How to reduce abusive interest rate applied on outstanding balance?

Paul_Herring

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.

And you "can" (what's with the scare quotes anyway?) usually take your business elsewhere, which was another point that was made. Or you could arrange it so you don't pay the interest to begin with - another point which was made.

Both of which you've conveniently ignored.

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??

At which point do you feel you should be paying it? If you're unwilling to arrange it so you're not paying interest, maybe you should find a lender that's willing to lend to you at that rate, instead of putting up with your current lender.

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

Already addressed. Additionally: no profit, no company, and people reclaiming charges made for their own behaviour, people getting their debts written off eat into those profits, as do operating costs. Yes, there is some degree of profiteering, but not to the extent you're attempting to make out.

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.

All I saw was a very fluffy article with little substance, along with a post making accusations likening the CC companies to the likes of Bernie Madoff and Myra Hindley. (See? - You're not the only one who can use hyperbole.)

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.

If you don't like the answers people give, you could either not post such controversial views, or you could always use the board features to put them on ignore, then you won't see their replies. Then everyone's happy. Telling them to shut-up however is not going to work.

Budner

Banks borrow money from the International Money Markets, as such they pay the Interbank Lending Rate, which is rising due to lack of liquidity. As such, the BOE rate has no bearing on unsecured credit, like credit cards

nzseries1

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 think none of these rates would be abusive, because all of these rates are in keeping with what I would have signed (variable rate agreement).

If I didn't like it, I would take my business elsewhere, as has been stated by numerous other posters. When the bank increases the rate, you have the option to stay at the old rate but not make any more purchases.

Credit is not a right, it is a privilege.

Doublespresso

The point here is that Money Lending is not a "normal business" or subject to "normal market forces" and therefore IT IS open to abuse. The so called "variable rate agreement" is something quite unique in the sense that the bank can unilaterally and at THEIR DISCRETION can set the rate at whatever level they see fit.

In many cases, banks *specifically* targets people who, without fail, make regular monthly payments and are careful not to default, but are near their limits and may find it difficult to move their business elsewhere. IMO the rates Banks choose to apply are rates they think they can get away with, rather than any real risk calculation.

Ironically it is this very lending policy that may exacerbate the financial situation of those who otherwise would have been quite capable to service their borrowing commitments... and consequently actually increase their risk ratings. A bit of a self fulfilling prophecy from the the banks.

Nobody here is naive enough to think that banks are not in business to make a profit. They are indeed entitled to make a profit, however it is well documented that they often resource to abuse till Governments interfere just as the US administration is currently doing (as per OP) and maybe even our own Government will.

http://news.bbc.co.uk/1/hi/business/8169225.stm

Although this specifically refers to loans to small businesses but the same principles apply.

Maybe the "pro-banks"/"I told you so"/"I'm alright Jack"/"Let them burn" brigade here can tell Mr Darling about how fair and proper the Bank conduct their business and if the Bank applies a certain lending policy it must correct and actually set according to market forces?
If borrowers don't like it they should look elsewhere ...right?? :rolleyes:

chattychappy

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!!)

Actually I make it 6100% markup, or roughly 98.4% gross profit margin

dfh

I remember credit card charges of 25 pounds were within the "Terms and conditions" but people queried them and as a result they were deemed excessive and reduced.Banks should definitely be allowed to make a profit but it should not descend to outright exploitation.I followed YBS rates closely when the BOE was reducing rates.They reduced their SVR to 4.99 and then said that they would not reduce them further as they had to keep their savers in mind.I was fine with it untill they reduced savings rates to below 2% !

chattychappy

dfh wrote: »

I remember credit card charges of 25 pounds were within the "Terms and conditions" but people queried them and as a result they were deemed excessive and reduced.

Good point... one of my hobby horses is the mistaken belief people often have here that just because you've signed up to something, it is contractually binding in law.

However in the case you refer to, they were deemed "excessive" in the context of the Unfair Terms in Consumer Contracts Regulations 1999 which limits penalties charges.

CannyJock

Doublespresso wrote: »

Maybe the "pro-banks"/"I told you so"/"I'm alright Jack"/"Let them burn" brigade here can tell Mr Darling about how fair and proper the Bank conduct their business

Just scanned back through the replies and nobody has actually made a pro-bank statement

I think everyone in the forum has saw enough evidence or experienced directly that banks aren't always "fair" in how they deal with people. PPI, excessive bank charges and excessive interest are all "unfair" in my opinion. What amazes me is that joe public still expect the banks to be fair, trust their local branch's advisor and see it as a huge hassle to switch banks, credit cards or any other financial product.

The main disagreement seems to be between people who think that ultimate responsibility for personal finances remains with the consumer (I'm one of them) and others who want big-brother to intervene and tell the banks to all behave differently.

I agree with you that people in adverse circumstances shouldn't be exploited and there should be some form of protection for them (mortgage repossessions being one example). But for the majority of people who aren't in such dire situations, I put the onus on the individual to educate themselves how the system works and learn how to take advantage of it.

I'd back any proposal to teach basic personal finance in schools - but as you know there will still be people who "can't be aarrsseedd". It's these people I don't have a great deal of sympathy for - especially when they go on a stupid spending spree, create a huge problem for themselves and then want someone else to fix it.

KimYeovil

If you don't like the new rate transfer to a different provider. If no other provider will look at you pay off the debt. If you can not afford to pay off the debt over a month or two then ask a toddler what the difference is between a fixed-term fixed-cost loan and a credit card.