BEWARE! THE BANKS ARE OUT TO GET YOU!

[Stanley]

The only word is obscene Peter. Andrew Carnegie is famous for saying that anyone who did rich died disgraced. Perhaps we should consider what it means to live controlling that amount of wealth. Could it be that there is something wrong with the way the world's wealth is distributed? Surely not....

[Stanley]

I forgot to mention.... In this time of economic hardship it was comforting to get an offer of a pre-loaded credit card with £50 credit on it free and guaranteed acceptance. The annual interest is only 39%.
Needless to say I shredded the card and the offer so fast I forgot to look at the name on it but how can an offer like this be anything other than an attempt to drag people further into debt.
Isn't modern finance wonderful!

[Stanley]

It looks as though Philip Green's Arcadia retail empire is going into administration. (LINK)
It's been a long time coming......

[Stanley]

If the Mirror and other papers are to be believed, Philip Green has arranged his getaway holiday to the Maldives as his Arcadia Group totters on the brink of extinction. In addition it is reported that he won't be putting back any of the dividends he has taken out of the company as he will not be trying to take any of the assets over.
Meanwhile 13,000 people have absolutely no security as they go into the weekend.
The word is that there are other big names in exactly the same position.

[plaques]

Ask yourself this question. Philip Green's wife got the biggest dividend payout on record. £1.2bn. Now he is asking for some suckers to invest £30m to keep it going. Why not ask his wife to lend him a bit?

[Stanley]

He doesn't want any help from anyone. My guess is that he is going to use this administration as an opportunity to cut and run. He'll take anything that can be salvaged from the wreck as he and his wife sit there in the Maldives or whatever alternative flesh-pot they have lined up. The fate of 13,000 workers will never cross their minds.
Nice people.....
Keep your eyes open. The people who follow these things can see that a lot of retail is only hanging in for Xmas to see if there is a last minute miracle. If that doesn't happen the aftermath of 'The Festive Season' could be slash and burn.

[Tizer]

The BBC's Technology correspondent, Rory Cellan-Jones...
`Tech Tent: Is Tesla really worth $500 billion?' LINK
`At the beginning of 2020, Tesla was valued by the stock market at around $80bn - and even then, sceptics thought that was a high price for a business that was barely profitable. Throughout the year its shares have soared, and its valuation climbed above $500bn on the news that the business was going to be included in the S&P 500 index of leading companies. Just to put that into context: Tesla is now worth more than Toyota, Volkswagen, Hyundai, GM and Ford put together.'

In answer to his own question `Is Tesla really worth $500 billion?' he goes on to say: `Just like a bottle of 1945 Burgundy, or a Picasso, or a tiny flat in London or San Francisco, Tesla's "value" is whatever someone is willing to pay for it, however irrational the price may seem.' This reminds me of a disagreement I had with an estate agent while viewing a house. I said it wasn't worth the asking price; she replied that it's value is what someone is willing to pay for it. I said that isn't its market value it's only, as she put it herself, `what someone is willing to pay for it'. If a man walks into a pub and pays £100 for a pint of beer that doesn't mean the beer has a market value of £100 a pint. The other drinkers in the pub aren't going to immediately start paying £100 for every pint they buy. But then drinkers in pubs probably have more nous than investors on the stock market!

[Stanley]

See THIS BBC report on the state of the Arcadia affair. The Commons committee on Pensions has said that the Arcadia fund is £350million in debt and Philip Green is expected to pay up. Question is, can anyone make him do it? He's holed up on his yacht in Monaco and notg answering the phone....

[Whyperion]

The BBC's Technology correspondent, Rory Cellan-Jones...
`Tech Tent: Is Tesla really worth $500 billion?' LINK
`At the beginning of 2020, Tesla was valued by the stock market at around $80bn - and even then, sceptics thought that was a high price for a business that was barely profitable. Throughout the year its shares have soared, and its valuation climbed above $500bn on the news that the business was going to be included in the S&P 500 index of leading companies. Just to put that into context: Tesla is now worth more than Toyota, Volkswagen, Hyundai, GM and Ford put together.'

Shades of Tulip Bulbs. Multiplying all stock by the last price of the last deal done, rather than the discounted net earnings likely , or the asset value if sold to the next best alternative. Markets are sentimental, not rational. However Telsa has some possibly earnings streams that other vehicle companies have ignored. They manipulate the power source ( custom chargers), they could 'rent' rather than sell the battery packs and motors - which gives longer term earnings. The technology is scalable to more than just private cars, and there is possibility of licence income from the other manufacturers. There is also the myth (or reality) of improved battery technology. Tesla could also quicker invest in production in world wide countries faster than other companies did in the past - and of course the more Telsa takes market share from the other vehicle companies , the less they in turn are valued. R&D Tax Credits etc too may give tesla a better after tax income compare to the other companies.

