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Sunday, 29 April 2012

THE CONTINUOUS PAYMENTS RACKET

UPDATE 28 JUNE 2013 
The new regulator, the Financial Conduct Authority has stepped in to make sure banks and others follow the clear legal rules and cancel continuous payment authorities for payday loans and subscriptions. See its press release http://goo.gl/Ky9hE 

In the past some banks had wrongly said the rules did not apply to single payments of the sort taken by a payday loan company, even if the lender takes more than one amount from your bank account to meet that single payment. Some banks told customers they cannot cancel the payment because it is 'to a finance company'. That is nonsense. Others have said that the regulations only apply to a series of payments and these are single payments. But lawyers, and now the FCA, agree that interpretation is wrong. The payment regulations apply to all payments. 
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THE RULES
If you agree to make a payment or series of payments on your debit or credit card you can cancel future payments by telling your bank or card provider. 

In the past just about every bank and credit card provider in the UK has told customers they cannot do that and given them  false information about their rights to cancel payments on credit and debit cards.

Those rights have existed since 1 November 2009. 

And on 28 June 2013 the Financial Conduct Authority confirmed the advice which has been given in this blog since April 2012. The FCA says:

"high street banks and mutuals process requests to cancel CPAs, they have agreed that they will ensure that when a customer asks for a recurring payment to end - that will be sufficient to cancel the arrangement.  They have also confirmed that should a payment go through by mistake following cancellation by a customer the customer will be refunded immediately."

CONTINUOUS PAYMENTS
These payments are called ‘continuous payment authorities’ or ‘recurring payments’. I will call them CPAs. They are NOT direct debits or standing orders which are regular payments from your current account and are covered by separate rules. You have always been able to stop a direct debit or standing order just by telling your bank. But until recently CPAs have been very different.

A CPA is an agreement you make with a retailer, hotel, gym, insurance company, lender or other firm providing you with a service (they are all called ‘merchants’ in the bank jargon). You give the merchant permission to take money from a credit card or a debit card. Even though the debit card money comes out of your current account it is NOT a direct debit – it is a CPA.

The agreement can be made over the phone and it allows the merchant to take money in the future off your card. You normally have no control over the amount that is taken or when – it can be any amount at any time.

In some cases these CPAs are a scam – you think you are buying one item online only to find that you are committed to paying monthly for years. In other cases payday loan companies will store your details and recover future debts using the original card details. Even subscriptions to gyms, publications or insurance premiums are taken through a CPA because the merchant believes it puts them in control of when the payment is cancelled.

In the past it has been very difficult to stop these payments. Originally CPAs could only be stopped by the merchant. If you went to your bank or card company it would say that it could do nothing and advise you to contact the merchant to stop the payment. If the merchant refused the bank or card provider would continue to allow the merchant to take your money.

That changed on 1 November 2009 when a new law came into force. It is in the Payment Services Regulations 2009. It makes it clear that your bank or card provider has to stop the payments if you ask it to do so even if the merchant refuses to cancel it or even if you have not told the merchant.

If the bank or card provider does not obey your instructions then it has to refund any subsequent payment it allows to be taken from your account. And if a subsequent payment causes you to incur any fees – such as an overdraft charge or a late payment fee – or to lose any interest, then those losses have to be refunded too.

Despite that change in the law Money Box listeners and my tweeps have reported that just about every bank and card provider in the UK has wrongly told them that they can only cancel the payment through the merchant. They include Amex, Barclays, Co-operative Bank, First Direct, Halifax, HSBC, MBNA, Lloyds, M&S, Nationwide, NatWest, Post Office, RBS, Santander, and Smile.

Some banks have even advised that the only way to stop the payment is to close the account and cut up the card. Not only is that advice wrong it may not work. Visa and Mastercard can let merchants track you and move the agreement to a card you take out in the future. It has also been known for a bank or credit card provider to try to recover the money – and penalty charges – from customers who have cancelled a card.

