You would think that, generally speaking, banks are staffed by people who have a modicum of common sense.

On the following evidence, you might be inclined to change your opinion…

This is because the great and good staff of Lloyds TSB have been mailing debit cards direct to children as young as 11 without telling their parents.

Not essentially a huge huge problem if the children were buying nice things like toys, CDs and DVDs; unfortunately, this little glimmer of financial freedom saw a 15 year old buying cigarettes, alcohol, Viagra and porn videos over the internet!

• Visa enabled cards

In the past, any child aged 11 to 15 who held a current account was limited to debit cards that could be used only in cash machines or at bank branches.

The new cards could let them spend large sums on the web, potentially emptying their accounts, and all without their parents' knowledge (which is probably the whole point for them surely?)

The new cards are Visa-enabled, meaning they can be used anywhere that displays a Visa sign. The bank takes a fee from the retailer every time a card is used.

Lloyds TSB insists it is the parents responsibility to keep a check on how their children use the cards and says there are safeguards to ensure they cannot be used on adult websites.

But the 15-year-old clearly had no trouble buying goods supposedly restricted to adults!

His parents found out only when they received a Customs demand for duty on the cigarettes, which had been bought from a foreign websites.  The boy's father contacted Lloyds TSB, who then admitted that other parents had also complained.

Consumer groups and MPS have reacted with horror; LibDem Treasury spokesman Vince Cable said:  

'You would have thought banks might have learned some lessons from their irresponsible lending on credit cards and mortgages.

'But now they seem to be compounding the problems by adopting the grossly irresponsible policy of encouraging youngsters to spend on these debit cards.'

Chris Tapp, director of the money education charity Credit Action, said:

'It goes against common sense for banks to cut parents out of the loop... Parents need to have some control over how children are spending their money.

'Children may be swayed by advertising or other influences to make an impulse buy. Some may end up buying things that are unwise.

'We all know about the monsters that lurk on the internet in terms of the things that you can access with a card.'

• “Its up to the parents”

The father of the 15-year-old, who asked not to be named, believes Lloyds TSB is promoting illegal activity. He said:

'I pointed out to them that by enabling children to purchase goods illegally over the internet, they were aiding and abetting a crime.

'Their response was that it was not down to them to monitor other people's children, and that teenagers who were brought up well would not abuse this facility.

'It was not their policy to inform parents as they would expect the children to do so.'

Yes, and of course every child is going to tell its parents that its racking up dodgy purchases on debit card they probably shouldn't have,  aren’t they?

Lloyds TSB could not say how many cards have been sent out but it is thought to be many thousands; it also says it has a special system to prevent purchases from adult sites. It also said it was willing to investigate how the 15-year-old boy could buy cigarettes, Viagra and a fake ID despite the safeguards.

• A few questions to think about

The main point of this issue is that Lloyds TSB has been sending out cards without telling the parents or guardians of the children.

Lloyds TSB's excuse is that: 

'We don't always have the parents' contact details or know the family's circumstances. There are cases where the child might bank with us but the parent might not.'

It seems highly unlikely the bank has never had contact with these people. Think about it; do children go by themselves to open an account or do they go with an adult? 

Also, does the bank open accounts without checking with the parent and verifying things such as a home address? Or does it take the word of an 11-year-old? Unlikely; it speaks to the parents or guardians and if that is the case, then that’s the database Lloyds TSB should be using when pushing Visa-enabled debit cards onto children!

And if it can't get authorisation from a parent before issuing a card, for whatever reason, then tough! Lloyds TSB won't be able to set up a Visa account with that child so it shouldn’t be a huge loss.

Isn’t is odd that when you break your overdraft limit by just a few quid, the banks track you down quicker than Jason Bourne and hits you with penalties? Why the heck can’t they apply the same sort of urgency to locate children's parents?

Perhaps, if they dim we wouldn’t have children getting into bad financial habits (or worse!) at an early age.

So. whose at blame in this little situation? Is it Lloyds TSB for giving cards to kids who are going to misuse them? Or is down to the parents to monitor what their kids are doing with them?

Should children even be given Visa cards? Let us know your thoughts!

Related stories

Who is Britain’s worst bank?

5 million of you got a credit card without proper checks

As money becomes a bit tight, payday loans are fast becoming a part of everyday life for many people…but they come at a high price.

A ‘payday loan’ is a sum of money less than your next payslip that can be applied for at short notice.

