How to reduce abusive interest rate applied on outstanding balance?

Doublespresso

CC companies are increasing interest rates on existing balances to an extortionate rate over 31%/pa while the current BoE rate is at record lows of 0.5/pa%. (that's a 6200% profit margin!!)

Is there a way in which one can fight this and get the Banks to reduce the rates to a more sensible level?

It seems that they can apply any rate they like under the pretence of increased "risk", isn't there any kind of consumer protection against this practice?

I hear in the US the new administration have taken steps to stop this abuse, why cant we have the same here?

http://features.csmonitor.com/economyrebuild/2009/04/23/obama-seeks-to-protect-credit-card-users/

Any advice or template letters would be greatly appreciated.

jonesMUFCforever

Banks don't get money at 0.5%
Whilst it does smack of profiteering the best way to hit back is to either pay off the debt or balance transfer to a lower charging card.

CannyJock

Doublespresso wrote: »

Is there a way in which one can fight this and get the Banks to reduce the rates to a more sensible level?

Take your business to another bank.

Doublespresso wrote: »

It seems that they can apply any rate they like under the pretence of increased "risk", isn't there any kind of consumer protection against this practice?

If you disagree with an interest rate rise, they can freeze the interest rate and close your account. You just need another card to use while you repay the closed one.

At the end of the day, they're in business to make money, not to offer a public service. Ask around the sub-prime posters, they'll tell you that 31% isn't the worst rate people have had.

Paul_Herring

Doublespresso wrote: »

CC companies are increasing interest rates on existing balances to an extortionate rate over 31%/pa while the current BoE rate is at record lows of 0.5/pa%. (that's a 6200% profit margin!!)

Which credit card companies do you believe are borrowing money at that rate? A more sensible number to look at would be LIBOR. And that's only the AAA rated institutions that can borrow anywhere near that number - others will pay more.

Is there a way in which one can fight this and get the Banks to reduce the rates to a more sensible level?

As pointed out above, take your business elsewhere. Or pay your cards off every month so you aren't paying any interest at all.

It seems that they can apply any rate they like under the pretence of increased "risk", isn't there any kind of consumer protection against this practice?

Pretence? :rotfl: There is increased risk out there. People are losing their jobs (or the more fortunate are losing hours.)

Quite a number of families have reduced incomes, putting their houses at risk due to non-payment of secured debt. What makes you think there hasn't been an increased risk of non-secured debt being defaulted on?

And what about all these people running to their pre-April 2007 debt issuers, and not just claiming back the interest, but writing the money they've spent in good faith written off.

I hear in the US the new administration have taken steps to stop this abuse, why cant we have the same here?

http://features.csmonitor.com/economyrebuild/2009/04/23/obama-seeks-to-protect-credit-card-users/

That article appears a little light on substance, and contains no-where near any concrete plans; I wouldn't hold my breath on anything actually being done here.

Any advice or template letters would be greatly appreciated.

Pay your credit card bills on time, and in full, so the interest rates don't affect you. Failing that, move your business. If your credit rating is so bad that you can't even do this, then you are, by definition, an even higher risk.

NickX

Paul_Herring wrote: »

A more sensible number to look at would be LIBOR.

Whilst this is true, LIBOR is also at a historically low level. I think there is some profitering going on by the Card Providers in the way they are hiking interest rates.

The government appear to have recognised this by forcing them to offer the option to close the account and pay the debt back at the existing rate.

As you state, it is still perfectly possible to avoid interest altogether and this is the preferred option.

_Andy_

Of course there is 'profiteering' - they exist to make profit. I don't understand why making profit is so sneered on - if they didn't make any profit, they wouldn't exist and there wouldn't be any credit cards.

NickX

_Andy_ wrote: »

I don't understand why making profit is so sneered on

I have no problem with making a profit, I just prefer the profit to be with me rather than the financial institution

Doublespresso

I see all the usual negativity in some of the posters here, the point being made is that the Banks "can" raise the interest to any level they want.

I ask the cynics and pro banks in here.. at what point do you think it would be considered abusive: 40%/pa? 50%/pa? maybe 100%/pa??

What makes you think that such profiteering actually reflects the risk involved?

Many here seem to think that banks are "fair and proper" in the way they conduct business, and we all know the truth about that..

Obviously in the US the authorities have started to take notice and are taking steps to offer more protection to the consumer while not releasing them from their obligation which is what my OP is all about.

And to any future replies to this thread, please do not moralise, if you cant offer constructive, on topic advice then don't post, thank you.

_Andy_

Doublespresso wrote: »

I

I ask the cynics and pro banks in here.. at what point do you think it would be considered abusive: 40%/pa? 50%/pa? maybe 100%/pa??

And to any future replies to this thread, please do not moralise, if you cant offer constructive, on topic advice then don't post, thank you.

So I'm only 'allowed' to answer that question if it's to your liking then. Superb.:T

CannyJock

Doublespresso wrote: »

I see all the usual negativity in some of the posters here, the point being made is that the Banks "can" raise the interest to any level they want.

Correct, and people are free to decide who to bank with.

Doublespresso wrote: »

I ask the cynics and pro banks in here.. at what point do you think it would be considered abusive: 40%/pa? 50%/pa? maybe 100%/pa??

I consider anything greater than 0% to be abusive. That's why I don't pay any interest. I have in the past. But I learned how to work the system and now I'm very pro-bank ... infact I make a tidy sum from them each year in stoozing, switching and juggling savings.

Doublespresso wrote: »

What makes you think that such profiteering actually reflects the risk involved?

Because there's a recession on in most countries they operate. Because unemployment figures have been rising for around a year. Whether it's opportunistic or justified is moot, it is what it is.

Doublespresso wrote: »

Many here seem to think that banks are "fair and proper" in the way they conduct business, and we all know the truth about that..

Many of us also think it's great fun to outwit them, make money from them and help others minimise the interest they pay them through a bit of ingenuity and lateral thinking (i.e. not crying foul and demanding their debts are written off because the agreement they never even read has some technicality in it).

Doublespresso wrote: »

Obviously in the US the authorities have started to take notice and are taking steps to offer more protection to the consumer while not releasing them from their obligation which is what my OP is all about.

These will be the same US authorities who permitted the sort of sub-prime lending that tipped the global economic system over the edge?

Doublespresso wrote: »

And to any future replies to this thread, please do not moralise, if you cant offer constructive, on topic advice then don't post, thank you.

You're welcome.

Inactive

Doublespresso wrote: »

And to any future replies to this thread, please do not moralise, if you cant offer constructive, on topic advice then don't post, thank you.

Sadly you only started the thread, you don't actually own it, so members can post whatever they like within the forum rules.

Sorry if that was off " topic ".. :rolleyes: