THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE.

MONEY BOX

Presenter: Paul Lewis

TRANSMISSION 15th DECEMBER 2001 1200-1230 BBC RADIO 4

Mortgage Regulation

Annuity Reform

Providian

Abbey National Credit Cards

Government Money for Heating

euro Accounts

Latin Competition

LEWIS: Hello. In today's programme...

The world's most powerful financial regulator is given yet more power.

Despite the freezing temperatures a warm front could be approaching your cold home.

The American bank that has been telling 10,000 UK investors what will happen if it goes bust.

Chris A'Court is with me today, Chris

A'COURT: And I'm investigating the nightmare before Christmas, the muddle that's stopping some people from using their credit card this festive season...

WOMAN: It's infuriating I feel as if I'm running down a corridor I run through a door like a bad dream and I'm back in the same corridor again.

LEWIS: Do you need a euro bank account? - and our competition.

LEWIS: First though just two weeks after the Financial Services Authority took on its full powers the Government has announced it is to get even more. From early 2004 it will regulate brokers who sell mortgages and those who sell insurance for our homes or cars. It does seem sensible that the people who advise us on the biggest financial deal we do - buying a home - should be covered by statutory regulation - many people are surprised they're not already. And the move has been widely welcomed, even by the brokers who now face regulation by the FSA. Though they were surprised at the timing - they expected to regulate themselves for a few more years. But a change in European law seems to have forced the government to bring forward its plans to expand the FSA's role. The announcement was made by the Treasury Economic Secretary, Ruth Kelly. I asked her why the change had been made now.

KELLY: What we've done is streamline regulation so that the Financial Services Authority is responsible for regulating mortgage advice, mortgage brokers, and general insurance products. So that the consumer knows exactly where to turn if they have a problem with a particular mortgage or insurance product. That makes it much simpler and more transparent for the consumer to understand and gets rid of a lot of the unnecessary complexity that surrounds the current situation. LEWIS: Well it may simpler for consumers but it is going to involve more bureaucracy, more people at the FSA and more cost isn't it - which ultimately will be passed on to customers. KELLY: Not at all that's the opposite to the reality in fact. At the moment if you are an independent financial advisor for instance or a broker selling products you could be regulated by the Mortgage Code Compliance Board, by the General Insurance Standards Council, by the Financial Services Authority and in the future the proposal was that you'd also be regulated by all of the main lenders who's products you sell. So what we're doing is stripping away a whole extra tier of bureaucracy and streamlining the process so that they now only have to deal with the Financial Services Authority.

LEWIS: You mentioned brokers but hundreds of millions of pounds of insurance is sold every year by retailers isn't it - electrical shops selling warranties, travel agents selling holiday insurance, motor traders will these be included in the new regime?

KELLY: There are other areas that we're currently considering such as extended warranties and clearly on issues like that where it's not clear at the moment that there is particularly severe costs for the consumer in being given faulty advice we will be doing a very careful cost benefit analysis to see if it's appropriate for the FSA to regulate that or not.

LEWIS: But surely when, as I say, when hundreds of millions of pounds of insurance is being sold by people who are not trained to sell insurance, who earn big commissions that is exactly the sort of area you should be regulating.

KELLY: Well what you're looking to do in regulation is to regulate proportionately and to make sure the benefits of the system out weigh any costs of imposing regulation and so it's absolutely essential that we do this fundamental cost benefit analysis before deciding whether to regulate.

LEWIS: You're doing a proper analysis its obviously going to take time, you're going to put off implementing any sort of regulation for another 18 months to 2004 doesn't that just give people who are in the business just to make money longer to mis-sell us things.

KELLY: I think you're misrepresenting it up to a point because at the moment mortgages are effectively regulated on the whole by being members of the Mortgage Code Compliance Board which is a self regulatory organisation. And what we're doing is transferring responsibility over to the Financial Services Authority and it's absolutely essential that in that interim period that mortgage lenders and brokers continue to sign up to in a deal with the Mortgage Code Compliance Board and in the interim period that's where consumers need to turn as it is at the moment.

LEWIS: Why are you doing this for insurance and mortgage brokers making them statutory regulated but leaving the banks to regulate themselves?

KELLY: We asked DeAnne Julius, who is a very eminent economist to look into this area, to look at the roles of voluntary codes and to see how effective they were in protecting consumers. And she reported that while she thought mortgage advice ought to be regulated, that the Banking Code as it stands was actually very effective at ensuring that there was adequate protection for consumers and she made some recommendations which we're working on with the industry, some of which the industry have already accepted.