[Tizer]

I was shocked to read in The Times that the Klarna-type unregulated lending has boomed in the lockdown periods and is now being used by all and sundry. It started with the fashion shops and was aimed at the younger customers. Now it's spread to the likes of M&S and way beyond - for example there are dentists offering it and it's being used to sell alcohol and even nitrous oxide canisters. The Klarna-type companies are not subject to the Financial Conduct Agency's regulations on lending and buyers don't have their usual rights if something goes wrong with whatever they buy. Why weren't these companies made subject to the regulations as soon as they set up business? It's also unfair to the regulated credit companies.

[plaques]

Klarna looks like one of these 'to good to be true' businesses. They appear to be facilitators allowing the customer to buy with no up front payment and various payment delayed options with only a 'soft' credit assessment. Klarna The actual payment debt is held by other loan companies. Klarna charges the retailer for using their service. The retailer hopes to gain by having bigger sales, The debt is held by the loan companies who can charge up to 20% for late payments and can also instruct dept collecting agencies for recovery. The big fear with no up front payments is that people can soon overstretch themselves and get into serious debt.

[Stanley]

I'd never heard of them so I did a furtle and it looks to me like the old catalogue selling idea but even better because the bill doesn't come in as quickly. It looks like a recipe for overspending to me.
Peter, the government isn't going to hamper anyone who makes it easier or more attractive to spend money. They are desperate for spending to increase and couldn't care less if it is financed by debt. That's how they run the government, paying for everything (including their mistakes) with debt.
The obvious targets are the young, the very poor and desperate and people who don't clearly understand how money works. They are the ones who will suffer.

[Big Kev]

The obvious targets are the young, the very poor and desperate and people who don't clearly understand how money works. They are the ones who will suffer.

As part of the Business Studies lessons, youngest offspring teaches, there is a 'personal finance' module. He said some of them don't have a clue, the usual comment is 'it's OK my parents pay for that'...

[Tizer]

Klarna's been around for a while now and I've mentioned it on here before. Just ask any youngster and they'll tell you other brands too. They're snapping it up.

[Stanley]

See THIS BBC report on Arcadia. The guessing is over, the administrators are in on a better wage than the shop workers.....
Later.... JD Sports, Mike Ashley's group, are expected to pull out of the bid for Debenhams this morning because so many of the Arcadia companies had slots in Debenham stores.

[Tizer]

How about this for madness when house prices will possibly crash next year and folk will get stuck in negative equity...
` Stamp duty holiday ‘stampede’ drives soaring UK mortgage market: Approvals in October reached highest level since 2007 as buyers rush to beat deadline' LINK
`A “mad stampede” to buy houses before the stamp duty holiday ends drove UK mortgage approvals in October to the highest level since 2007, defying surging unemployment and an economic downturn. Approvals for home purchases jumped to 97,500 in October, the most since September 2007. The figure was 33 per cent higher than approvals in February 2020, before the pandemic, and about 10 times higher than the trough of 9,400 in May, according to Bank of England data....Experts expect the strength of the property market to continue until March 2021, when the government’s nine-month holiday ends on paying stamp duty on the first £500,000 of home and land purchases in England and Northern Ireland...

`Nitesh Patel, strategic economist for Yorkshire Building Society, said the housing market continued “to defy economic logic” and was surging “despite challenging economic conditions caused by the global Covid-19 pandemic and uncertainty over the UK’s trading deal with the EU”. However, Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said that without further government support, a weakened labour market and higher mortgage rates were pointing to “lower levels of [housing] activity next year and a partial reversal of this year’s surge in house prices”..'.

[Stanley]

I heard that report also Peter and you are right, it's madness.
It's just been announced, it's official, unless there is a last minute buyer Debenhams will close all outlets as soon as present stock is sold. Another 12,000 redundancies.

[Tizer]

As well as a big Debenhams store on the main street, Taunton has an office block which is a Debenhams Support Centre just around the corner from it. It feels like a more personal blow to people in this town.

The Times has had an excoriating article on National Savings & Investments. The Money Editor has warned readers not to put any more money in NS&I, it's in a state of collapse. They're not answering phone calls, emails or letters. Many people can't get at their money, especially older folks without internet (NS&I recently switched most communications to online because they couldn't cope with mail any more). Even the Money Editor can't get things done - he'd tried to get a premium bond for his 5-year-old nephew and NS&I have been trying to contact the child instead of him. That's what started him looking in to the problems there and as soon as he mentioned it in the paper the Times got a load of emails from readers.
---------------------------------------------------------------------------------

Sorry about all the grim news but it's best to put out warnings...and here's another one. Just when you've got to grips with understanding what Klarna et al are up to here's another credit scam that's taken off. It's amazing what gets past the FCA!

