As more and more people trade in foreign lands via the internet, there has been a marked jump in the number of reported frauds, scams and thefts.  Up until now it had been almost impossible to chase foreign based crooks, but now the European Commission and the Department for Business Enterprise and Regulatory Reform have joined forces to tackle cross border disputes.  The new UK European Consumer Centre (UK ECC) is one of 27 such centres across Europe and should now be your first port of call for cross border disputes.

The Scheme will cover goods purchased in the EU and will also take in Iceland and Norway who are both supporting the scheme.  This fast track way to attack and close down the crooks who plague the internet is being hailed as a major step by many in the industry – although some are speculating that it will only force the fraudsters and crooks to other areas of the world not covered by the ECC.

So how wide spread is fraud and illegal activity in the retail market?

While it is known that this kind of activity has increased dramatically since the internet offered access to all areas of the world, it is very difficult to obtain true and accurate figures because many people are ashamed to admit their own short comings when falling for these get rich quick schemes. 

Many commercial companies are very unlikely to report being the subject of such stings as it will affect their reputation, possibly alarm their customers and show them in a distinctly unflattering light.  While everyone knows that the scams cannot be closed down as quickly as they should be without people coming forward, the taint on a company’s reputation may be greater than any potential financial loss.

In this kind of market the scammers are often hidden from the rest of the world, causing untold financial heartbreak for far too many people.

While the US housing market was flying high and everybody was making money, the banks, builders and home owners alike there were no clouds in the sky and everybody was happy.  Since the onset of the sub-prime mortgage collapse we have seen US house prices fall and millions of US citizens put at real risk of being evicted from their homes after falling behind on their mortgage payments.  But why is there no solution yet?

As often happens in America the problem seems to be the ideals of each of the main political parties, with one favouring regulation and the other demanding a solution from the private sector.  While the politicians engage in cheap points scoring and fighting in Congress, literally millions of Americans are looking to pack their bags very soon and move home – only they have no where to go!

Each day that the politician cannot reach agreement sees more people moved out of their homes, more homes going on the market at sub-market prices and more pressure on the economy.  The situation has the potential to push the US into a very steep recession if no help is forth coming very very soon.  The banks know this and the politicians know this but they seem unable to put a package together – even though they have had up to 12 months notice that the situation was getting worse and worse.

Could this happen in the UK?

While you can never say never, the US financial industry has been guilty of pushing high risk loans to those who could ill afford the payments.  Even while the US housing market was flying high, behind the scenes in the sub-prime market, more and more home owners were falling behind with their payments – but was this headline news when the market was rising and rising?

It will be interesting to see how the authorities finally decide to resolve the situation, especially with the presidential election next year.  Who will be brave enough to make the big decisions? How long can they afford to sit on their hands? How will George Bush’s final months be remembered?

While the authorities have for some time been looking to make the financial industry a lot more transparent, do you really know the full extent of the charges which you incur when you take out a loan, open a bank account or even take out a mortgage?

Even though advisors have been forced to breakdown the charges which you will incur, many seem to do it such a way that it is almost impossible to understand what the final figure is. Do you pay a termination charge if you repay your loan early? What are the penalties for late payment?

Very often it is only when you actually get into the situation that you will realise that not only will you be penalised for missing a loan repayment, but you will also pay further interest on the payment until you actually catch up.  The mortgage market has been the subject of much controversy over the years with many providers using early repayment charges to bump up there profit on your loan.  While this practice is supposed to have been outlawed some time ago, there are still a small number who will penalise you in some shape or form for early repayment.

It is vital that whenever you take out  a loan, mortgage or even a bank account that you know exactly what you are being charged and will be charged in the event of missing payments, etc.  While the banks are making charges available to their customers it is often up to you to find them in the small print, otherwise you may be in for some shocks in the future.

Even though the experts expect the UK housing market to fall back over the next 12 months, when you consider that the average house in the UK costs around £200,000 it is nearly impossible for first time buyers to get onto the housing ladder, without over stretching themselves.  So what can you do?