Some banks admit they have given customers the wrong information. Lloyds Banking Group – which includes Halifax and Bank of Scotland – has still not updated the terms and conditions on all its accounts to reflect the new law. And both Lloyds and Santander have admitted that customers have been wrongly advised.

If you want to cancel a CPA
Tell your bank or card provider that you have a CPA and name the merchant; give any other details you can such as how the payment appears on your statement and, if you know, the dates and times when the payment is normally taken. Tell the bank that you cancel that payment authority with immediate effect. Quote regulation 55 of the Payment Services Regulations 2009. And the latest release from the FCA dated 28 June 2013 http://goo.gl/Ky9hE 

You can give this instruction on the phone, through an online message, by letter, or at a personal visit to a branch. It is best to do it in writing but always make a note of the time and date when you give the instruction.

If a payment from that merchant is taken in future, contact the bank again and say you want that money (and any penalties or losses it may have caused you to incur) refunded immediately under regulation 61.

If the bank or card provider refuses to do so, or fails to do so after eight weeks, you can take your complaint to the Financial Ombudsman Service www.financial-ombudsman.org.uk or call 0800 023 4567 from a landline or 0300 123 9 123 from a monthly contract mobile. The FOS will most likely take your side in the dispute.

If you have told your bank to cancel a CPA in the past
If your bank or card provider has failed to act on your instructions to cancel a CPA at any time since 1 November 2009 you should be able to get back all the payments taken from your account since you gave that instruction. The bank or card provider has to refund them to you. You should also get back any penalties that the transaction led you to incur such as an overdraft charge or a late payment fee and any loss of interest.

The FCA has confirmed this in its latest statement

"the largest banks and mutuals have agreed to review every individual complaint they have received about the non-cancellation of a CPA and to pay redress where payments have continued to be made despite the customer cancelling the arrangement. This applies to all complaints since November 2009 when the Financial Services Authority (FSA), the FCA’s predecessor, began regulating banking conduct."

The rules depend on when you gave the instruction – it must always be on or after 1 November 2009 – and when the payment was made.

Payments made in the last 13 months.  
Tell the bank or card provider
·         That you gave a clear instruction to cancel the payment on a particular date (which must be 1 November 2009 or later)
·         That the payment made was after that date and was therefore unauthorised under reg.55(3) and 55(4)of the Payment Services Regulations 2009
·         That you are entitled to an immediate refund of the amount and any penalties under reg. 61
·         That the event occurred less than 13 months ago as specified in reg.59(a)

Payments taken between 1 November 2009 and 13 months ago
Tell the bank or card provider
·         That you gave a clear instruction to cancel the payment on a particular date (which must be 1 November 2009 or later)
·         That the payment was unauthorised under reg.55(3) and 55(4) of the Payment Services Regulations 2009
·         That you are entitled to redress under reg. 61
·         That under reg.59(2) the thirteen month time limit does not apply because the bank or card provider failed to give you adequate information under Part 5 of the Regulations.

You should also add that the bank or card provider has a duty to treat you fairly and to give information which is clear, fair and not misleading. When you asked it to cancel the payment it failed to explain your rights correctly thus preventing you from taking the correct action at the right time.

If the bank refuses take your case to the Financial Ombudsman Service – details above.

The law

The Regulations came into force on 1 November 2009. Regulation 55 covers a customer (the payer) consenting to a payment being made and withdrawing that consent. Regulation 55(3)&(4) says

“(3) The payer may withdraw its consent to a payment transaction at any time before the point at which the payment order can no longer be revoked …  (4) …the payer may withdraw its consent to the execution of a series of payment transactions at any time with the effect that any future payment transactions are not regarded as authorised for the purposes of this Part. “

Regulation 61 makes it clear that where a payment was not authorised the “provider must immediately— (a) refund the amount of the unauthorised payment transaction to the payer;
And must also (b)… restore the debited payment account to the state it would have been in had the unauthorised payment transaction not taken place.”

In other words it has to refund any penalties that have been incurred.