LEWIS: And if the banking code doesn't continue to work is there a hidden threat that you might impose statutory regulation on the banks as well ?

KELLY: No what we need to do is to improve the Banking Code and DeAnne Julius when she looked at this was absolutely sure that this could be done through the voluntary system. And we're working with the industry to look at ways at improving it further to look at what the barriers are to competition in the market and to see how consumers can be better informed.

LEWIS: Ruth Kelly on new powers for the FSA. And while I was talking to the Minister I raised another question with her. Money Box learned this week that there will be a delay in publishing the document which sets out the Government's plans to reform annuities. As we reported last week, the Chancellor promised the review in his Pre-budget Statement. And the Treasury said the document would be published before the end of December. But we've have learned that has now slipped to January. And that will leave more people reaching the age of 75 and being forced under current rules to take out an annuity which they are stuck with for life. So I asked the Minister if she would suspend the rule which made people take out an annuity at 75, pending the consultation.

KELLY: We are about to publish a consultation document and in that we'll examine ways of opening up the market for greater competition and ensuring that consumers have greater choice. I think you'll have to wait until the date of publication to see what it actually says.

LEWIS: Yes but that's just the document setting out the consultation, there are people reaching 75 now who are being locked into a deal for the rest of their lives. When in a few days, a few weeks time that condition may be removed.

KELLY: Well this will be going out for consultation and people will have adequate chance to send in representations. I'm committed to making sure this isn't a one-off financial commitment from which there is no escape and to look at ways of really injecting far more competition into that market.

LEWIS: And what about the people who are currently being forced to buy an annuity because their 75, will you suspend the rules for them now?

KELLY: Well it's more important that we get the details of this right and that people in the future are given real choice in a way that is workable and that's why we're committed to working with the industry and consumer groups on these issues.

LEWIS: Ruth Kelly saying 'no', I think.

LEWIS: Half a million UK customers of the American bank Providian National are in for a worrying Christmas. Worst affected are the 10,000 people who have invested at least �5000 each in Providian's fixed interest bonds. They consistently topped the best-buy tables. But two weeks ago in the face of falling profits, the Chief Executive Officer resigned and the bank's business in the UK was put up for sale. Then it stopped accepting new customers here and the Financial Services Authority has now made it write to all its existing customers telling them what would happen if it went bust.

MAN: In the event of a possible liquidation of a US bank with a UK branch, such as Providian , the Financial Services Authority has advised us to inform you that the depositors of the bank in the US would rank ahead of depositors in the UK branch.

LEWIS: The letter went on to tell investors that the bank had halved the penalty for cashing the bonds in early. And that has left many investors wondering what to do. Ivor e-mailed us from Norwich

IVOR: I have a �10,000 bond in Providian which matures on 29th January next year and I have had the debtor in from Providian that the penalty for cashing in has been reduced by 50% but I mean I would still be out of pocket and of course there's a danger now that possibly the bank could go into liquidation. So I have about six weeks to go- do I cash in now and have a small amount of loss or wait and things could go really drastically wrong?

LEWIS: Providian refused all offers to come on Money Box to talk about the company's future. But in a statement said,

WOMAN: We are not in the process of liquidating the bank on the contrary we are in the process of structuring the business to be a successful ongoing concern.

LEWIS: Well that was Providian. Let's talk now to Anna Bowes from Independent Financial Advisers, Chase de Vere. Anna what should Ivor and people like him do ?

BOWES: Well really it's down to how worried they are because at the end of the day if they are really worried and they are having sleepless nights then they may just want to take their money out and cut their losses. The worst scenario there is they do lose the interest penalty but they will have their money and some interest.

LEWIS: And how do the figures work out for Ivor because he's got a one year bond so he only loses one month's interest - doesn't he ?

BOWES: Yes exactly he looses 30 days interest. Now for Ivor on a 7% bond which he has, that will equate to �57.50 or thereabouts so, plus of course any interest for the remainder of the term he won't be receiving any interest until the end of January on his bond.

LEWIS: But if the worst did come to the worst, I must stress that Providian say's it won't, but if the company did go out of business what would he get then from the Financial Services Compensation Scheme ?

