lending, also known as Private Lending, involves matching up investors, who are willing to lend, with borrowers – either private individuals or small businesses. We are sharing this article with you to raise awareness that peer to peer lending is a private arrangement and comes bearing significant risks; attractive as a solution but be cautious and understand exactly what you are signing up to.

By cutting out the middleman and not having the overheads of traditional banks, peer-to-peer lending may offer more favourable rates, or help borrowers who have struggled to get a personal loan elsewhere.

What are the risks as an investor?

By being connected directly to someone who wants to borrow, the most immediate risk to your money is if a borrower fails to repay what you’ve lent them (known as ‘defaulting’).

Your money is also not protected by the Depositors Compensation Scheme which guarantees your savings with Jersey banks up to the value of £50,000.

 

What are the risks as a borrower?

  1. Loans are usually granted on an interest-only basis (meaning you repay no capital) and for a short duration, typically 1 to 3 years.
  2. You would normally still need to have a deposit, or a stake in whatever property you’re putting up as the asset (sometimes called the security).
  3. At the end of the term, the loan is either paid off by some means, such as replacing with a conventional bank mortgage or selling the property, or in some cases the loan can be renewed for a further period. Take care, if you have struggled to obtain a traditional mortgage and your financial situation has not improved you have no guarantee of obtaining a traditional mortgage at the end of the term to enable you to continue to live in the property. What will you do if the value of the property goes down?
  4. Interest rates can vary, depending on the lender and their appetite or consideration of the risks involved.
  5. While the rate of return may be favourable to the investor/lender, the interest rate for the borrower can be higher than high street lending and much higher arrangement and early redemption penalties.
  6. Borrowers may intend for the loan to be a short term, interim solution before moving to mainstream mortgage lending but if they are still in the same circumstances at the end, the loan can be rolled over (and over) which just continues the difficulty.
  7. We strongly recommend that you ask any lender about the Jersey Code of Consumer Lending; this is a voluntary or ‘self-regulatory’ code, which sets standards of good lending practice. These standards seek to ensure that Jersey consumers are treated fairly and that the opportunities for taking on excessive financial commitments are reduced. The Consumer Council is working hard with industry, Jersey Financial Services Commission, Citizens Advice, Trading Standards and the Financial Services Unit, Chief Minister’s Department to update the Code and to raise awareness of its importance as it provides various safeguards for consumers. The Financial Ombudsman will take codes of practice into account when determining a complaint. The Code exists even whilst it is being updated, it can be found at this link gov.je/tradingstandards/consumerlending and remains fully relevant.
  8. The Channel Islands Financial Ombudsman (CIFO) is an independent organisation that resolves complaints about financial services with powers to investigate complaints and award compensation. If you take a loan from an individual, rather than a lending business, you may not be able to complain about them to CIFO. Contact details ci-fo.org and 01534-748610.

What advice do we have for consumers?

Ask yourself why it is important for you to take on additional risk with peer-to-peer lending?

Will your financial situation improve with hard work over time so you can access the traditional mortgage market?

Do you have other housing options? Possibly rental

Our advice is to get professional, qualified and independent legal and financial advice before making any decisions. Don’t let the excitement of a new home cloud your judgement on such a large long term financial commitment. This may be the largest financial decision you ever make – don’t let it be the worst!

Make sure you have a professional valuation on the property you are thinking of buying. Consider if your property will be adequately insured – life insurance, critical illness, building and contents?

Terry Vaughan, Director, Head of Risk and Compliance at The Mortgage Shop and Henley Financial highlighted that If you’re a borrower, your lawyers need to make sure the person granting the loan has the authority and legal right to do so. Your professional adviser will also check on source of funds for the loan being proposed. You also need to ensure the terms are suitable for you. You need to be aware of the repayment schedule and be sure that it is within your budget”

 

Reference

http://www.which.co.uk/money/investing/types-of-investment/guides/peer-to-peer-investing/peer-to-peer-lending-explained


Trading Standards credit card warning: online payments where you lose protection

August 30, 2017 Banking, Home life, Money Matters No Comments

A little-known flaw in the Consumer Credit Act may put Jersey shoppers at risk of losing their money if things go wrong.

