Credit card interest rates

Sir_Woody

Greetings one and all. I have got myself into a large pickle and the brown stuff has hit the fan.

I have a number of cards with a total debt approaching £80k. I have never missed a payment nor gone overlimit so there have been no charges but a number of them have hiked their rates all the same. The worst is MBNA which is charging me 2.2724% a month on about £30k across two cards. This works out at 31% APR. I don't recall the original rate when I took the cards out but it would have been something like 13%. I have an impeccable credit rating, 999 when I last looked on CreditExpert (well that just means you are on the Electoral Register, have a mortgage and haven't missed any payments - these things are very crude).

Now I have made arrangements via a secured loan to repay these and that is going through. But I don't see why MBNA should make such excess profits out of a reliable and regular payer.

I am thinking along the following lines:

1) Get from MBNA (or key in myself) a record of all transactions as purchase, balance transfers, cash (none AFAIK) and their corresponding interest rates.
2) Against the date and either BoE base rate or Libor rate calculate an appropriate interest rate.
3) Sue them for the difference. For example £30k at 2.27% over 5 years with 2.5% minimum payment is £26k. At 1% it is £12k. A big difference of £14k.
4) Repeat this for the other cards (although none of them are as disgusting as MBNA).

Any advice or previous similar cases would be welcome...

TIA

chalkie99

Not going to work though I think.

You signed up to a variable interest rate and it is your responsibility to either pay it or make alternative arrangements when rates change.

Eric_Pisch

My understanding is its part of the contract that they can vary the interest rate, fighting in this in court would cost you fortunes and probably end in a loss as well.

At the time they notify you of a change of rate you can "stop" the card and effectively turn the card into a loan at the old rate.

If your rating is ok you may be able to apply for some zero rate cards, then move the money over, often when you clear a card down they will offer you zero rate on it so you can then move more debt over to that.

Then pay of the debt, most expensive first.

Sir_Woody

This is not too helpful. Maybe I have posted this on the wrong board.

I know about balance transfers and that in retrospect it would have better to have complained when the rate was hiked. But then I wouldn't be here and I suspect a lot of people are in a similar boat. I can pay this debt off so BTs are not relevent.

I have just checked and on both cards, the interest charged actually exceeds by a few £ the minimum payment. So I would never repay the debt and eventually I would be hit by excess charges. I thought a previous month was just a glitch when the interest rate changed but clearly not so.

I have never missed a payment or been overlimit on these cards so increasing an interest rate on accounts that have been run according to their rules to 31% seems to me to be not dissimilar to the loan sharks. When would it stop?

The issue is one of fair trading. I know that the banks have recently won a case about excess charges and they were probably right in principal but not in magnitude of some of these charges.

The govt is rightfully worried about spiralling personal debt on credit cards. While most news seems to have been about these excess charges for the poor folk who have really hit the wall, there seems to be little attention to the second fundamental cause. The first is of course excess credit encouraged by unsolicited cards and increases in credit limits. But the second, particularly recently while the base rates have been on the floor, is rate hiking to the point that people are trapped. Rather like the neighbourhood loan shark, this ensures that victims remain victims. Maybe fools as well but that is another matter.

Of course in the present economic climate, banks are trying to rebuild their capital so maybe the govt is prepared to turn a blind eye while wringing its hands in public, given that the banks have been the sole cause of the national debt doubling. But there is no benefit to the economy of people being made bankrupt or becoming economically inactive which is an inevitable consequence of very unfair trading.

Is there not a case for a class action, possibly supported by some enterprising lawyer working on a no-win, no-fee basis? Am I alone in this or are there other people out there? Would it be better to spend my time whistling in the wind?

Sir_Woody

And I really don't understand MBNA's interest charges either. They seem to be all over the place. There are no transactions on either of these accounts so it should be fairly simple to calculate the interest by taking the average of the opening and closing balances - an approximation that should not be too far out. But the annualised interest charges on account 1 on this basis increased from 16.35% to 31.92% and on account 2 from 27.59% to 37.42%. I have extracted the data from their (possibly deliberately) unhelpful website.