BOWES: They are covered by the Financial Services Compensation Scheme this was called previously the UK Deposit Protection Scheme and what that covers you, is a 100% of the first �2,000 then 90% of the next �33,000. So anyone with investments up to �35,000 are covered on that amount . Now for Ivor that would mean he would receive obviously the first �2,000 back plus then 90% of the next �8,000 which would be �7,200. In total he could in the worst scenario get back �9,200 of his original �10,000 investment.

LEWIS: So he'd lose �800 and of course he'd probably lose the interest that he hadn't been paid yet this year

BOWES: He would loose the interest, that's correct.

LEWIS: So really he's balancing �57.00 against �800 and just has to judge the chances

BOWES: The worst scenario is I say that everything is fine, well not the worst scenario, the best scenario is that everything is fine and that he has just lost out on that little bit at the end of the bond plus the fee penalty.

LEWIS: And briefly Anna, Credit Card customers there's nearly half a million of them are they affected by all this ?

BOWES: Well Providian say 'no' they say it's got nothing to do with this. I suppose the very worst scenario again and this is a big if Paul - that is if the liquidators did come in they may call back all the money that is owed.

LEWIS: So if you've got a balance you could be asked to pay it off ?

BOWES: You might be, that is very much a big if.

LEWIS: Anna Bowes thanks very much for talking to us about that

LEWIS: And now another nightmare before Christmas. Money Box can reveal how a mix up between a bank and a credit card company has blocked some people from using their card for their festive spending this year. The muddle involves two of the biggest names in personal finance - Abbey National and MBNA. Chris A'Court has been investigating...

A'COURT: Yes we were alerted to this by Jackie, a Money Box listener from Sussex. She's been having terrible problems paying her Abbey National card bill. When Abbey's 500,000 credit card holders pay their card bill each month it's no longer Abbey National which needs to receive their money but the giant American card company MBNA, which now administers Abbey card accounts. You can still go into an Abbey National branch to pay, which is what Jackie did; but what happened next was that both the bank and card company lost all track of her �1,700 cheque, and shops started rejecting her card. And, it got even worse as all Jackie's attempts to talk with the bank and card company simply proved futile..

JACKIE: They don't seem to have got their act together and if I phone MBNA they tell me to contact Abbey National and if I phone Abbey National they put me back through to MBNA. They don't seem bothered you know, since it's my problem, I don't feel it's my problem . I feel if MBNA are managing Abbey National's credit card then it's between them to sort out how they pass money between them. In the meantime I can't use my credit card and I can't seem to get out of this loop.

A'COURT: Four days after she'd visited the Abbey National branch to pay off her card bill the money had cleared from Jackie's bank account but weeks later MBNA still hadn't credited the payment to her card making it look as though she'd defaulted on her debt. Jackie discovered that amid huge embarrassment when a shop refused to take her card and asked her to put back the goods. She made another call to MBNA and discovered that other people were in the same predicament......

JACKIE: They told me they have a lot of payments that had come through from Abbey National branches which they can't trace, because they haven't come through with the correct details from Abbey National, they obviously haven't got the system sorted out very well. And I'm the piggy in the middle.

LEWIS: Chris, it's an awful situation for customers to be in isn't it, what's going wrong?

A'COURT: Well essentially it is systems confusion between Abbey and MBNA, clearly this recent marriage of bank and card company is not as solid as customers should expect. Naturally we asked both Abbey National and MBNA if they would be interviewed - guess what - both refused. Neither will they state exactly how many of Abbey's half a million cardholders have been affected like Jackie, but they said it's not a widespread problem, and has now been rectified. Jackie did receive an apology after they said that, on Friday afternoon, and at last her card account has been sorted. Her Christmas spending power is back too with an extra �100 that Abbey and MBNA have given as a 'goodwill gesture'. Unfortunately, and despite the season, Jackie's spirit of goodwill is already exhausted ..

JACKIE: It's left me feeling very concerned about the use of this kind of card because if something does go wrong and your payment does go astray you don't seem to have any come back, and their approach and the attitude, you feel you're the one to blame when they've made a mess of it.

LEWIS: Well that was Money Box listener Jackie - a feeling we've all had with our bank at one time or another I think. Chris, Jackie has been sorted now - what should other Abbey National credit card customers do?

