Ever wondered how to calculate an APR?

Here's the equation you should use!

where

• X is the APR;
• m is the number of the last drawdown;
• k is the number of a drawdown, thus l ≤ k ≤ m;
• C_k is the amount of drawdown k;
• t_k is the interval, expressed in years and fractions of a year, between the date of the first drawdown and the date of each subsequent drawdown, thus t_l = 0;
• m’ is the number of the last repayment or payment of charges;
• l is the number of a repayment or payment of charges;
• D_l is the amount of a repayment or payment of charges;
• S_l is the interval, expressed in years and fractions of a year, between the date of the first drawdown and the date of each repayment or payment of charges.

Booking through an airline website could still be risky

The Department for Transport is stretching the ATOL scheme to cover travel agents and websites which book flights and accommodation separately - up until now they have managed to sneak around the rules.
But airlines still aren't covered, unless they've actually set up a tour company. Why?
Way back in the distant past when the ATOL bonding system was created, the world of air travel was a much simpler place. We're in the early 1970s when most airlines were state-owned symbols of national prestige.
What that meant was that there was virtually no chance that the scheduled airline you were travelling on would go bust. So there was no need for a bonding scheme to provide you with protection.
Of course, the situation was quite different with tour operators and charters. They had expanded massively thanks to the boom in package holidays and were seen as the cowboy end of the business.
There really was a danger that your holiday company could fail and you would be left stranded with no means of getting back, unless you paid a lot of money.
That was how ATOL started out. Tour operators have to be ATOL bonded, which usually means depositing at least £40,000 with the scheme. £2.50 has to be paid in for each booking as well.
Forty years on, airlines have changed. There's less value put on national carriers. There are more no-frills airlines. And, most importantly, airlines can very definitely go bust.
In this situation, tour operators are complaining that today's expansion of ATOL doesn't go far enough, because the changes announced by the Department of Transport don't cover airlines in a couple of crucial respects.
The first is an old chestnut. If a holiday company was to book you on a scheduled airline, you would be protected. But if you booked direct and the airline folded, you would be in danger of being stranded without any help.
The second concerns the service airlines offer on their own websites for you to book accommodation and other holiday extras. You "click through" and book something for which the airline earns a commission. This is a hugely important additional stream of income for carriers and it's growing.
But click throughs from airline websites won't be covered by the expanded ATOL scheme. Tour operators say that's unfair and a danger to consumers.
Because airlines were not included in the original ATOL scheme all those years ago, new legislation would be needed to bring them in and that would take time, possibly years.
Incidentally, the European Commission is looking at the question of whether there should be a protection scheme for travellers who book themselves directly on scheduled airlines, as part of its review of the Package Travel Directive.
However, Brussels could spend a couple of years on this -- and the UK government might be inclined to wait and see what happens.

Motion to cap PayDay loans

Stella Creasy's motion in the House of Commons today to put caps on the cost of payday lending:

 "That this House notes with alarm recent evidence showing a fourfold increase in the use of payday lending since the beginning of the recession and that high cost credit lenders advanced approximately £7.5 billion to low and middle income consumers in 2008 alone; recognises the problems of financial exclusion, lack of financial and debt management education, lack of price competitiveness in the unsecured lending market and the near monopoly positions of many large lenders which contribute to the high costs of borrowing; considers that without action these factors could worsen family debt, poverty and financial difficulties to the detriment of the economic recovery; therefore calls upon the Government to introduce *measures to increase access to affordable credit; urges regulators to consider putting* in place a range of caps on prices in areas of the market in unsecured lending which are non price-competitive, likely to cause detriment to consumers or where there is evidence of irresponsible practice; and believes that such caps should take account of the desirability of maintaining access to affordable and responsible credit, the likely impact on the supply of credit and the cost of enforcement, that they should be regularly reviewed and that they should use the total cost of credit, calculated on a yearly basis, to ensure that lender avoidance and distortions in price are prevented."

**amended text between the stars

What happens if the motion is passed? The Department for Business (BIS) tells me debate will be treated the same as any other debate. So, according to them, if the vote passes, it is up to Stella Creasy to lead it through the house.

Court rules prize draw promotions are against the law

A High Court judge has ruled that certain promotions using prize draws are in breach of the law. Five companies have been told that they face enforcement orders.

The judge, Mr Justice Briggs, found that the infringements had occurred on a large scale and very large numbers of consumers had been sent the promotions.