While the authorities have made much noise about helping first time buyers, there is very little that they can do.  If they offer financial assistance then they open themselves up to criticism for favouring a particular group of society, but if they do nothing they will further feed the frenzy for housing associations, which have pushed prices further and further ahead.  The bottom line is that you can’t have a free market and then complain when it does not go the way of the government.  Will prices ever come back down to more realistic levels?

Highly unlikely.  While prices have flown over the last few years there seems little chance of them falling back too far because :-

• There is still a firm demand behind the scenes.
• The authorities could not manipulate lower prices, because this would place many people in deep financial debt.
• There are still too few homes being built in the UK to cover demand.

The situation really is dire for first time buyers going forward, and even in the event of a property crash could we realistically expect prices to fall by 50%? If that were the case unemployment would be up and even fewer people would be able to afford a home.  This really is a nightmare scenario for the first time buyer, and there is little likelihood of prices and wages falling into line in the short or even medium term.

As we move towards a decline in worldwide business activity, a time when interest rates around the world will fall, many are starting to ask when they should consider re-financing their debts.  Is it time to do it now, or wait as long as possible?

While it may be tempting to take advantage of the recent reduction in interest rates in some areas of the world, those who can may well benefit from waiting a few months longer.  The UK for one is expected to see interest rates start to decline very soon, with recent indications by the Bank of England seemingly confirming this.  We are also in a situation where finance is still more expensive in real terms than it was 6 months ago, because there is less liquidity in markets, which has pushed money market lending rates higher.

If you are looking for a fixed rate refinancing of your debt, and you are able to hold on for a little longer without impacting upon your credit rating, it may well be beneficial to hold off any action for a little while.  We could see UK rates fall by more than one percentage point over the next 12 to 18 months, depending upon the performance f the economy.  Even this relatively small fall will offer many consumers, who have built up substantial debts, the chance to reduce their future debt repayments.

Each person’s situation will be different and there is no simple answer to the question, but it seems inevitable that the UK, US and other major countries around the world will be seeing lower interest rates in the not too distant future.

With news that Barclays Bank alone will be writing down their asset base by approaching £1 billion – with many expecting the final figure to be above this – many are starting to ask who will pay for this financial mess.  Will the Banks take it on the chin, or will they look for compensation from the consumer?

As you guessed, it will no doubt be the consumer who will pay the price in the end, with Banks arguing that the consumers benefitted when their balance sheets were strong (with better lending terms, etc) and now they will need to pay the price.  While the recent write-off by Barclays, and the others expected to be announced from other UK Banks, will not have a long term impact on the financial strength of these institutions, it has affected confidence in the system on the short term.  This will be the reason the Banks use to increase your charges, notch up your loan interest rates and generally squeeze you for a little extra.

Lets not forget that the UK Banks are also in the middle of a messy court case with regard to overdraft charges and the question of there legality.  They have already shelled out some £570 million in compensation, with potentially billions more at risk if they lose the test case in January 2008.  The Banks have traditionally come down in favour of their shareholders in such situations, looking to replace the lost funds by hitting their customers.  We have seen masses of Bank branches closed down, many systems now automated and a general reduction in free face to face advice.  The consumer is already paying the price for increased competition and risk in the sector.

The bottom line is that even though the main UK Banks have substantial asset bases, and will be relatively untouched by recent events in the long term, they have shareholders to keep happy.  Slowly but surely “free” banking will disappear (if it has not already!), charges will creep up and many more new fees will be introduced.  The next few years will show the value of shopping around for the best deal, with many expecting a general hike in the cost of personal and business banking – you have been warned!

With many puzzled as to why they did not close the door on further rumours earlier, Barclays Bank have now confirmed they did suffer losses in the sub-prime / credit crunch but no where near the levels which were mentioned by some.  They have admitted that certain assets have been written down by £800m in total - a lot less than many had feared.

As Barclays Bank announced profits of £1.9 billion for the first 10 months of 2007, it seems that they are still on target for a very profitable year – but are they?  Hidden away in the details of today’s results is a sentence which states that Barclays Capital – their investment arm – still have £5 billion of assets in the debt sector with many still linked to sub-prime lending in the US, with the potential for more write-downs in due course.