A'COURT: Well we suggest they check their accounts carefully this weekend. In Jackie's case it was a large payment that wasn't credited to her card account so was easily spotted, but if you've paid smaller amounts off your Abbey National card, by making a payment over the counter, you might not have noticed if there's been a mistake. Abbey National have a dedicated phone line open for people this weekend, 24 hours, it's 08459 724724. And if that doesn't help get things resolved then we'd like to know about it.

LEWIS: Indeed, at [email protected]

LEWIS: British Gas chose this coldest week of the winter so far to tell us that it would be raising its prices in the New Year by more than 5%. That'll add �17 to the average annual British Gas bill. But if you're feeling cold at home, as the thermometer dips below zero, you may like to know about a Government scheme which can give you up to �2000 for insulation and better heating. And the organisers are concerned that if they don't get more people applying for the money they won't be able to spend all the funds they've got before April. To find out more let's talk now to Janet Sutherland who's a Director of Eaga which runs the scheme across most of the UK. Janet who exactly qualifies for this money?

SUTHERLAND: The scheme targets three main groups of people - it targets pensioners, people who are over 60 and are in receipt of benefits, families of children under 16 who are in receipt of benefits and disabled households, people who are in receipt of disability benefit.

LEWIS: And you say benefits but what does that include cause it's quite a broad definition I think isn't it.

SUTHERLAND: It is yes - there are benefits such as income support , housing benefit, council tax benefit , disabled persons tax credit that sort of income related benefit.

LEWIS: Yes, I mean the figures I saw 5 million people get council tax benefit and another one and a half million could but don't, it's quite a big chunk of the population. What can you get if you do qualify ?

SUTHERLAND: You qualify for a range of energy efficiency and heating measures so measures such as cavity wall insulation, loft insulation, draft proofing and heating measures, all of which are to help people have warmer homes and hopefully reduce their fuel bills as well.

LEWIS: How much do you get - if you're under 60 how much can you get ?

SUTHERLAND: If you're under 60 there is a grant of up to �1,000 available and what happens when somebody applies is we send one of our surveyors along to look at their property and to assess their needs and to recommend the best package of measures for them.

LEWIS: So that's a �1,000 under 60 and people who are 60 or over they can get a bit more can they ?

SUTHERLAND: Yes- there's a grant of up to �2,000 for people who are over 60 and are in receipt of a benefit.

LEWIS: And what can they get for that - cause that's quite a lot of money to spend on insulation

SUTHERLAND: It is, insulation measures and heating. We will check the existing heating within a property and we would recommend central heating if we thought the occupant would benefit from that.

LEWIS: So they can actually get central heating fitted which of course is gas central heating probably the most efficient way of heating an insulated home.

SUTHERLAND: That's right - Yes it is.

LEWIS: And what if you don't qualify cause I'm sure their are people listening who are think oh I'm a bit cold but I don't get any of those benefits - can they get any help at all ?

SUTHERLAND: Well Eaga partnership managers arranges a range of programmes on behalf of utilities and local authorities as well as central government and the devolved administrations so even if someone doesn't qualify for Warm Front we may be able to help them on another scheme. And new schemes are constantly being set up so we can keep people's details on record for future contact.

LEWIS: So it's worth ringing to find out. Now of course not everyone owns their own home a lot of people rent,

SUTHERLAND: Yes

LEWIS: Who qualifies then is it the person renting or the landlord.

SUTHERLAND: It's the person renting who needs to be in receipt of the benefit and the scheme is targeting the private renting sector.

LEWIS: So a private landlord can actually get an improvement to the property on the grounds that the tenant is on one of these benefits.

SUTHERLAND: That's correct - Yes.

LEWIS: Can't they then just put the rent up ?

SUTHERLAND: No there are certain terms and conditions which a landlord must agree to. If a tenant of a private landlord applies then we would write to their landlord to ask permission for work to go ahead at their property. And as part of providing us with permission they need to agree to a period of up to two years of not increasing the rent for that tenant.

LEWIS: Janet Sutherland from Eaga thanks for talking to us. There is a helpline, it's only open on weekdays, the number is with the audience line and on our website - details of course of those later. And I should say this scheme goes under different names across the UK the Home Energy Efficiency scheme in Wales, the Warm Deal scheme in Scotland, the Warm Home Scheme in Northern Ireland and Warm Front in England.

