Rate Jacking Article Discussion

Cell

I am a little surprised that this thread has not been more vigorously discussed (and not just because I'm posting in it:p). I think it's going to be more and more of an issue as Martin has highlighted.

This site exists to allow the consumer to know their rights, and in terms of 'Risk re-pricing' I have now received a definitive response from the UK Cards Association.

If you get a letter from your credit card, make a note of the date it was received. It won't help you get the decision changed, but I can definitively state that in the case of Capital One it will hopefully help me show that their notice was null and void.

Anyway, here's the response.

My colleague who manages our general email box has passed to me your recent query about the appropriate level of notice you should receive of any re-pricing decision.

We would expect you to receive 30 days clear notice (whether in writing or any other medium) before the risk-based re-pricing takes effect. So if you receive a letter today, saying that risk-based repricing on your account would take effect from 19th October then that would be sufficient notice, but if you received that letter on Monday, then it wouldn't be. Obviously during a postal strike, that'll cause an issue.

If you do have any concerns that you've not received appropriate notice, you should go back to your credit card company with your concerns and ask them to address them. If you have an unresolved dispute, you can then refer that to the Financial Ombudsman Service. The principles agreed last year between the industry and Government are enforced and monitored by the Banking Code Standards Board.

milliemonster

2 issues with us, firstly HSBC. We have various cards at the moment which since around June last year we are paying off in order of highest interest first as everyone recommends, as HSBC card was way down on the list (15% APR compared to A&L at 34%) we paid min on this and have been overpaying on the others first, consequently I have noticed HSBC have sneakily been increasing the APR on this card, it is now up to 20.9% despite never missing a payment or making a late payment, they have never ecven had the courtesy to write informing us of this, are they allowed to do this?

On top of this, Egg have just emailed me a coupkle of weeks ago to tell me they are increasing my APR from 17.9% to 21.9% from October, this again is despite never missing a payment and making an overpayment every month of £50, the only way to avoid this I am told is to close the account immediately and make at least the min payment every month until the balance is cleared, so this is what I have done, again Egg wasn't at the top of the list.

What gets me so mad is that I feel that despite not making any late payments or missed payments on any of our debts, no adverse stuff on our credit files at all, the only thing we have against us is high outstanding level of unsecured debt (just under £40k but we have a combined annual income of £80k)

We are being responsible by ensuring we meet our committments every month and are overpaying as much as we can each month to pay it all off but for some reason, they are all deciding we are a 'risk' and therefore are increasing our APR's as much as they can possibly get away with just to lengthen our time to repay and make more profit for themselves.

I can't understand how they can get away with this when we have nothing adverse on our files. What is the point in just overpaying the highest bearing interest debt first when all the other creditors then start to hike up the rates? it makes a complete mockery of snowballing, I am beginning to wonder if I should just spread the money we allocate to debt repayment each month fairly amongst each creditor so each gets overpaid substantially each month, at leats then they may stop hiking up the rates anymore

Cell

I was under the impression that they would have had to search your files (as you agree to when you sign up) to increase on a risk basis. I was surprised when I checked that no credit card company has searched in the last year on my Experian report. However the guidance sheet above explains when this might occur (bottom page, right hand side).

http://www.choosingandusing.com/resources/documents/CreditCardFactsheet.pdf

The 'regularly uses a high proportion of credit limit' is self explanatory. It means they don't even need to search the files. By using a high proportion of your limit there is a presumption it's because you're stretched.

As for HSBC - they have to send notice of any increases in your APR. Give them a call and ask them when they did this.

Hope that helps a little:o

YorkshireBoy

Cell wrote: »

I was under the impression that they would have had to search your files (as you agree to when you sign up) to increase on a risk basis. I was surprised when I checked that no credit card company has searched in the last year on my Experian report.

Lenders (can, and often do) obtain information, in the form of monthly feeds, from the CRAs without searching your file and leaving a footprint; one example being your CII (consumer indebtedness index) score.

There's also something else, I believe, called 'Delphi' which works on similar lines.

A Google search will provide more information.

Cell

Thanks for that. Makes sense I guess. A load of footprints on your Experian record would make it look like you're applying left right and centre or that your card companies have concerns which they're following up.

DebtMagnet

Hi all,

My Credit Card rate was upped just days before the new rules regarding freezing and closing the card came in to play. As such I had no option to reject it (which i most certainly would have done).

I feel that the timing was specifically to sneak it in before the rule change but does anyone think this is reason enough to complain or would I be better not wasting my time?

Thanks in advance,
DM

ramblingtree

DebtMagnet - I completely agree, ours was upped in the months running up to the legislation coming into place. The increase made it pointless to freeze it. We've sent a complaints letter asking for the rate to be frozen prior to the initial rate increase. Not sure if we have a chance, but will go to the Ombudsman when mbna don't reply!!
One thing I do get mad with is that it seems you have to default to get anywhere with the company. The companies think that a rate increase is ok if you can meet payments, even though that could well tip you over into defaulting. As a business model it makes no sense to me!

jonnyb1978

Bank of Scotland has increase mine from 14.95 to 19.95% without no knowledge or letters. The change has just appeared on my September statement along with a list of changes to Terms and conditions. But these have no mention of interest rate. And last months statement is just the old amounts and again nothing mentioned or any notice given.

DebtMagnet

ramblingtree wrote: »

DebtMagnet - I completely agree, ours was upped in the months running up to the legislation coming into place. The increase made it pointless to freeze it. We've sent a complaints letter asking for the rate to be frozen prior to the initial rate increase. Not sure if we have a chance, but will go to the Ombudsman when mbna don't reply!!
One thing I do get mad with is that it seems you have to default to get anywhere with the company. The companies think that a rate increase is ok if you can meet payments, even though that could well tip you over into defaulting. As a business model it makes no sense to me!

Hi ramblingtree

This has been my confusion for months now as by them putting up the APR so much it has changed my position from managing ok, to now not coping very well at all. They say it's because I am a bigger risk to them but in truth I am a much bigger risk now due to their rate hike than I ever was before, so like you said their business model is insane?!

If you have a customer who has a large debt but who pays at least the minimum without fail and has done so for many years without problem, surely they are the ones you want to keep as they provide a good steady income. Any business knows that you need to look after your regulars as they are your 'bread and butter'........Instead they seem to have decided to push me and many others to the limit and this will only result in people either doing whatever they can to pay them off and close them (and so lose their steady income) or push them to defaulting or going bankrupt, in which case they will get very little if anything at all and will have a messy case to deal with. So what really do they want to achieve out of this as I really don't know?

If they really don't want my business as they think I am a big risk in the future then surely they should have given me an incentive to go, rather than ensuring I am trapped in an ever increasing cycle of debt and unlikely to ever be able to go anywhere without going under????

Yes I know it was me who spent on the card and they didn't force me to, but I chose to spend at a rate at the time that was affordable to me, not the rate i find my debt being charged at now.

And I was brought thinking that big bankers were supposed to be clever so and so's :rolleyes:

Think I'm going to try complaining anyway and see what they say, nothing to lose I suppose?

Cell

I agree entirely.

If you've assessed people as being in risk of default (despite any objective evidence in support) it seems counterintuitive to take a decision which is likely to enhance the chances of that default occurring.

My guess is that it's more to do with squeezing every bit out of people who have thus far managed to run an account with a balance but wholly in accordance with the terms and conditions.

It's difficult to imagine what a credit card's ideal customer is now. Not one who spends but pays it off (see Egg las year). Not someone who runs a balance but has never defaulted.

I think the industry actually has no idea at all and is making it up as it goes along. And that's how we got to where we are in the first place if you think about it.