The problem with the current financial climate is the fact that nobody knows when there will be a turning point, when confidence will return or when the sub-prime sector will recover or even stabilise.  Stock markets, and consumers, prefer to see cold hard facts rather than be driven by speculation and rumour, which can very often lead to panic among investors.

As we approach the full bank reporting season it will be interesting to see how the other UK majors have performed over the last few months.  Many have been very quiet of late and there are concerns that we could be in for some nasty surprises as they start to reconsider their asset values and their thoughts going forward.  Barclays have now ridden part of the storm, although they are not out of it yet, but many other UK banks have yet to set off on what may turn out to be a dangerous journey.

In a surprise move ahead of the test case hearing in January 2008, the OFT have come out and publically rejected the Banking Sectors arguments with regards to overdraft charges and the like – the payments at the centre of the overcharging situation which has been rumbling on for some time.

This is actually a huge body blow for the Banks, who have already paid out a staggering £570 million to disgruntled customers on a no blame basis.  The banks claim that the overdraft charges in question are actually used to fund their all round customer services, and as such they should not be covered by the rules being used to take them to court.  The OFT strongly disagree with this idea and have dismissed the argument out of hand.

We are not even at the steps of the Court yet and the two parties are starting to crank up the pressure in what promises to be an explosive court case.  There is even speculation that the banks may actually settle out of court in order to prevent a whole host of their charging measures being presented to the public.  While legally the banks have not accepted any blame for the £570 million of payments already agreed, morally they have severely weakened their case.

The only problem for the UK banking customer is the fact that whatever is taken off the banks if they lose, they will need to recoup somewhere else, whether by reduced savings rates, increased charges or some similar income producing action.  There is no way that the banks will handover what could add up to billions of pounds and let the customer off the hook.  Keep a very close eye on this, as it is only now just beginning to simmer nicely!

Over the last few years the number of complaints about credit cards has mushroomed, with many customers querying why they are being treat differently from new customers who receive better rates.  While this is a fair point, the financial companies argue that they need an incentive to attract new customers, and that existing customers would probably have received a special short term rate when they joined up.  Fair point, but……

More and more credit card companies are offering 0% balance transfers for the life of the balance, something which is obviously not a short term incentive.  Many are now arguing that their interest payments and charges are being used to fund these offers to potential customers and they are losing out.  So who is right?

It basically boils down to the fact that if you don’t ask you won’t get! If you call you Credit Card Company and express your displeasure at the treatment you are receiving compared to new customers, there is every chance they will offer you an incentive if you threaten to leave.  Why would they risk losing you when they would need to advertise to replace you (at additional cost to themselves)? Why would they want to bring in low profit customers, and not be willing to meet their existing customers half way?

If you call your credit card company and query the rates available to new and old customers they will try to blind you with science, but if you threaten to leave they will soon wise up and speak to you in a language you can understand – pounds and pence! It won’t be easy, but don’t give up and ensure that you at least get something off them – no matter how small – or move!

With all of the talk about credit crunches, a drying up of liquidity, the real question on the mind of the consumer is – When will markets return to normal? When will my credit card application be accepted? When will my mortgage go through?

The quick answer to that is, nobody really knows! While the initial credit concerns may be leaving the market, money is still tight with many companies retaining as much liquidity as possible just in case they need it themselves.  The Northern Rock debacle was a special situation, but it was brought on by the credit crunch and the reduction in the pool of money available.

Slowly but surely we are seeing more and more companies bring out depressing statements, financial companies are having to write down the value of some assets and shareholders are biting their finger nails awaiting the worst.  Markets are awash with stories that Northern Rock is effectively worthless and Barclays Bank are now in trouble, but it will all blow over in the end.

It could take up to another year for the full effects of the credit crunch to wash through the markets, and the attitude to risk will change for many.  The problem is that we have been here before, everything flying high, business booming and then the risks become greater as people look for a new approach a new angle – and then bang! One problem, such as the US sub-prime mortgage crisis, can make the whole market re-evaluate risk and pull in their horns, having a knock on effect to all areas of business.  Then slowly but surely confidence grows, and the whole process begins again – history is littered with them.

The credit crunch may be over, but the after effects are not and they will be with us for some time.