The time limit for a refund is set down in regulation 59 which says the customer

“59(1)…is entitled to redress under regulation 61…only if it notifies the payment service provider without undue delay, and in any event no later than 13 months after the debit date, on becoming aware of any unauthorised or incorrectly executed payment transaction.”
However 59(2) states that the 13 month limit may be waived if the provider has not given the relevant information to the customer. That information is set down in Part 5 of the Regulations.

Past FSA guidance
The Financial Services Authority issued guidance on how the Regulations should be implemented. Its latest published version is dated January 2012. http://www.fsa.gov.uk/static/pubs/other/psd_approach_jan12.pdf Although this document makes it clear that the customer has the right to withdraw a payment at any time before it is made it does, confusingly, state that “best practice” is “for the customer to be advised that notice of the withdrawal of consent be given to the payee [merchant].”

Some banks and card providers have taken that to mean that the customer had to do that before the payment would be revoked.

But a draft version of the guidance dated May 2012 http://www.fsa.gov.uk/static/pubs/other/draft-psd-apr12.pdf explains why it has now been changed

“with reference to the customer’s right to withdraw consent for a series of payment transactions, clarification that it is not acceptable for the payment service provider to make withdrawal of consent dependent on notice having been given to the merchant.”

And the latest version dated October 2012 http://www.fsa.gov.uk/static/pubs/other/draft-psd-oct12.pdf  repeats the same advice from the May 2012 draft in paragraph 8.132 (p79) 

“However, it is best practice for the customer to be advised that notice of the withdrawal of consent should also be given to the payee, because the PSRs. [Payment Services Regulations] do not address the payer’s underlying liability under the terms of any contract they have signed.  For the avoidance of doubt, it is not acceptable for the payment service provider to make withdrawal of consent dependent on notice having been given to the merchant.”

It also clarifies that consent can be withdrawn up to the day before the payment is due

"For future dated payments, the latest point at which the payer can revoke the payment
instruction is the close of business on the day before the payment is due to be made, or if the
payment transaction is to be made when funds are available, close of business on the day
before those funds become available."

And this clearer guidance is reflected in the information given to customers on p.15 of this document www.fsa.gov.uk/static/pubs/consumer_info/know_your_rights_guide.pdf  

"Cancelling a regular card payment.
When you give your credit or debit card details to a company and authorise them to take regular payments from your account, such as for a gym membership or magazine subscription, it is known as a ‘recurring transaction’ or ‘continuous payment authority’.
These are often confused with direct debits, but do not offer the same guarantee if the amount or date of the payment changes.
In most cases, regular payments can be cancelled by telling the company taking the payments. However, you have the right to cancel them directly with your bank or card issuer by telling it that you have stopped permission for the payments. Your bank or card issuer must then stop them – it has no right to insist that you agree this first with the company taking the payments.
Be aware, though, that you will still be responsible for paying any money that you owe."

Conclusion
Although the banks and card providers claim to have relied on earlier FSA advice they have a duty themselves to obey the law which is clear. You can cancel a continuous payment authority on a debit or credit card simply by telling your bank or card provider. And it must act on your instruction at once.

ENDS

NOTE
THE INFORMATION IN THIS ARTICLE IS GIVEN IN GOOD FAITH, HAS BEEN CAREFULLY CHECKED WITH MULTIPLE SOURCES AND IS BELIEVED TO BE CORRECT. PAUL LEWIS ACCEPTS NO RESPONSIBILITY FOR ITS USE OR MISUSE OR ANY LOSSES THAT MAY CONSEQUENTLY BE INCURRED. 

Wednesday, 18 April 2012

LOSING EMPLOYMENT & SUPPORT ALLOWANCE


About 100,000 ill and disabled people will lose their Employment and Support Allowance on 30 April 2012.

From that date a new time limit will apply to the Employment and Support Allowance which is paid on the basis of National Insurance contributions. It is called contributory ESA. At the moment it can be paid indefinitely. In future the allowance, worth £99.15 a week, will stop after one year.