It enables you to borrow up to £1,000 over 31 days, which then has to be paid back; normally with hundreds of pounds added on in interest.

Now, offshore money-lending companies are targeting cash-strapped borrowers in the UK via the Internet and charging them interest rates in excess of 2,000%!

Some lenders come from the US, where payday loans have become big business since the credit crunch started over there.  One, Pounds Till Payday, operates from Malta and its website states their annual interest rates of 2,225%.

Peter Tutton, debt policy adviser at Citizens' Advice said:

'We are concerned that although payday loans have been on the UK high street for some time they are now springing up in increasing numbers online. Until recently people on a low income could still access loans from mainstream lenders but now the banks have closed their doors to higher risk customers.'

Payday loans are targeted at those of us who are desperate as we cannot get money elsewhere. No credit checks are carried out and all that is required in most cases to get the money is your bank account or debit card details. The money is paid into your account the same day and is debited straight from your account (with charges) 31 days later.

This no-questions-asked approach to lending is irresponsible, say the debt charities, tempting people to borrow money with no prospect of repaying.

Guide to Payday Loans

Need loan advice? Use our loan calculator and talk to an impartial loan adviser

Debt On Our Doorstep, a coalition of debt charities and credit unions, is so concerned about payday loans that it has tabled a motion in Parliament calling for their investigation.

Damon Gibbons, chair of Debt On Our Doorstep said:

'We would suggest that not bothering to run any credit checks or verify income constitutes irresponsible lending and would like the Office of Fair Trading to look at whether these companies should have their credit licences revoked.'

Citizens Advice came across one case of a single parent with a 10-year-old child who had multiple debts of £8,000. Her weekly income when she came to the CAB consisted of £83 statutory sick pay and £200 in state benefits. One of her debts was a payday loan, taken out online, with an APR of 1,355%.

'Her mental health was deteriorating and her financial situation was becoming increasingly impossible,' said a Citizens Advice spokesman.

Repayment scales

The following amounts are charged for every £100 borrowed:

• Pounds Till Payday £29.98* 
• Payday Express     £20.00
• Month End Money  £25.00

(* it was revealed that a £59 charge would be added to the bill if it was not repaid on time; this is not advertised anywhere on their website)

Debt advisers are worried that the squeeze on conventional credit will lead to a similar situation as in the USA, where payday loan companies are now. In some parts of Cleveland, the Ohio city hardest hit by the sub-prime mortgage crisis, all the conventional banks have been replaced by payday lenders!

Payday loans are so notorious that they have been banned in certain states; in New York, annualised rates of interest offered by any lender cannot exceed 25% But even in New York the number of so-called 'check-cashing shops' is on the rise.

The biggest payday loans company, the MoneyShop, owned by US company Dollar Financial, has 250 stores in the UK and recorded 55% lending growth in the last quarter of 2007. 

Payday loans are being heavily advertised  on the internet and are even offered via big-name financial comparison website's Moneysupermarket.com and Moneyexpert.com.

Sean Gardner, chief executive of Moneyexpert.com defended their position saying: 

'Payday loans have their place, but people have to be very clear about what they are signing up for. There are rightly serious criticisms about the product and they should come with a health warning.'

So, are payday loans a serious financial threat that should be avoided at al costs? Or is there a place for them despite their drawbacks?

Have you made use of a payday loan? How did you find the experience?

Mortgage approvals are down, but it's not deterring the big banks, who are snapping up as much as much business as possible right now…

Whilst the banks are taking market share from traditional building societies, the overall number of mortgages approved for house purchases dropped sharply last month to the lowest level since records began back in 1993, new figures have shown. 

The Bank of England (BoE) said 42,000 mortgages were approved for purchases during the month, down from 58,000 in April and 63,000 in March. This is the thirteenth month running that approval rates have fallen and the figure for May is 64% below that for the same period in 2007.

Remortgaging, which has been making up the bulk of lending, was also down over the month, with the number of of you switching mortgages down 10% on April's figure.

A total of 90,000 remortgages worth £12.1 billion were approved in May, accounting for almost 60% of the £18.5billion of mortgages approved overall.

Looking to remortgage? Speak to an impartial adviser who can help.

Philip Shaw, chief economist at Investec was succinct about the figures saying they were:

"Terrible. There is no other way of describing them. It is really symptomatic of what is going on the housing market. The real danger is there is a knock-on effect to consumer activity."

