Taking Virgin Credit Card (MBNA) to the Financial Ombudsman. 35 % APR is 'unfair'

jofawa

Hello Moneysavers,

My husband and I originally were on a zero (0%) balance transfer rate with Virgin Credit Card (MBNA). We are now paying 35% interest.
We have been in touch with the financial ombudsman.
At first the Ombudsman suggested we have no case, but we explained that we are now trapped. We request reductions and have no ability to negotiate with the company, they have all the power. In addition, they have repeatedly increased our credit limit so that we can no longer shift our balance from Virgin to another credit card provider since they will not take the whole amount as a balance transfer.
The financial ombudsman agreed that we have a case and suggested that we may not be the only people who are being charged these rates and now find themselves in this position.
They have decided to take on our case and investigate our claims that they have us in an 'unfair' situation.

The ombudsman suggested that if other people feel that their interest rate with Virgin Credit Card (MBNA) is 'unfair' that they should contact the financial ombudsman. The first thing to do is request a decrease in interest rates with Virgin Credit card (MBNA) (if you have not tried already) if you are declined, call the financial ombudsman. The more people who complain the stronger the case will be. We were told that if a lot of people complain, they might be able to do something big about the issue.
If you feel your rates are unfair then please consider contacting the Financial Ombudsman, they told us there is ‘power in numbers’.

BACKGROUND TO OUR STORY

After 6 months of calling Virgin MBNA and requesting reductions to the interest rate we have be told "No" repeatedly. The main reason we are told is because "There are no other interest rates available".
I wrote to Sir Richard Branson on his website blog and requested that he reconsider applying such high rates to credit cards and discuss with MBNA that they are not consistent with the projected 'Virgin' brand. I explained to Sir Richard Branson that with using a money website credit card repayment calculator, our balance Approx £8,000 was calculated at our current 35% APR. The estimated repayment period was in excess of 50 years, or more than 600 payments (at the minimum monthly repayment of 2.5% of the balance). With no additional purchases we will repay £671,175.
As a result of this communication, I was contact by Roland Russell (Chief Financial Officer for MBNA) who 'investigated' our interest rate and found that he felt the rates were fair.
I responded that I did not agree.
3 weeks ago in the Saturday Telegraph I read that APR's above 20% are considered high, it was suggested that you should first contact the company and request a reduction, if refused, contact the financial ombudsman if you feel that you have an ‘unfair’ APR.
We contacted Virgin Credit Card (MBNA) and requested a reduction again in our interest rate. They declined our request so we requested that to assist our case, and since we are customers, that we would like to take the interest rate issue up with the financial ombudsman and now we have 3 times made requests to Virgin Credit Card (MBNA) to provide:
a) reasons for our rate reduction refusal and,
b) a printed copy of the records they hold of each call we have made to them regarding reducing the APR on our account.
Now it seems that they are sending us on a 'run-around' trying locate their records of our conversation.

SarahNeedle1872

Hiya, couple of questions to consider....

Can you get another CC and transfer some of the balance, reducing the overall amount of interest you are paying?
Are you only paying the minimum payments, or are you throwing all spare money at this card?
You say that Virgin increased your limit, did you spend more on this card, thus increasing the overall balance?

If you are having trouble paying, why not pop over to DFW to see if the lovelys over there can help...?

dazza.mk

"they have repeatedly increased our credit limit so that we can no longer shift our balance from Virgin to another credit card provider since they will not take the whole amount as a balance transfer. "

And MBNA forced you to use this additional balance how? - I've got an MBNA card with a reasonable limit as well, however I saw that as a limit as opposed to a target

Dabooka

I have to agree, increasing the limit doesn't mean you should spend on it. And what APR did you expect after the 0% term ended? incidently, has your credit rating been affected since taking out the offer (other cards / missed payments etc?).

Good luck with the case though, I suspect plenty of others will be watching with interest.

fozmcfc

I've just got a Virgin card with 0% which I intend to pay off my balance before the 0% BT rate runs out.

Apart from wanting to do this before any interest comes on to the balance, I'm extra keen, having read several people saying the rate goes to 30% +, which is at least 10% more than I was paying Egg before the transfer.

While I agree it is a steep rise in interest, and I don't necessarily agree that rate should go up so sky high, as other have said an increase in credit limit is not a goal, but a temptation and you can hardly blame them for you spending upto it.

Having said that it sure will be interesing to see if the outcome puts any blame on Virgin.

ILW

jofawa wrote: »

they have all the power. In addition, they have repeatedly increased our credit limit so that we can no longer shift our balance from Virgin to another credit card provider since they will not take the whole amount as a balance transfer.

