Virgin money/mbna new minimum payments !

Squeezed69

Hello, I am a newbie to this site and forum. I hope someone has some information, guidance and advice for me and other Virgin/MBNA Card holders.

Last month I received notification from Virgin Money (MBNA Card) that as a result of FSA changes and Government Pressure, the way minimum Payments are calculated is being re worked. I have noticed information about this via the internet and Google Searching. So far, it seems none of the other card suppliers are interpreting these new directives in the same way as Virgin Money are doing.

Virgin Money have advised me that from my MAY 2011 statement my minimum payments of £163+ will increase to over £300+ per month !!! I phoned them and they confirmed this is correct. They even provide a handy-dandy calculator on their website that enables you to demonstrate the horror to, and for, yourself !

Surely the New Coalition Government cannot really be allowing this ? Or even directing this ? I mean the UK economy is in enough of a bad state as it is with Consumers worrying about the threat of Mortgage Interest Rate rise that might add £25-£50 per month onto their Mortgage.

yet here we have Virgin Money enforcing an almost 100% rise in minimum card payments ! This cannot be right. If it is then it would be the largest single mistake by a company in the history of credit and at the worst time in Economic History !!!

Can anyone tell me if this is happening to them ? Are your payments doubling ? (Or substantially increasing).

And, of course, if you are not happy with this then they offer to put you through to their distress department to negotiate. But, of course, if we do this, I am certain this would reflect on ones Credit File and, most likely, result in a reduction of ones credit limit and credit worthiness.

I would be grateful for any feedback. This cannot be morally right. How can the Government standby and allow such an action to take place ? To DOUBLE consumers minimum payments ?

dunstonh

Surely the New Coalition Government cannot really be allowing this ?

This was initially put into place by the Labour Govt. This has been coming for 2 years so its not new. It was first proposed by Lord Mandelson in 2009 and went into consultation for 2 months then.

since Jan 2011 banks are compelled to make the minimum payment cover at least the interest and charges plus 1% of your debt (though most already did).

And, of course, if you are not happy with this then they offer to put you through to their distress department to negotiate. But, of course, if we do this, I am certain this would reflect on ones Credit File and, most likely, result in a reduction of ones credit limit and credit worthiness.

if you fail to meet the minimum payment then it will almost certainly go reported on your credit file.

To DOUBLE consumers minimum payments ?

The intention is to make them realise that if they couldnt afford a realistic minimum payment that they are actually in big financial trouble and should consider other options. It may also make people think twice before spending money they do not have (which is the intention).

As martin says in his article on this:
Borrow £3,000 at age 19 and you'd be 60 before it was clear! That's the case if you just make minimum repayments

Squeezed69

Thank you for your reply Dunstonh - The point is, I WAS able to manage all my Minimum payments, everything was fine and dandy and in fact I was beginning to pay a little more than my minimum after recognising that I needed to pay off more. But to double ones payment is just outrageous I feel and will push thousands of people over the edge I fear... We shall see. By this time next month we may be seeing many more posts about peoples distress when they realise their minimum payments have doubled.

Fruit_and_Nut_Case

Squeezed69 wrote: »

By this time next month we may be seeing many more posts about peoples distress when they realise their minimum payments have doubled.

We have been seeing them already. Yours wasn't the first and most certainly won't be the last. Hope you find a way around the difficulty.

michaelvintner

Squeezed69 wrote: »

worst time in Economic History !!!

Of course it is, lol.

chattychappy

This change is entirely a commercial decision by MBNA and has nothing to do with regulation. Specifically, the new rules only apply to new accounts - it was decided not to apply them to accounts already open - exactly because of the distress it could cause. (Though I think repayments are nevertheless supposed to cover at least interest.) In my case, I'm on interest + £5. My repayments will triple as I'm on a very low APR. (Balances ranging from 0% to 6.9%). I'm annoyed because it retrospectively reduces the value of BT deals for which I paid an upfront fee, though it won't cause me distress.

People are where they are. Personally I think it is wrong that people are tipped into "distress" because of this change. Agreed some might be heading that way anyway. Others won't be - for example they might be servicing other debts on higher APRs and paying these off first, have savings bonds maturing etc.

Also people's situations change - they might be have short periods of low income/higher expenses followed by periods of being better off. I've always thought the "borrow £3000 at 19 and only pay the minimums and you'll be 60 by the time its paid off" is ridiculous. The minimums would be declining during that time and inflation makes them even smaller in real terms. Given they are mathematically a percentage of what's left, then of course the debt will go on for a long time. Only the £10 minimum (or whatever) stops them going for ever. Besides who actually runs up a big balance, only pays minimums and never spends again?

Anyway here are some other threads on this:
http://forums.moneysavingexpert.com/showthread.php?t=3121684
http://forums.moneysavingexpert.com/showthread.php?t=3078372
http://forums.moneysavingexpert.com/showthread.php?t=3077964
http://forums.moneysavingexpert.com/showthread.php?t=3072002
http://forums.moneysavingexpert.com/showthread.php?t=3073642
http://forums.moneysavingexpert.com/showthread.php?t=3067956
http://forums.moneysavingexpert.com/showthread.php?t=3062638
http://forums.moneysavingexpert.com/showthread.php?t=3044966
http://forums.moneysavingexpert.com/showthread.php?t=3052700
http://forums.moneysavingexpert.com/showthread.php?t=3048604
http://forums.moneysavingexpert.com/showthread.php?t=3067956
http://forums.moneysavingexpert.com/showthread.php?t=3131816

[Deleted User]

mbna are applying their"new rules" TO ALL ACCOUNTS not just new ones

chattychappy

woodbine wrote: »

mbna are applying their"new rules" TO ALL ACCOUNTS not just new ones

AFAIK MBNA have opened all accounts with these new rules for a couple of years. Now they are bring the old accounts into line.

dunstonh wrote: »

The intention is to make them realise that if they couldnt afford a realistic minimum payment that they are actually in big financial trouble and should consider other options. It may also make people think twice before spending money they do not have (which is the intention).

This maybe be sensible in respect of new accounts, but forcing people to default as a way to make them "consider other options" is not the way to go.

If MBNA wants to apply this change to old accounts, a fairer approach IMHO would be to apply the new regime to new spend only or allow people to opt out (as with interest hikes) and not spend further.