Just £5.8 billion was advanced to those of us wishing to buy houses last month; this compares to 16.9 billion a year ago.

However, the interesting thing that has emerged is that the main high street banks have increased their share of the new mortgages despite lending us less money!

Their market share has grown from 56% in October 2007 to 77% in May 2008.  Two years ago, during the market boom, the new mortgage market was fairer when banks had about half of the market.

David Kuo, Head of Personal Finance at impartial website Fool.co.uk, says:

“The increasing dominance of banks in the market for new mortgages is a worry for anyone looking to step onto the housing ladder.

“The once level playing field that borrowers could count on for competitive rates has been tilted in favour of banks. Even worse, banks are offering unattractive deals knowing that customers are faced with little option but to accept them. 

“Fool.co.uk urges banks to treat customers fairly at this difficult time. The pendulum of power has swung in their direction, but they need to remember that a pendulum swings both ways. If they exploit their privileged position now, then they need to be ready to duck for cover when the pendulum swings back the other way.”

So, as banks expand into the mortgage market, are they playing fair when they provide our mortgages, especially when we are left with little choice?

Even if you don’t think they are, what can we do about it?

Let us know your comments.

Information © Fool.co.uk 2008

Some good news among the financial gloom!

We are going to able to save some money on our food bills.

This because a rice war has broken out between the UK's largest supermarkets as a flurry of discount offers designed to attract cash-strapped consumers is announced.

Tesco will reduce the price of 3,000 items by up to 50% from today in an attempt to win back those of us struggling to cope with record petrol prices and utility bills.

On Friday Asda was helping customers to "fight back against inflation" with price cuts to 10 staple items. A customer buying the whole range of goods in one of Asda's 329 stores would see their shopping bill reduced from £10.83 to £5.83. That’s 30% less than you would have paid for the same goods 12 months ago.

Asda has already started selling a 2p sausage (16p for a packet of eight) and has slashed the price of mince from 96p to 50p. Its 50p promotion is being seen as an attempt to tackle big discounters such as Aldi and Lidl head on.

(However, the ‘quality’ of 2p sausages is certainly up for debate!)

• Discount supermarkets doing well

Aldi, the German-owned discount chain, has seen a 20%  per cent rise in sales over the past month; the fastest growth rate in Britain. The number of shoppers visiting its 400 stores has gone up by 35% in the last 3 months. 

Meanwhile, Iceland has seen a 15% rise in sales (that is Iceland the frozen food chain, rather than Iceland the puffin eating country). Marks & Spencer, meanwhile, has seen a 3.2% fall in takings in its food halls in the past month.

Sainsbury’s started a “Feed Your Family for a Fiver” campaign in March, backed by the celebrity chef Jamie Oliver, while Morrisons cut the price of 2,000 items this month.

• Families cutting back

The supermarkets are having to reduce their prices despite soaring costs because as we all become a bit more cash strapped, we are cutting back on our weekly shopping so we can afford higher electricity and gas charges, motoring cost and mortgages.

The credit crunch has seen an unprecedented sales boom at budget supermarkets such as Aldi and Lidl.

Meanwhile, the biggest supermarket name, Tesco, has already cut more than £400 million from prices this year! Now it is going farther, placing more emphasis on its cheaper, own-label goods.

Tesco pockets nearly £1 of every £7 we spend on the high streets and has more financial muscle than anyone else. One retail executive said the retailer had been “arming itself” in recent weeks by trying to wring more money from its suppliers, before a price battle at the checkout.

Because of the credit crunch, nearly 30% of the goods in the big four supermarkets are on special offer now; up from 20% a year ago.

• Grocery bills going up

We have all been seeing our grocery bills rocket in the last year as higher commodity costs push up the price of wheat and rice. National Statistics now believe that food price inflation is running at close to 9%. The high cost of items such as pasta, eggs and cheese has been blamed for Britain’s inflation rate hitting its highest level for nearly 18 years (which is daft thing to claim!)

MySupermarket.co.UK claims that a typical family faces a £1,000 rise in the amount it spends in supermarkets over the next 12 months.  Its last survey suggested the cost of a typical family shop had risen by 21% over the past year to £120.

The director of mySupermarket, Johnny Stern, said supermarkets were offering other price cuts alongside their special offers:

"We can see that supermarkets are making a significant effort to help consumers combat the credit crunch by reducing prices on many items."

The move to value shopping has been striking, with Aldi reporting a year-on-year sales growth of 21% and Sainsbury's reporting a 300% increase in sales of some of its Basics range of products.

Meanwhile, in something that doesn’t come as a complete surprise, sales in organic products have now slowed.

By the way, can anyone tell us why good healthy organic stuff costs so much more than all the stuff with pesticides in?

• Pricing war now in full effect

Analysts believe that the recent series of price promotions have been little more than skirmishes because supermarkets have feared that a full-blown price-cutting campaign would harm their profits; it seems that now they are left with no alternative if they want to get us through their doors.

Aldi, (which claims to be at least 20% cheaper than the four leading supermarkets), has been trying to poach more Asda shoppers by highlighting wine and olives.

Paul Foley, its UK managing director, said:

“For those who need a store with piped music, a choice of 42 yoghurts and who can’t pack their own shopping bag, then perhaps Aldi’s not for them. But for those who want a guaranteed quality at low prices, then the current economic climate simply makes Aldi an even more obvious choice.”

So, is the price battle about supermarkets trying to help us in our time of need, or are they just desperate to keep their customer base?

What do you think?

It seems that every day someone comes out with yet another portent of doom about the British property market.

Buy to let has had its fair share of detractors over the last year or so, and it wasn’t that long ago we were asking whether or not it was bye bye to buy to let?

This was due to the fact that buy to let mortgages had dropped by 85% in the last year but despite this, a good percentage of buy-to-let (BTL) landlords are still feeling bullish.

But should they be?

• Strong optimism

In a recent survey 41% of buy to let landlords said they felt optimistic about the UK’s private rental sector. Meanwhile, 54% thought that property still had the potential to offer better growth than other forms of investment.

In addition 44% said that while letting wasn’t currently their main source of income, they expected it to be in the future.

Oh dear.

• Property ownership pessimism

Even those landlords who are pessimistic have mainly become disillusioned because of the day-to-day aspects of property ownership. About 50% had experienced a void (when the property doesn’t generate rent), which sounds low. More than half had had trouble with tenants; the key issue unsurprisingly being property damage. 

Hmm, the landlords apparent lack of concern appears a bit complacent…

This is because rising interest rates have pushed rental profitability to its lowest level since the survey began; average gross rent was £30,140 a year, and the average “portfolio size” was £697,670; so even rental yields before deductions averaged just 4.3%; that is well below the cost of borrowing.

So how can so many still be optimistic?

• BTL still affordable

The main reason seems to be that the average BTL position is still affordable. But that’s only because the average loan is £282,950, making the average loan-to-value (LTV) 40.5%.

This explains why 41% are still bullish!

If they had larger loans, their worsening cash-flow position would by now be more clearly reflecting the deterioration in the financial argument. By being less leveraged, BTL investors think they can ride out the storm, saying they’re “in it for the long-term”.

Even if variable mortgage rates have now risen above 7%, your average BTL investor will still have outgoings of no more than £20,000 against a gross income of £30,140. It would have to be an very unfortunate landlord who suffers £10,000 of damage, maintenance and other costs in a year, so we are assuming most must still be cash-flow positive.

But this is a double-edged sword. If the average BTL investor was instead 100% leveraged, outgoings would be nearly £20,000 higher than gross income. 

Would so many be as complacent if that were the case? 

• BTL landlords missing mortgage payments

Already, those who do have significant leverage can’t afford any voids at all now. A full 17% say they have already missed a mortgage payment; what is shocking is that this is up 8% in the three months since December.

That means that in the first quarter there was an annualised 32% rise in delinquent BTL borrowers. Earlier this month, Bradford & Bingley confirmed as much when they revealed that in the first four months of 2008, the number of buy to let mortgages that were at least 90 days in arrears had risen by 52% to over 3,000. 

These more-leveraged BTL investors already realise how hostile the market has become and its only the under-leveraged, complacent people who’ve been in the game longer who believe they can survive and ride out the current financial storm. 

But if the more highly leveraged Johnny-come-­latelys are forced to bail out, the whole market will be swept out from under their feet.

It’s time for the 'long-termers' to get their calculators out and try to see it from the other guy’s perspective. With some investors so close to the wire already, repossessions are looking a distinct possibility.

So, do you think buy to let had had its day or is it something still worth investing in?

Why not let us know in the comments?