Consumer rights: I might not be able to pay my mortgage
How to avoid getting into arrears / Making payments to an elderly parent without incurring tax / Can Ryanair get away with charging for debit cards?
Sunday 03 May 2009
I was made redundant at the start of the year and have been struggling to get another job. We are now nearing the limit of our savings and I'm worried that we may not be able to make the mortgage repayments in a couple of months' time. How long will it take for the bank to throw us out of our home? Is there anything I can do? Am I entitled to benefits?
Despite talk of green shoots, recovery in the economy still feels some way off. Unemployment is likely to rise for a while and many people will face a similar dilemma to yours. But being in plentiful company is little consolation. The Government announced plans in December to help struggling homeowners, which allow the deferral of interest payments for up to two years with unpaid interest added to the outstanding mortgage. But to date, apparently only a handful of people have used the scheme.
The Financial Services Authority advises you to contact your lender as soon as possible. "They need to know if there are specific reasons why you cannot make your mortgage payments and will have procedures for dealing with cases like yours. Along with any help your lender can provide, you can also get free and independent advice from agencies that specialise in money problems."
There are many debt advice agencies which can help, such as the consumer credit counselling service (www.cccs.co.uk), National Debtline (www.nationaldebtline. co.uk), the Money Advice Trust (www.moneyadvicetrust.org)and your local Citizens Advice (www. citizensadvice.org). All these agencies offer free, independent advice. They can talk you through how to negotiate with your creditors, offer advice on how to budget and prioritise which debts to pay. In some instances, they can negotiate with your creditors on your behalf. Be wary of firms masquerading as offering independent debt advice. What they want to do is to persuade you to enter into an arrangement with your creditors which will see you pay less each month in repayments, but they will charge a whopping fee for setting up and monitoring this arrangement. Stick to the agencies I have listed.
The FSA has a Moneymadeclear guide giving more details on what to do if you can't pay your mortgage, which you can find at www. moneymadeclear.fsa.gov.uk. This site also has a budget calculator to help you to work out your income and spending. This will help you to ensure that all your essential bills are paid first, such as mortgage, utility bills, insurance, council tax and housekeeping. Lenders will almost certainly expect you to have gone through this exercise if they are to look at deferring payments.
Equally, even if you do agree a deferral, it's important to pay what you can. An FSA spokesman says: "This shows your lender you are willing to make an effort to pay, and may increase your chances of keeping your home."
My mother is struggling to live on her pension. I would like to supplement her income by a few hundred pounds every month, but she is worried that she will have to pay tax on it and therefore it will be a waste of money. I don't think this is the case. Who is right? Also, what are the best investments to generate a long-term income? I currently have the money in cash, but I'm happy to take some risk to the capital.
Stepping in to pay nursing home fees or supplement a pension may become the lot of many of this working generation as pensioners increasingly find themselves in penury. The good news is that you are right about the tax position. Sheriar Bradbury, managing director of financial advice firm Bradbury Hamilton, says: "According to HMRC, you can give away this money to your mother without her being assessed on it for income tax." But he adds a note of caution that she should be careful not to build up too much capital if she is in receipt of any means-tested benefits as it will affect the amount she receives.
Although the current economic environment can make all investments outside cash look daunting, Bradbury says that if you are prepared to take some risk, you can create a long-term income stream using your stocks and shares Individual Savings Account (ISA) allowance of £7,200 (up to £10,200 a year for the over 50s from 6 October). He adds: "If you have spare cash over and above this you may want to consider putting some of these funds in a series of collective investments (such as unit trusts and investment trusts). It would be advisable to use a company that offers a large choice of funds and pick a diversified selection that matches your attitude to risk."
In each subsequent year, he says, you can then transfer money from your unit trusts and investment trust and place them in an ISA. "You should be able to take income at the level you have described and potentially fund ISAs in subsequent tax years from the collective investments by using your capital gains tax allowance each year."
I've just booked a flight with Ryanair. It has charged me £10 for using my credit card to pay. In fact, it seems to charge this for using any kind of card and I'm a bit mystified as to how I could avoid the charge. Do retailers have the right to charge anything they like for using credit cards? Do I have any comeback?
Anecdotally, these charges seem to be cropping up more frequently. My suspicion is that it is banks and retailers trying to prop up their waning profit margins. Apacs, the payments service, says that it is still not common practice for card accepting businesses in the UK to add an additional charge for using a credit or debit card. However, it adds: "One exception is in the travel sector, where the practice tends to be more widespread." The travel industry can generally get away with charging for credit card transactions in particular because people need to ensure the large payments made to holiday companies are insured. Remember, under section 75 of the Consumer Credit Act, with payments over £100 made with a credit card, the card issuer is jointly liable if the goods or service bought cannot be supplied.
Apacs says that the Credit Cards (Price Discrimination) Order 1990 allows card-accepting businesses to issue a surcharge for accepting a credit card to recoup the cost of the transaction. No such legislation covers debit cards but businesses are within their rights to charge its customers an administration fee. Apacs adds: "This, however, is a competitive decision. From our perspective, the issue of major importance is that customers are made aware of the charges prior to making a payment, so that they can make an informed decision."
To be fair, Ryanair has certainly made you aware of its charges upfront. When I spoke to the airline it said that it is trying to encourage its passengers to pay by Visa Electron and those who choose not to are subject to payment handling fees. The trouble with Visa Electron is that you can pay for goods only if you have enough money in your account and it is offered by only a handful of UK banks.
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