The one year time limit will apply at once to an estimated 100,000 people who have already been on contributory ESA for at least a year. Another 100,000 will lose it by April 2013.

The number affected will grow by about 200,000 a year. By 2015/16 a total of 700,000 people on contributory ESA will have lost it when they reached the one year time limit. The Government estimates the net savings to the Treasury will be £1 billion in 2014/15.

More detail
Employment and Support Allowance is paid to people who are too ill or disabled to work. It was introduced in October 2008 to replace Incapacity Benefit. Everyone on Incapacity Benefit is being reassessed and put into one of two ESA groups.

The time limit applies to people in what is called the Work Related Activity Group (WRAG). They have been assessed as able to return to work with some help. The time limit does NOT apply to those in the Support Group who are not expected to return to work because their condition is long-term and severe.

The time limit applies to ESA which is based on National Insurance contributions (contributory ESA). It does NOT affect the means-tested (income-related) ESA paid to those with a low income.

The time limit includes the 13 weeks spent in the assessment phase at the start of the claim for ESA when people are allocated to the work group or the support group.

Can you get money from other sources?
If you are due to lose ESA you should have been sent a letter by the DWP. It is very important to check if you can replace at least some of the ESA you will lose.

1. Can you claim income-related ESA? That is based on your income and savings and if you have a partner on theirs as well. You cannot get income related ESA if your partner works more than 24 hours a week or if their income is too high or your joint savings are more than £16,000. The Government estimates that 60% of those who lose contributory ESA will be able to get at least some income-related ESA. Income-related ESA has no time limit. If you get income-related ESA you may be able to get some help with mortgage payments.

2. Can you get your council tax reduced through Council Tax Benefit? If you pay rent can you get that reduced through Housing Benefit? If you already get either of those benefits they should go up when your ESA goes and your income is reduced. But that will only happen if you tell the council which pays them about your drop in income.

3. Can your partner get Working Tax Credit? If you have no children your partner must normally work at least 30 hours a week to get Working Tax Credit. But if they are over 60 or qualify for disability element that is just 16 hours a week. If you have children then your partner must normally work at least 24 hours a week (assuming you do not work at all). But that may be reduced to 16 hours for a variety of reasons including your own health. Get advice. If your partner already gets tax credits make sure you report your reduced income when ESA stops. Your partner's tax credit should then increase.

The Government estimates that claiming extra from these other benefits will reduce the average loss for those who lose from the full £99.15 a week to about £52 a week.

Where to get help
You can get help and advice from your local Citizen's Advice Bureau. Your local council may have a welfare rights office, though these have been cut back recently. You can also enquire at your local JobCentrePlus. Or you can work out your own entitlement at www.entitledto.com. That takes you to the website of  www.turn2us.org.uk and you can call them on 0808 802 200. The organisation Disability Rights UK may be able to help through its website or publications www.disabilityrightsuk.org/about.htm

The Government published some information on the impact of the Welfare Reform Act on disabled people which you can find through this page www.dwp.gov.uk/policy/disability/welfare-reform-bill-2011-and-disabled. Many of the figures in this blog are taken from the estimates in those documents.

Monday, 16 April 2012

TREASURY INCOME TAX FIGURES - UPDATED

These are the figures the UK Treasury gave to the press 15/16 April 2012.

Table 1
Proportion of individuals reporting various average tax rates by total income category (2010-11)
                                              Income 
£100k to £150k £150k to £250k £250k to £500k £500k to £1m £1m to £5m £5m to £10m Over £10m
Average tax rates
Above 40% 0% 6% 73% 81% 80% 81% 72%
30% to 40% 67% 77% 18% 11% 10% 8% 12%
20% to 30% 24% 13% 5% 4% 5% 4% 8%
10% to 20% 8% 3% 2% 2% 2% 3% 3%
Under 10% 1% 2% 2% 2% 3% 4% 6%








Source: Treasury/HMRC

HM Treasury spokesman: “There are currently millionaires paying a lower tax rate than ordinary taxpayers.  This is the system we have at the moment, but the Government is committed to making it fairer.  We’re capping benefits and these figures clearly show why it’s fair to cap tax reliefs for the wealthy as well.”
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MY ANALYSIS
The table shows the percentage of people paying the rate of tax in the left hand column for income across the top.
The Treasury table above includes only Income Tax not Capital Gains Tax nor National Insurance
The Treasury table shows average tax rate across all income, not marginal rate.

