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Aren’t brands peculiar things? Where would we be be without them?

Imagine a world where all brands were done away with and for consumer visibility the name of the parent company had to appear on products.

Instead of Gillete Razors, we would have Proctor and Gamble Company Razors. Out would go Flora Margarine to be replaced by Unilever Margarine - it doesn’t quite have the same ring to it, does it?

Heinz Beans would still be here, or would they - if we were pedantic, would they become H.J. Heinz Company Beans?

I guess brands come along for a number of reasons, in some cases they exist because of company takeovers. Perhaps too they exist because the chosen name has ‘more of a ring’ to it or is more suitable for the product or maybe even - in some cases - it is to distance the parent company from the product or service.

In the secured loans world we have a plethora of brands. If you trace Purple Loans through GE Money and GE Capital Bank you arrive at the General Electric Company. Who would have thought, when taking out a loan with Purple Loans, you are actually borrowing money from an American Industrial Giant who traces its origins back to Thomas Edison the inventor of the electric lamp?

Debtbusterloans through Central Capital becomes the more officious sounding Central Trust PLC.

And not many people know when taking out a secured loan from Firstplus, the sponsors of the Internet Pop-Up Queen - Carol Vorderman - they are actually borrowing from Barclays Bank PLC.

Oh well, that’s it for now - I’m off to cook some Cap’n Unilever Fish Fingers and chips.

I find it interesting that Hamptons International Mortgages has called for the annual percentage rate (APR) on mortgage products to be scrapped - I sometimes think the same about secured loans.

As we all know (or should do), the APR is used to give an indication of the cost of a loan over the entire term of the mortgage, so for example, with a two-year fixed rate at 5% with a £499 fee that then switches to standard variable rate (SVR) - currently at 6.75%, the APR would work out at around the 6.80% mark over a 25-year term.

Hamptons argues that - as consumers become wise to the concept of re-mortgaging to get a better rate, the system is flawed because: -

• The movement of standard variable rates in the future over two decades is impossible to predict, meaning that the calculation of APR is flawed
• Secondly, as re-mortgaging increases, the length of time a customer spends on the SVR (the one they took the mortgage out at) decreases dramatically, again rendering the APR calculation inaccurate.

Jonathan Cornell, technical director for Hamptons International Mortgages, commented: “I’m baffled as to why APRs have lasted as long as they have, as I cannot think of anyone within the industry who feels they are a good measure of value. It is a shame that such a flawed measure of value is forced to be given such prominence on advertisements and key facts illustrations. I don’t think many customers actually understand them either. In the interests of “Treating Customers Fairly” we should be removing meaningless jargon and worthless measurements such as the APR entirely.”

I suppose the argument from the OFT and FSA will be that the APR is used as a gauge the competitiveness’ of APR rates at the time the mortgage is taken out and there is no realistic alternative to it.

Having said that, I do think the APR rate is flawed for secured loans too. For one thing the APR rate doesn’t typically include the Payment Protection Insurance (PPI) for the secured loan - it only has to, if the PPI is compulsory - which it never is. This means a Company with a headline APR rate less than a competitor might not necessarily be the cheapest option if their PPI is more expensive.

The use of an APR rate for secured loans also makes some ‘rate comparison’ sites like MoneySuperMarket pretty pointless too. It’s not as though you’re buying a new Digital Camera and know the specific model number in advance and can therefore compare prices accurately. With a secured loan the actual rate you will pay isn’t known until after the loan application is actually processed - there are just so many factors involved.

However I suppose at the end of the day people just want money and are easily duped or possibly don’t even care about the headline rate.

Okay, before I ramble on about IVAs, I’d like to make sure you know what they are - but, too be honest, I’d have ask myself what somone who doesn’t know what an IVA is, is doing trawling through a Blog about the secured loans industry. But, if you don’t know what an Individual Voluntary Arrangement (IVA) is, then this flowchart will help.

The reason for my ramble is - I’ve been having a gander at the IVA market and I’ve been completely blown over by what I’ve read. My first ports of call were the various DTI websites that talk about IVAs. They show that the number of IVAs being taken out is basically doubling every year. If you want proof then these DTI statistics back this up.

The next thing that interested me was the number of publicly quoted companies who now deal with IVAs.

Firstly there’s Debtmatters Group PLC who deal exclusively with IVAs and claim to have 14% of the market. In their last results they increased the number of IVAs they dealt with by an impressive 329% with 554 cases processed in the last reported year. This contributed to turnover of £7.8m and an impressive PBT of £2.8m.

From the results, their ‘outlook’ reads

“Debtmatters has delivered impressive growth during the period under review and is well positioned to continue its momentum. It is the Board’s intention to employ additional insolvency practitioners to underpin the strength of our core business as well as to develop ancillary services through select acquisitions. Significant opportunities exist for the Group and I look forward to updating shareholders with further progress in due course.”

Then there’s Debts.co.uk PLC who also deal in secured loans. They only joined AIM a couple of months ago, but in a trading statement say “The Board of Debts.co.uk, the specialist advisors for personal debt solution
management, are pleased to announce that trading for the last quarter, since the publication of the AIM admission document, has exceeded their expectations and the Company is confident that the final results for the year ended 31 July 2006 will be in line with market expectations.

The next trundling along on the IVA bandwaggon is Accuma Group PLC who also purchased the London based IVA specialist Thomas Charles and Co Ltd only last month.

then there’s The Begbies Traynor Group PLC who in May bought Middleton Partners and the following month Wilson Pitts.

It’s interesting to note that following the dramatic increase in IVAs in the last few years the DTI are bound to follow up with more investigations into the market.