Changes to way minimum payments are calculated...

izools

Tixy wrote: »

Not really anything you can do - and yes its going to all MBNA customers.

Your only option if you cannot afford it, and cannot make cutbacks elsewhere so you can afford it, is to default on the agreement and accept you will get a default registered on your credit file. They may then consider freezing interest & charges on your account.

No point trying to move to another CC as all new accounts now have these repayment terms.

Just to clarify the options here...

If you miss one or two payments, the account will not default, but MBNA Collections may very well then entertain a reduced payment plan with a very low interest rate or no interest. If they agree to this you will have an "Arrangement" marker on your credit file but no Default. This will slightly affect your credit rating i.e. you may not be able to get the best remortgage on the market or another good balance transfer deal but should be fine with the likes of mobile contracts, overdrafts, utilities, etc.

If you miss three to six payments, the account will then fall into default, at which point no interest can be added to the account. Ever. This will severely affect your credit rating.

izools

Oh, a loan from Zopa at 8.6% APR, for £13,000, over 5 years, will cost £265 a month.

If you can get a loan from Zopa (they are very strict) it's well worth looking at as they have the best actual rates on the market.

You can also create a listing explaining to lenders / investors why you are a safe pair of hands etc and set a target APR.

They will then, depending on the quality of your pitch, offer lending at APRs and once your loan is funded the APR will start to drop and you get to borrow the money at the lowest rates offered by lenders / investors.

The lenders / investors are average joes like you or me - my loan from them is funded by hundreds of people lending between about £10 and £100 each who want to see a greater return on their savings after three years than any ISA or Bond could offer

Tixy

izools wrote: »

If you miss three to six payments, the account will then fall into default, at which point no interest can be added to the account. Ever. This will severely affect your credit rating.

Interest definitely can continue to be added to debts once a default is registered.
Usually if after your have been defaulted you keep in contact with your creditor, continue to pay something each month and ask them to freeze charges they will. But they are under no obligation to.

Naomim

Is it just MBNA cards which are doing this or will all credit card companies be going this way?

Naomi x

izools

Tixy wrote: »

Interest definitely can continue to be added to debts once a default is registered.
Usually if after your have been defaulted you keep in contact with your creditor, continue to pay something each month and ask them to freeze charges they will. But they are under no obligation to.

I think you are confusing an account that has been defaulted, i.e. closed, with an account that has fallen into arrears and has been closed.

If a formal default notice is issued, not just the £12 default charges, the account is closed and the original terms no longer apply in the same way - so interest is not added. The DCA (be it in house or external) may add FEES for tracing the debtor and the like, but not interest.

If the default notice progresses into a CCJ, the creditor is within their rights to ask the court to pass on 8% APR interest.

janninew

Naomim wrote: »

Is it just MBNA cards which are doing this or will all credit card companies be going this way?

Naomi x

I had a letter from Virgin yesterday saying they were changing the way minimum repayments are calculated, it won't effect me as I'm still on interest free and will have it paid of soon. Not sure about other credit cards though.

Tixy

Nope not confusing it.
After a formal default notice has been issused and a default is registered on the debtors credit file the creditor may continue to charge interest in accordance with the terms of the agreement, even though the agreement has broken down.

There are lots of people on DMPs in this situation whose creditors do continue to charge interest. I have seen this confirmed on the OFT website somewhere (although cannot find at the moment - its one of those sites that the search always seems like hardwork to use- like the dreadful FSA website). However there is this extract from the CCCS website here http://www.cccs.co.uk/InfoCentre/EnglandandWales/Creditoraction/Chargesandinterest.aspx

Usually, a creditor will stop interest and charges either after they issue a default notice or they pass it onto a debt collection agency, although this does not always happen.

Edit - found this now - http://www.legislation.gov.uk/ukpga/1974/39/section/86F extract from the Consumer Credit Act. It confirms they can charge interest on a defaulted (although obviously only simple interest), and this section http://www.legislation.gov.uk/ukpga/1974/39/section/86E confirms they mean by 'default sums' a balance after a default notice has been formally issued.

Percy1983

Naomim wrote: »

Is it just MBNA cards which are doing this or will all credit card companies be going this way?

Naomi x

It is a new minimum all cards must charge, as it is some cards won't be affected as they already charge more.

izools

Tixy wrote: »

Nope not confusing it.
After a formal default notice has been issused and a default is registered on the debtors credit file the creditor may continue to charge interest in accordance with the terms of the agreement, even though the agreement has broken down.

There are lots of people on DMPs in this situation whose creditors do continue to charge interest. I have seen this confirmed on the OFT website somewhere (although cannot find at the moment - its one of those sites that the search always seems like hardwork to use- like the dreadful FSA website). However there is this extract from the CCCS website here http://www.cccs.co.uk/InfoCentre/EnglandandWales/Creditoraction/Chargesandinterest.aspx

Usually, a creditor will stop interest and charges either after they issue a default notice or they pass it onto a debt collection agency, although this does not always happen.

Edit - found this now - http://www.legislation.gov.uk/ukpga/1974/39/section/86F extract from the Consumer Credit Act. It confirms they can charge interest on a defaulted (although obviously only simple interest), and this section http://www.legislation.gov.uk/ukpga/1974/39/section/86E confirms they mean by 'default sums' a balance after a default notice has been formally issued.

Huh. Well there you go.

I'm still yet to come across anyone who's been charged interest on a default balance though

Tixy

You don't spend much time on the DFW board in that case :)
You should see the number of people posting they are still being charged and what can they do about it (often Lloyds customers - they seem to be the current worst offenders).