A letter asking for an explanation will be on its way today.

chalkie99

Sir_Woody wrote: »

This is not too helpful. Maybe I have posted this on the wrong board.

Correct! - You should have posted on TellMeWhatIWantToHere.com :rolleyes:

Sorry, I am not trying to be rude but credit cards are always variable rate as you have been told. There would have to be a huge public outcry to even bring about a debate on this let alone get the system changed.

opinions4u

Sir_Woody wrote: »

This is not too helpful. Maybe I have posted this on the wrong board.

Look, this is an open forum and you will get honest views from those who post here. Just because an honest view doesn't tell you what you want to hear doesn't make it unhelpful.

Get a grip on yourself. You have an obscene amount of unsecured debt that YOU chose to build up.

Despite your ability to maintain it you have made yourself an exceptionally high risk and as such MBNA have priced your account to reflect this. Risk based pricing is perfectly legal.

Enjoy the consequences of your own recklessness and start taking responsibility for your own actions.

(As for your plan - the only people with a chance of making money on it are the solicitors. You'll lose. No lawyer would be stupid enough to take on such an action without seeing the fees paid up front. Additionally, what the hell makes you think they are currently raising their funds at BofE or LIBOR? There will be a significant added rate to this that you have failed to take in to account).

Sir_Woody

Gee thanks guyz. That's really helpful.

Since you don't know the background I don't think comments about how the debt was built up are relevent or any of your business. And shouting just means you should get a grip on your blood pressure. I thought that MSE forums may be a place for people who want to solve problems not rant.

Never mind - clearly MSE is populated at least in part by folk who having solved their problems (or not) are basking in schadenfreude. Anyone else who has a over smart reply of the obvious, please don't bother.

Otherwise constructive suggestions are welcome. Make it private if you want.

CLAPTON

Sir_Woody wrote: »

Gee thanks guyz. That's really helpful.

Since you don't know the background I don't think comments about how the debt was built up are relevent or any of your business. And shouting just means you should get a grip on your blood pressure. I thought that MSE forums may be a place for people who want to solve problems not rant.

Never mind - clearly MSE is populated at least in part by folk who having solved their problems (or not) are basking in schadenfreude. Anyone else who has a over smart reply of the obvious, please don't bother.

Otherwise constructive suggestions are welcome. Make it private if you want.

If summary, your questions are:

1. can MBNA legally change their APR without linking it to the BoE or libor base rate?

2. would a class action be successful on grounds of unfair contract?

my answers would be

1. Yes they can legally change their APRs unless your contract specifically links your rate to BoE/Libor rate

2. I think it unlikely that changing an APR would be considered unfair. However there might be mileage in arguing that you should have received notice and/or given the opportunity to freeze the APR and the account.

marksoton

Sir_Woody wrote: »

I can pay this debt off so BTs are not relevent.

Er, well evidently not ! :rolleyes:

All of your ideas are non starters. I suggest you concentrate on reducing the debt any possible way you can rather than taking an aggressive attitude towards the lender.

opinions4u

Sir_Woody wrote: »

Since you don't know the background I don't think comments about how the debt was built up are relevent or any of your business.

The amount of unsecured debt you have is relevant because a credit card issuer will reprice on an individual basis taking in to account what it can identify from a credit reference report.

I don't believe I commented on how the debts were built up. Simply that you chose to build them up.

It became my business when you asked for thoughts on your circumstances.

For crying out loud, post something on a public forum and then saying it's "none of your business" is a pretty stupid thing to do.

And shouting just means you should get a grip on your blood pressure. I thought that MSE forums may be a place for people who want to solve problems not rant.

Silly person. The bolding of key phrases was so that people could clearly see the issues. I'll repost them again in unbolded font if it helps.

1) You built up lots of unsecured debt - nudging up towards 3 times the average salary.
2) Card issuers have looked at you as an individual risk and priced up accordingly.
3) You are looking for ways of avoiding your obligations to meet the commitments that you signed up to.

Not a rant. A clear statement of the facts that you outlined in your posts.