The 50% tax rate on incomes over £150,000 began in 2010/11.

I have worked out the percentage in Income Tax and NI due on these levels of taxable income if no avoidance was undertaken. So these are the rates that 'should' be paid.

Table 2
Full tax on taxable income of

Source:      £100k      £150k         £250k      £500k      £1m     £5m        £10m
Earnings 29.9% 35.0% 41.0% 45.5% 47.8% 49.6% 49.8%
Dividends 16.6% 20.5% 26.7% 31.4% 33.8% 35.6% 35.9%
Source: Paul Lewis using UK Tax Tool 2012 app and uktaxcalculators.co.uk









You will see that the percentage of income paid in tax is very different if it is solely from dividends. The rows in the Treasury table where people could be said to be avoiding tax are the bottom three. The top row are paying about their full whack and row four may or may not be depending on dividend/earnings ratio.

The numbers of individual taxpayers in the various bands - calculated by me from the Treasury figures - are shown in Table 3 below

Table 3


Number of individuals (2) reporting various average tax rates by total income category 
 Income 2010/11   
£100k to £150k£150k to £250k£250k to £500k£500k to £1m£1m to £5m£5m to £10mOver £10mTotal (3)
Average tax rates
 Above 40%              -      10,200    51,100    20,250     8,000        324            144     90,000
 30% to 40%   201,000  130,900    12,600      2,750     1,000          32              24   348,300
 20% to 30%     72,000    22,100      3,500      1,000        500          16              16     99,100
 10% to 20%     24,000      5,100      1,400          500        200          12                6     31,200
 Under 10%       3,000      3,400      1,400          500        300          16              12       8,600
Total (1)  300,000  170,000    70,000    25,000  10,000        400            200 
(1) Treasury says these figures are approximate as all selfassessment returns are not in yet
and it stresses that the numbers at top incomes are very low and subject to error
(2) My calculations in the table are particularly liable to inaccuracy at the top end
(3) Rounded to nearest hundred
(4) totals do not cross match because of approximations in percentages and totals


These figures show there are 8,600 people with incomes of £100,000 or more paying less than 10% tax and 31,200 paying 10% to 20%. They cannot be paying the full rate of tax on all their income.

Another 99,100 paying 20% to 30% are unlikely to be paying tax on all their income.

The 348,300 paying 30% to 40% and the 90,000 paying above 40% are likely to be paying tax on almost all or all their income depending on the proportion of dividends and earnings in their income.

The Budget papers showed capping several tax reliefs at 25% of income or £50,000 whichever the higher would save the Treasury £490m in 2014/15, £240m in 2015/16 and £300m in 2016/17. Treasury Secretary David Gauke said on 16 April on Today on Radio 4 that the charity tax relief would account for "£50m-£100m" of the 2016/17 saving.

The Treasury wouldn't be drawn on what change the cap would make on the percentages of taxpayers paying various rates, but told me "The cap should mean people move up the rows."


Wednesday, 11 April 2012

WINE INVESTMENT – BORDEAUXING ON THE RIDICULOUS


It all started with the pun in the title. Here is the timeline of how my tweeps responded to it.


Paul Lewis @paullewismoney  Wine investment - Bordeauxing on the ridiculous.

Michael Ware  @HorusConsulting
good pun

Paul Lewis @paullewismoney 
“@HorusConsulting: @paullewismoney good pun” >>> it's not a pun, it's financial advice!!!

Bee Chandler @mummyyummy34  
you're on top form tonight! #cheers

Paul Lewis @paullewismoney 
@mummyyummy34 >>> cheesy but with a hint of oak and blueberries over notes of grass?