 

Under Section 75 of the UK Consumer Credit Act, shoppers who make payments between £100 and £30,000 on a credit card can get their money back if the goods turn out to be faulty, not as described or don’t arrive. The UK law makes the retailer and credit card company jointly liable. Jersey consumers usually benefit from this protection due to terms and conditions reflecting the UK Consumer Credit Act.

 

However, a little-known loophole revealed by a MoneySavingExpert means that consumers will only be reimbursed if there is a direct link between the customer, their credit card provider and the supplier. If the payment is processed by a third-party company then the protection under Section 75 does not apply.

 

So, if you bought a concert ticket through an agent on a credit card, you may not be able to get your money back using Section 75 if it doesn’t arrive.

The same may apply if you booked a holiday through a travel agent. However, the travel industry may very well have their own financial protection schemes in place.

 

You may also not be covered for credit card transactions made through online payment platforms, such as PayPal, because it breaks the chain between customer and supplier.  However, if the firm you’re buying from has a “Commercial Entity Agreement” you’ll be able to make a claim under Section 75 even if you use PayPal. PayPal has its own Buyer Protection scheme. This covers online purchases made on eBay and other websites if the item does not arrive or match the seller’s description. Property, vehicles, custom-made items and industrial machinery are among some items that are not guaranteed.

 

Amazon is another firm where Section 75 may not apply. Shoppers who buy items on a credit card from third-party suppliers on the online marketplace will not be covered. If you buy directly from Amazon then you could make a claim.

 

Confused, it is not surprising! Trading Standards offers the following advice:

  • Know who you are buying from and who will take your payment
  • Wherever possible put payments on your credit card
  • If you are entitled to protection, you are still covered even if a small proportion, part payment or deposit was paid using your card
  • When things go wrong, don’t delay. If you don’t have Section 75 protection you may alternative protection through platform buyer protection schemes, but these are often time limited.

 

Free confidential consumer advice is available from Trading Standards on 448162 or email tradingstandards@gov.je. You can also drop in, they are in the Central Market under the clock.

 


5 Ways to Respond to a Credit Card Interest Rate Increase

November 2, 2015 Banking No Comments

5 Ways to Respond to a Credit Card Interest Rate Increase

What to Do When Your Credit Card’s Interest Rate Increases

Wouldn’t it be nice if low interest rates last forever? Unfortunately, the saying “All good things must come to an end” is especially true when it comes to credit cards.
One of the practices credit card issuers are notorious for is suddenly increasing interest rates. Of course one of the reasons it seems so sudden is because most credit card issuers only have to send you 15 days notice before increasing your interest rate.

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Staying Secure at Cashpoints

October 26, 2015 Banking, Top tips No Comments

Staying Secure at Cashpoints

LINK is the UK’s cash machine network, providing you with access to your cash. The number of free machines is at an all time high, and to help you manage your money effectively you can also check your balance free of charge at any LINK machine.

Despite some recent high-profile incidents, cash machine crime is very uncommon. LINK have provided a number of simple steps which all cardholders can take to help fight ATM crime :

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Credit Ratings

October 23, 2015 Banking, Top tips No Comments

Credit rating – what’s the score?

The importance of your credit history is not overrated. Your credit history information is of interest to a lot of people. A bad credit history can make it harder for you to obtain loans and even a mobile phone contract. Landlords and potential employers can and will also look at your credit history report.

Banks have changed the way they decide to lend money since the financial crisis. Essentially, the lenders now want to take fewer risks with their cash.

Basically, being granted a credit facility enables you to repay over a set term usually having interest added and paid back with the initial advance on a monthly basis.

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What are Contactless Payments?

October 21, 2015 Banking No Comments

What is Contactless?

Contactless is a function on certain debit, credit and prepaid cards that allows you to make a quick and easy payment for goods or services for an amount that is £30 or less without entering a PIN.

The embedded chip allows you to wave or place your card over a reader at the point of sale.

Where you see the contactless wave displayed (like the one on this page) and have a contactless card (debit, credit or prepaid), you can make a contactless payment where the amount is for less than £30.

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