For heavens sake grow up and show some resposibilty for your own actions. YOU spent the money not anyone else.

oscar52

ILW wrote: »

For heavens sake grow up and show some resposibilty for your own actions. YOU spent the money not anyone else.

Nice to see this bandwagon is still rolling.

Would you tell a fat person its all their fault because they ate too much?

How about someone who is ill - maybe they smoked too much?


People get into debt for various reasons, maybe not the case with the OP but maybe they NEEDED to spend it, maybe it was for medical treatment.

People are far too quick to jump on this bandwagon.

I agree with the OP, and agree that MBNA (whom I actually work for) has underhanded practices - do you think they increase the limit for someone who clears their account each month?? IMO opinion, some credit card companies deliberatly increase limits knowing (from the account history) the problems it is likely to cause - is like dangling a carrot. It is all well and good to say "you didnt have to spend it", but would you take a child to a sweet shop and tell them they couldnt have any??

jofawa

Thank you for all your comments.
Please let me say you are right, we did spend the cash.
I bought a university education with the money. I paid upfront for it.
I thought that i would be able to get a great paying job after finishing my undergrad and then post grad degree. Unfortunately after achieving these I have found myself now engaged in a volunteering position whilst seeking a full time role.
My husband works full time and we are trying to pay off the Virgin card in a reasonable time so we may be able to start contributing toward a pension fund. I am not trying NOT to pay it off. My central complaint is that the interest rate is excessive. We pay £250 a month off and £205 goes back on in interest. We appreciate we entered a contract on the understanding that there would be interest at a later stage and are happy to pay a 'fair' amount. We can't obtain a justification from Virgin/MBNA why our rate is so high either. In addition, particularly when our other credit cards are under 15% APR and virgin is 35%.

Thank you for taking the time to read my post.

midlandsgirl_2

You are so right. The interest rate is ridiculous. Is it possible for you to take out a loan and pay off the Credit Card? At least the interest rate wouldn't be so high and you would have a definate end date.

We have a Credit card with Abbey also issued by MNBA and have had the same problem. Luckily though, we did mange to pay it off another way.

chattychappy

I'm not clear...

When you say "In addition, they have repeatedly increased our credit limit so that we can no longer shift our balance from Virgin to another credit card provider since they will not take the whole amount as a balance transfer."


Are you you saying that you then took that extra credit? I think this is important.

If the problem is that they gave you extra credit limit (which you didn't want/use), and this extra available credit made other providers nervous about extending you credit, then I think the case is very strong. Afterall, they have effectively monopolised your access to credit and are (potentially) abusing that position. But surely the remedy is simple: you ask them to reduce your credit limit and not offer further increases. Of course this might not necessarily improve your credit rating if it makes your utilisation look bad (ie you've taken all your credit).

If the problem is that they have extended you extra credit which you have then taken, then I feel you're a bit stuck. If other credit card companies won't give you (or your husband) credit at all, I think MBNA can argue that their rate is fair. After all, they are taking a risk that no other provider is prepared to take.

Mozette

oscar52 wrote: »

Nice to see this bandwagon is still rolling.

Would you tell a fat person its all their fault because they ate too much?

How about someone who is ill - maybe they smoked too much?


People get into debt for various reasons, maybe not the case with the OP but maybe they NEEDED to spend it, maybe it was for medical treatment.

People are far too quick to jump on this bandwagon.

Oscar52. I am fat, I think with me it is as much the drink as the food, but it certainly is my own fault - no one forces me to overconsume and do very little excercise - all my own choice and doing.

I'm virtually out of debt now, but yes, I got in it because I spent too much compared to my income and necessary bills. Oh it was partly my marriage breaking down, joint debts in my name, spending while depressed after, but end of the day, it was my own fault. I blame no one but myself and thankfully I got a grip and have had the long hard slog from owing 'around' £25,000 unsecured to now about £2,000 which will be paid off in the near future.

Even now I have credit limits that approach double my gross annual salary, but as someone else on this thread said, it's a limit, not a target.

I take full responsibility for what I do, and the consequences.

The op seems to be saying that it was the raising of the credit limit that 'caused' them to spend, not urgent medical supplies or whatever.

As for advice to the op, they should try and at least transfer as much as possible to a lower rate card, or loan. Considering the base rate is 0.5%, then 35% is totally outrageous; but then we're paying for the goverment and the bankers greed shortsightedness and stupidity. Good luck with getting it reduced, it is outrageous, but take responsibility for your own deeds too; speaking as one who has, all I can say is, it feels great.