Loan Protection Claims

Many British bosses are willing to incur loan charges or access credit from other sources to avoid making their staff redundant.

This is according to research from More Than, which found 35 per cent of these business leaders have taken pay cuts to avoid reducing the size of their workforce.

Of these individuals, 60 per cent claim the reduction in earnings has lasted at least 12 months, with 17 per cent noting it could continue indefinitely.

Furthermore, 70 per cent have reduced their income by more than half, with one in 20 stating they no longer take a salary.

One-tenth of bosses have gone as far as remortgaging their home so they can keep employees and pay wages.

“It’s sad that so many small business owners have had to remortgage their homes and take hefty pay cuts, but at the same time it shows real compassion on their part,” More Than managing director Janet Connor said.

Compassionate bosses may be interested to hear the Trades Union Congress recently called on company leaders to enable their workers to enjoy the Diamond Jubilee four-day weekend.

There appears to have been an increase in the number of Brits incurring payday loan charges, statements from an expert have indicated.

MoneyMagpie.com founder Jasmine Birtles said her organisation has witnessed an “explosion” in the use of this form of credit.

Many people assume banks will refuse to give them any cash and turn to payday lenders without examining other funding options, she declared.

The specialist noted some individuals appear to have become more sensible with money and are managing their finances better than they used to.

However, others are using credit card charges to pay for utility bills, food and housing costs.

This is a “big worry for the government”, with men and women taking out payday loans “having big problems”, Ms Birtles remarked.

She added: “Nobody with any sense, who is in any way managing their money properly, would bother with a payday loan.”

Debt Support Trust director Stuart Carmichael recently claimed parliament should legislate to deal with the problems posed by this form of finance.

Payday loan charges could be moderated by establishing an industry standard on these lenders, it has been said.

Stuart Carmichael, director of the Debt Support Trust, argued legislation ought to be enacted that would enable credit agreements to be overruled by the government.

Many people use these enterprises because they are finding it very difficult to cope with credit card charges and other expenses, with the expert saying: “In a lot of cases, people tell us, ‘I used a payday loan company to survive’.”

He called them a “borrower’s last resort” and argued a significant number of their customers hate the companies.

Eventually, a “sensible conversation and sensible ideas” will have to be enacted in the market, Mr Carmichael said.

He had previously complained that when people visit the Debt Support Trust with problems relating to payday loans, the lenders often refuse to speak to the enterprise and will only converse with the debtor.

Companies that deal with credit card claims and help consumers handle bank charges have been provided with guidance from the Office of Fair Trading (OFT).

The government body highlighted examples of unfair practices some of these enterprises engage in, such as running websites that make the business appear like a public organisation or charity and making other misleading claims.

Furthermore, debt management firms were advised against sending unsolicited marketing to members of the public, as well as providing their workers with financial incentives to encourage them to promote unsuitable products to clients.

In certain situations, these organisations will be expected to refer customers to non-profit organisations.

Overall, the firms are expected to be transparent and provide people with all of the information they would need to make informed decisions.

“It’s good to see the OFT tackle unacceptable marketing practices carried out by many debt management companies,” Citizens Advice chief executive Gillian Guy said.

The British Bankers Association (BBA) has welcomed the National Loan Guarantee Scheme (NLGS), noting it helps financial institutions to reduce the loan charges their customers incur.

It claimed this promotes the UK’s economic growth and supports new lending to businesses by opening up access to cheaper funding options.

Chief executive of the group Angela Knight said: “Now is a very good time for UK businesses to speak to a bank about their financing needs.”

She pointed out that the lending market in the country is particularly competitive and schemes such as the NLGS encourage this and enable consumers to borrow at even lower rates.

It will underwrite small business loans worth as much as £40 billion, which should assist firms in the nation.

Organisations with a turnover under £50 million will be eligible for the initiative.

Ms Knight also remarked on the pro-business elements of chancellor of the exchequer George Osborne’s recent Budget statement, explaining these could encourage enterprises to operate on these shores.