LEWIS: Now it's little more than a fortnight to E-day in 12 European countries. On January 1st euro notes and coins start circulating in the eurozone - and packs of euro coins worth around �8 went on sale this week to get people used to the look and feel of the new currency. Here in the UK, where we're not having the euro of course, people who visit Europe a lot or have a home or other financial interests there, want to know if they should have a bank account in euros? Having a euro account could cut out some of the currency hassles and interest in euro accounts is growing. Money Box listener Val called us from Wiltshire.

VAL: What I want is a euro Account that I can access when I want to, without penalty. I've approached my own bank but it seems rather expensive and complicated and I wondered whether I could open an account abroad in one of the European countries as long as I didn't necessarily have to go there.

LEWIS: Well Chris, let's deal with those points. First how easy is it to open a euro account with the big banks here in Britain ?

A'COURT: Well we don't hear or see much about it do we but the big high street banks in the UK do offer euro personal accounts. Val is right they can be complicated and expensive, and also don't really seem to offer what the occasional traveller or holidaymaker might want. Some of those accounts give you a chequebook but we found only one euro account offering a cashcard. That's run by LloydsTBS but to open an account you need 2,000 euro - that's about �1250 - you get virtually no interest -0.15% - plus there's an annual charge of fifty euros, about thirty one pounds

LEWIS: Well not a great deal is it - what exactly would be the advantage of having that account?

A'COURT: Well if you travel to eurozone countries regularly it could make it simpler to keep keep track of your money. You could, say, pay a large lump sum into your euro Account in January, which gets immediately converted into euro and you could draw from that account every time you're in the eurozone from the cash machine, saving currency conversion charges, though you'll still be charged a fee for a cash withdrawal. And word of warning too that by holding money in such an account you do expose yourself to the risk of currency fluctuation, so if you decided at some time to convert the money in your euro account back to pounds you might get less than you put in, depending on how the euro moves against the pound.

LEWIS: And if you do want to take that risk Chris, and not open your euro account with one of our banks in the UK, can you, as Val asked, open one with a bank based in the eurozone?

A'COURT: You'd have to seriously ask yourself if you really need to and it could be extremely difficult because of what you'd need to produce as proof of identity and residency, which would vary. And the euro banks will expect you to open an account with a large deposit of cash. It may be worthwhile if you own property abroad and get payments in euro but for the occasional traveller or holidaymaker like Val it doesn't seem practical or worthwhile to open a euro account abroad.

LEWIS: But if there were euro accounts offering higher interest rates than you get in the UK then that might be interesting.

A'COURT: But they don't. European central bank rates are even lower than ours (3.25% against 4%) at the moment and so the savings rates at the retail banks are also lower in the eurozone - there's nothing to be gained in that way.

LEWIS: And the extensive Money Box survey of those High Street bank euro accounts will be available in full on our website shortly after the programme and it's with the audience line. Details later.

And the eurozone countries, in case you're wondering are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain. Denmark, Sweden, and the UK are not in the euro.

And Money Box will be covering the arrival of euro notes and coins in our programme on January 5th with reports from Italy on how they've coped with the dramatic change in their currency which will mean converting nearly 2000 lire to one euro.

LEWIS: And if you want to be among the first in the UK to own real euro notes and coins - then you should enter our Money Box Christmas Challenge. We often say on Money Box 'If it seems too good to be true it probably is'. But like all good mottos we'd like this one to be in Latin. So if you think you can translate 'If it seems too good to be true it probably is' into Latin you can send us your answer at Money Box either by post or email. Our address - Room 1209, BBC White City, 201 Wood Lane, London W12 7TS - that's Room 1209, BBC White City, 201 Wood Lane, London W12 7TS. Entries have already started coming in to our e-mail address [email protected]. The prize will be euro-related and we'll bring it back for you from our Italian trip.

Entries must be received by Friday 28th December and the winner will be announced live on the last programme of the year Saturday 29th December. So Carpe Diem - Tempus Fugit.

And that's all we have time for today - in any language. You can get more information on the items on today's programme including that competition by calling the BBC Action Line 0800 044 044. Calls are free on 0800 044 044. Or you can look at our website - www.bbc.co.uk/moneybox which will be updated shortly.

There are personal finance stories all week on Working Lunch - BBC2 at 1230.

I'm here on Monday with our phone-in Money Box Live on investing for children - what is the best way to give money to children for Christmas?

I'm back with Money Box at the same time next week.

Today, the reporter was Chris A'Court, the producer was Jennifer Clarke and I'm Paul Lewis. Vale.