Credit crunch rebuke for FSA and Bank of England - Times Online

Britain’s financial regulator and its central bank must develop a better plan for warning banks and investors of high risks, after overseeing the loss of billions of pounds in the global credit crisis, a damning report by MPs will recommend today.

In its second report on last year’s liquidity crunch, the Commons Treasury Select Committee criticises the Financial Services Authority (FSA) and the Bank of England for failing to ensure that financial companies were prepared for the worldwide closure of credit markets. The Government must respond to the charges within two months.

Although the FSA and the Bank gave warning many times that banks were lending too much too easily, they failed to follow up their words with action, the cross-party committee says. John McFall, the chairman, says: “It is clear that many market participants failed to heed warnings about a serious underpricing of risk and the potential for impaired liquidity in financial markets in the mistaken belief that the good times would go on and on.”

The committee will recommend that in future the regulator and the bank should write a letter to financial companies highlighting two or three key risks. The MPs believe that the two institutions should then seek confirmation that the companies have considered the risks and publish a commentary on the responses.

Banks and investors, such as pension and hedge funds, wrote down billions of dollars last year after the value of their investments in asset-backed securities plunged because of a wave of defaults on the underlying American sub-prime mortgages. The banks, investors and credit-ratings agencies that rated the securities also face heavy criticism by the MPs.
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Nearly everyone is listed with a credit record since in the modern world today there is hardly anyone who is not taking a loan – whether by way of using a credit card or running up bills at the local store. Any failure to timely repay debts is immediately noted by the credit recording authorities. It is this record that is the deciding factor for the lender to advance the next loan to the borrower. It is natural that lenders will avoid a person with a bad record of repayment. That leaves the person with a bad credit history little chance to pull along with life. But since there are many – in fact innumerable who have bad credit, the lenders now see in them a potential market. So they have come up with this scheme of bad credit secured loans. The lenders dip into the market and the borrower benefits in two ways. Firstly the need is met with bad credit secured loan and secondly he or she gets another chance to rectify the bad record by repaying timely.

There is stiff competition in the loan market as there are many lenders in the fray. The borrower should go online to get acquainted with the various offers and opt for the one that is tailor made for the individual. The amount advanced may range from 3,000 pounds to 75,000 pounds to be repayable within 5 to 25 years.

A security or collateral has to be pledged for bad credit secured loans but despite the security being offered the interest is comparatively high because of the bad credit history. The money can be used for any purpose like renovation of the house, purchasing a vehicle, consolidating other debts or repaying excursion bills.

Bad credit secured loans is a boon for those with bad credit history because these persons are often considered to be intentional defaulters. Most lenders shy away from advancing money to those who are habitually at default. The question of security changes the complexion of the loan as now the borrower knows that if repayment is not made a valuable asset will have to be forfeited. Bad credit secured loans is a specialty of the financial world of UK. Bad credit record holders are those who have received judgments by the County Court, received IVA (individual voluntary arrangements), those who declared insolvent and those defaulting on mortgages.

Credit report is a very common phenomenon. Everyone has one. But it has been found that about 70% of the credit reports are either erroneous or misrepresented. A negative data however can have adverse impact on credit ratings. Credit repair is the method by which the individual can erase or rectify these incorrect mistakes. The process is not a difficult one and should not deter the individual from repairing the credit report personally.

Credit report is of such vital importance that there is a regular racket of fraudsters assuring consumers that they will take care of bad credit history. They just cannot deliver – this is the harsh truth. These scammers will just take thousands and vanish. In the UK there are three credit agencies – Callcredit plc, Experian and Equifac Plc. The last two can deliver credit reports online.

The first thing to do is to get a copy of the existing credit report. As per rules, if the individual’s application for loan has been turned down then within 60 days he or she is entitled to credit report without paying fees for the same. One is also entitled to get one free credit report annually from each of three credit-reporting agencies.

Having obtained the report and scrutinized it the person concerned has to let the agency know in writing the points of inaccuracies requesting them to remove the same. The mail should be sent by certified mail to avoid any kind of misunderstanding. Copies of the letters have to be maintained. Within 30 days the credit reporting agencies have to investigate the matter and return to the person concerned. If the complainant proves to be true then all three credit-reporting agencies must be notified as well as the person or organization that made the complaint. All must make the necessary corrections in the relevant files. After this has been done the credit-reporting agency will issue a fresh report updating the accounts. This again has to be acknowledged by the creditor or the group that filed the objection.

The matter of credit rating is very important because upon this depends the rate of interest of loans being taken. Considering the numerous loans one has to take nowadays (car loans, house mortgage, insurance etc) the interest adds up to a tidy sum. The credit rating also might affect job prospects for understandable reasons. Thus credit repair is vital for saving a lot of cash.