Quizzical Eyebrow @quizeye  Can somebody tell @paullewismoney that Tim Vine has hacked his twitter account please?

JSA+Expenses @JSAplusExpenses 
wine investment>>>investors chablis treated

Andrew Hill @AndrewJ_Hill 
Sadly the web has yet to find a way to succinctly express a sigh, shake of the head and roll of the eyes after a poor joke.

Stuart Walker @WalkerSah 
Investors end up in Hock?

Odysseus @headedforhades
corking advice at that! #badoomtish

De Bere Yendor @debere71 “@paullewismoney: Wine investment - Bordeauxing on the ridiculous.” A "corking" joke Sir !

De Bere Yendor @debere71 
One needs a lot of bottle to invest in wine !!

Neil Monk  @nm_uk *groan* Taxi for Lewis! RT @paullewismoney Wine investment - Bordeauxing on the ridiculous.

Computer Solutions @KenilworthComps 
Oh that's very good or even Bordeauxing on the Reisling

James Jones @ExperianJames 
Invest in wine and the future has to be rosé.

Jon Cundall @jon_g_c
regarding wine investment - you will get your money back merlot less

CB @thistoomustpass
wine investments, whether good or bad....Que Syrah Syrah

EmJ @Scooty413 
without a top - cabriolet sauvignon?

rightproperty.com @rightproperty 
that's a poor wine investment joke. How Merlot can your followers go?

Stuart Hill @sturtle1 
Are wine investors 'plonkers' ?

Paul Lockett @plc69 
Oh, stop w(h)ining!! ;-)

karen hobbs @karenhobbs 
it's all in the disulphide bonds!

Grant Salisbury @GrantSalisbury1 
What does Jeremy VINE think about it all?

I thought about investing in wine but my bottle went.

Optimum Otium @Optimum_Otium 
Major concern is that of liquidity...

Greg Fradd @fredgruff 
Sauvignon pennies for rainy day.
Look after the Pinots and the pounds will look after themselves. 

Robin Hames @robinhames 
bit late on this one! But presumably you'd have to be off your Rioja to invest.
Still any port in a storm for some.

So, it’s up to you. But remember…

…it's not a pun, it's financial advice!!!

These investments – and this page – are not regulated by the Financial Services Authority and any loss of humour is not covered by the Financial Services Compensation Scheme.

GRANNY TAX II



Imposing the Pay As You Earn (PAYE) tax collection system on the state pension – an Easter idea floated by the Treasury – could  be a disaster.

Not just because it would combine the communication and administrative talents of DWP and HMRC – a toxic mix if every there was one.

But because PAYE is least able to cope when income changes during the tax year and when there is more than one source of income.

Which is exactly what happens at retirement and after.

PAYE is a way of collecting tax not assessing it. That is why every year millions of tax codes are wrong, too little or too much tax is deducted, and HM Revenue & Customs has to write to those taxpayers asking them to send more money or enclosing a refund cheque - or sometimes both.

PAYE works well when people have a single smooth regular income. That is not the common experience in retirement. Eight out of ten older taxpayers have multiple sources of income.(1)

There is no longer one retirement age. People move from full time work to part-time, pensions kick in at different ages, and the state pension arrives at a date that is set to rise to 68 or beyond.

As retirement takes hold some taxpayers move to incomes too low to pay tax. Others who have not worked for some time will find the state pension is their first taxable source of income for years. Many will acquire a second, third or fourth source of income as pensions kick in and perhaps part-time work is started. 

All those changes may happen over several tax years. And they are exactly the conditions which baffle PAYE and lead to under- and over-payments of tax followed by recovery or repayment, often years later.

It may not matter too much to someone in a well paid job if they suddenly get a demand for hundreds of pounds tax. It certainly will matter to someone on an income of £12,000 a year.

MPs reported in February 2010 that an estimated 1.5 million older people had overpaid £250 million of tax on their personal and company pensions and half a million had underpaid £100 million. (1)

Why extend those problems to the state pension as well?