A number of companies have sprung up out of nowhere to offer `an alternative to using a bank overdraft. It all stems from the introduction of `open banking' - remember that? It's promoted by the banks and other organisations to make it easier, they claim, for you to pay and transfer money. You give permission to third parties to access your bank account(s) so you can easily set up regular payments and the like and have things happen automatically. We expressed concerns on OG when we first heard about it. Now the chickens have come home to roost - it's being wrongly used already.

An example is the business called `Safety Net', part of a company called Indigo Michael (never allow companies with silly names to have access to your money!). This is it's web site: LINK It's promo blurb says: ` SafetyNet provides flexible credit that is easy to manage and minimises costs. If you choose to turn Smart Top-ups on, we automatically top up your account when you are about to go into your overdraft. You can also borrow at any time from your credit limit on your dashboard or using the app. Automatic repayments are only taken when money comes into your account. We may take a repayment of more than your minimum payment, as set out in your terms and conditions.'

People are now finding the company is withdrawing money from their bank account within minutes of their salary going in and very high interest is charged for the loans. There are complaints flooding in already. I think the people have made a bad decision to use the company and are not taking sufficient precautions about their accounts, but even so they shouldn't be scammed like this. Is nothing safe these days? Has the FCA gone into hibernation?

[Tripps]

It all stems from the introduction of `open banking'

Well spotted - I'd been wondering what happened to that. Looks like another successor to the 'pay day loan' style of credit. Like the Klarna Bank thing. Do the banks need express permission to apply it to an account - or is it hidden in the (very) small print?

Credit by stealth - to people who shouldn't be getting it. makes me angry.

[Tizer]

As I understand it, the customer has to give permission for their bank to allow a named third party to have access to the customer's account. It will only apply to parties named by the customer. I don't know if the banks do any checks on the third party - it doesn't sound like it, judging from the customer complaints! The Financial Misconduct Authority just seems to wait and hope that the problem will go away.

[Stanley]

"Has the FCA gone into hibernation?"
If you read PE every fortnight you will be aware that in the Eye's opinion they have never been in an any other state. They apply the same thinking to the FSA which is equally at fault. Part of the problem might be the choice of people who are in charge, very often poachers turned gamekeepers, not a good principle.

[plaques]

As I understand it, the customer has to give permission for their bank to allow a named third party to have access to the customer's account.

This is probably to offset the ruling that any benefits are paid directly to the claimant and not to a third party. If in the case of rented property the landlord is a named party then they will grab it as quickly as possible and void the tenant getting behind with their rent. Of course this quickly spills over into other areas as well.

[Tizer]

Another day, another flawed financial scheme...
`'Direct debit fraud cost my mum £1,000'' LINK
`Phil Lind is describing the moment he realised criminals had used multiple direct debits to steal nearly £1,000 from his mother, Ursula. It's thought the thieves got access to her account by tricking her into handing over her bank details on the phone. But they were able to steal from her again and again after getting round security at direct debit payment provider GoCardless, which collects payments on behalf of other businesses....[The company] told Money Box that criminals got round its internal security system and were able to steal the money because the payments, which were all slightly less than £200 and taken over the course of several months, were not "identified as requiring immediate termination".

`Lisa Forte, a partner at Red Goat cyber security in Bristol, told Money Box: "I'm must say I'm not surprised. "This is something that I've seen happen an awful lot and it has increased during the pandemic, in fact. "What you've got to understand is that every element of that chain [the direct debit system] is relying on the element before it to authenticate, to prove that this is a legitimate direct debit. "If you insert poison into the start of the chain, ie through fraudulent companies, then it will poison the entire chain."

Note this comment at the end of the article:
Both Pay.UK and GoCardless said consumers are protected by the Direct Debit Guarantee which refunds any fraudulent payments.
Weasel words! That's not protection. To be protection something must stop the crime in the first place. The companies are either twisting the meaning of words to fool the customers or they don't have the intelligence to run a finance company.

[Stanley]

Peter. It's almost as though the providers have accepted funding fraud repayment as a business cost.

[Stanley]

News this morning that Mike Ashley might be showing renewed interest in Debenhams/Arcadia pickings.
Why is that the image that springs to mind is that of a vulture?
Later, it becomes clear that it is Ashley's Fraser Group that is making a bid for part of Debenhams. More turning of the screw on staff by raising their hopes again. It must be very close to torture for them.