Around 11.5 million promotions were sent out in one year. 200,000 consumers responded, mainly through premium rate phone calls or premium rate text messages

Typically, 'winners' would have to pay out costs amounting to more than the value of the prize. The price of calls and administration might be around £15. The prize, an MP3 player for instance, would only have cost the promoter £9.

In one example from 2008, letters were sent to nearly 1.5 million consumers telling them they had won one of a list of prizes, including £25,000 in cash. But 99.92% of recipients were allocated cheap electrical goods. They were encouraged to phone a premium rate line to claim the prize. Then they had to pay £8.50 for insurance and delivery.

In another one, 9 million strips of scratchcards were inserted in newspapers, offering Top Treats or a big jackpot as prizes. 99.9% of the winners won £10, a Greek cruise voucher, worth 59p or as the judge said "of dubious value".

The winners were encouraged to spend at least £8.43 on a premium rate call to learn about the prizes.

The case was brought by the Office of Fair Trading after it tried unsuccessfully to secure a voluntary agreement from the companies to stop distributing the promotions.

Britons are working longer before retiring - official

New figures from the Office for National Statistics throw into stark relief the growing tendency for men and women to work longer and retire later.

Over five years, the average retirement age for men has risen to 64.5 years from 63.8, while women carry on working until 62, up from an average of 61.2.

They are the clearest official data on a trend which could begin to accelerate, now that the state pension age is being raised and many pensioner households face higher costs and shrinking incomes.

The figures apply to 2009, which is the latest year in which statisticians can marry up the different surveys needed for the calculation.

There is proof, as well, that men can expect a shorter retirement than women.

At every age between 51 and 75, men's life expectancy once they stop working is lower than women's.

For instance, a 58 year-old man can expect to work 2 years longer than a woman of the same age. But from the date that they both stop working, the man's retirement is likely to be 5 years shorter.

New Consumer Credit Directive starting today

The new provisions from the Consumer Credit Directive include:

• a duty on the lender to provide standardised explanations about the credit on offer to the consumer;
• an  obligation on the lender to check creditworthiness before offering or increasing credit; 
• further requirements concerning information from credit reference databases if they form part of a lender’s refusal for credit;
• a right for consumers to withdraw from a credit agreement within 14 days, without giving any reason;
• requirements to inform consumers when debts under a consumer credit agreement are sold on;
• requirements on credit intermediaries to disclose fees and links to creditors; and
• a right to make partial early repayments of loans

Additional information from the Office of Fair Trading:

The new right to withdraw, unlike previous rights of cancellation, applies to all credit agreements with only some limited exceptions (for example mortgages).

Previously there was a limited right to cancel a credit agreement under Section 67 (Consumer Credit Act) - but only where the agreement was signed off trade premises following oral representations in the consumer's presence.  For example, a home credit loan which was negotiated and signed in the borrower's home.  It did not apply where the agreement was signed on trade premises. 

From an OFT perspective, we expand on some relevant issues in our recent Irresponsible Lending Guidance. In particular, Chapter Three of the Guidance sets out our position on the need to provide an adequate explanation of key features of the credit agreement - please see this link.  

Who needs specialist - and free - debt advice?

Kim does.
He ran his own hairdressing shop in London. Then he fell ill.
He was in hospital for three months. Now he has to pop in and out regularly.
He still gets tired and has to lie down in the day. He's trying to get better.
Kim had a mortgage, loans, credit cards and bills for heat and light to pay. But no income.
He was being pursued by creditors. He told me that they even rang him in hospital.
Kim had no prospect of making any payments. That made him useless to profit-making debt management companies, because they take their cut from repayments.
Luckily, in the hospital, someone came and recommended that he find free help from the Mary Ward Centre near Queen Square, central London.
It's a long haul.
But Kim has a big smile and he's using it, even though he's still sick.
One reason is that the financial pressure from creditors has been taken away, with the help of the Mary Ward's debt advisers.
I told Kim that ten advisers from the centre were losing their jobs.
They are casualties of the cuts. The Treasury is axing the Financial Inclusion Fund which pays their wages.
Nearly 500 specialist debt advisers around England and Wales have received redundancy notices.
When I asked Kim what the impact would be, he said:
"They've helped me a hell of a lot. I fear for other people who can't get the the help or wouldn't get the help. I think they probably would be devastated. I wouldn't like to be in their shoes."
And what if he had had to seek paid-for advice?
"I'd be stuck. In my situation I've got no income so I couldn't afford it. I don't think there'd be anyone out there to take my case on. I think they'd shut the door in my face."
I've written up the full story of the debt advice cuts here .