HBOS change terms and conditions

luvsnail

chattychappy wrote: »

The Lending Code allows them to do this: see para 144. [...] See also...

[...]

I expect interest rate rises will be 0.25% or 0.5% at a time. If you're on, say, 20% APR, a rise to 20.25% is not really significant. About £1 a month on a debt of £5000.

I understand that they are allowed to do this, but my main objection is not that they are breaking the law - just that they are clearly exploiting a loophole to undermine the consumer protection provided by the "right to reject".

My second objection is the way they've chosen to communicate the change to customers. Their letter begins by telling me how my interest calculations are getting simpler and fairer, and they follow with a big table showing how my interest rates are actually decreasing. They even say that the right to reject still applies if my "personal rate" increases. Nowhere in the letter does it mention that the base rate hikes are immune from this - you have to see the small print on a small leaflet that's also stuffed in the back of the envelope to find this out.

I know all banks tend to sugar-coat the bad news they send out, but this communication as whole seems deliberately misleading.

Finally, speculating on the amount by which the base rate will increase is pretty irrelevant here. The point is that when the increases come they will hit you immediately, and you will no longer have the right to reject.

Gallery_2

Nice post there, pretty useful information. Thanks!

ahxcjb

I received the letter also. It informed me that my Reward Clarity rate was being dropped to 6.9% across the BOARD. That's for cash withdrawals, purchases, balance transfers - the lot. How they expect to make any money out of me is beyond me, given I pay it off in full every month. Apart from the transaction fees from Mastercard, that is.

chattychappy

luvsnail wrote: »

I understand that they are allowed to do this, but my main objection is not that they are breaking the law - just that they are clearly exploiting a loophole to undermine the consumer protection provided by the "right to reject".

It's hardly a loophole. It is simply the way the rules were written. The intention was to protect people from "risk based re-pricing" - ie where banks take the chance to hike rates without an underlying increase in their rates.

luvsnail wrote: »

My second objection is the way they've chosen to communicate the change to customers. Their letter begins by telling me how my interest calculations are getting simpler and fairer, and they follow with a big table showing how my interest rates are actually decreasing. They even say that the right to reject still applies if my "personal rate" increases. Nowhere in the letter does it mention that the base rate hikes are immune from this - you have to see the small print on a small leaflet that's also stuffed in the back of the envelope to find this out.

I know all banks tend to sugar-coat the bad news they send out, but this communication as whole seems deliberately misleading.

I've not seen it - but from what you say I'm not sure I share your opinion.

luvsnail wrote: »

Finally, speculating on the amount by which the base rate will increase is pretty irrelevant here. The point is that when the increases come they will hit you immediately, and you will no longer have the right to reject.

You never had the right to reject. It was something that was offered over and above regulatory requirements which has now been withdrawn.

I think the difference is very relevant. Base rate changes tend to be small and are related to the "raw material cost" of delivering credit. The "personal rate" here is entirely of the banks and hikes could be unlimited without the opt-out provision.

luvsnail

chattychappy wrote: »

You never had the right to reject. It was something that was offered over and above regulatory requirements which has now been withdrawn.

It's not law, but it is part of the industry-agreed code of practice. Here's what the MSE guide on rate-jacking says (I can't link to it because I'm a newbie, but it's easily found in the Credit Cards section of the site):

While not law, so it's questionable whether you could challenge a breach of them in court, these rules now form part of an industry agreed code of practice.

And that's important, as it means the Financial Ombudsman Service (FOS) will use it as part of making a decision on whether you've been treated fairly or not.

In any case, HBOS is making changes that result in a material disadvantage to the consumer and that give us fewer protections from rate increases, and they're announcing it in a way that makes it sound like it's somehow in our best interests. I have to say I'm surprised that people on MSE forums are taking HBOS's side on this one.

opinions4u

luvsnail wrote: »

In any case, HBOS is making changes that result in a material disadvantage to the consumer and that give us fewer protections from rate increases, and they're announcing it in a way that makes it sound like it's somehow in our best interests.

If you are somebody who wishes to back out of an agreement to vary interest rates, then it's not to your benefit. But the overwhelming majority of card users are not in that position. So the majority are no worse off as a result of this change.

I have to say I'm surprised that people on MSE forums are taking HBOS's side on this one.

It's not a case of taking sides. It's simply highlighting the hows and whys that mean they can do this and also identifying the rather important point that it isn't detrimental to most customers.

If you don't like it, there are many other card issuers out there. If you can't switch, back out of future rises now and stop using the card.

I suspect other card companies will follow suit anyway.

chattychappy

luvsnail wrote: »

It's not law, but it is part of the industry-agreed code of practice.

No. See the links I gave before. It is part of the code of practice that they CAN track base rates.

The FOS would have no problem with this.

luvsnail

opinions4u wrote: »

I suspect other card companies will follow suit anyway.

Most probably, the precedent has been set.

All my remaining credit card debt is on a 0% deal at the moment. Thanks largely to Martin and MSE it'll be paid off entirely by October, and I have no plans to borrow on cards again. This HBOS change won't affect me financially, but it's a slap in the face for those with poor credit ratings who may not have the option of ditching and switching or the luxury of 0% balance transfers.

chattychappy wrote:

No. See the links I gave before. It is part of the code of practice that they CAN track base rates.

Thanks for the links. I agree that paragraph 144 on the Lending Code allows lenders to track an external index (and explicitly names the base rate as an example). This does have to be laid out in the Terms and Conditions though, which is why they're making the changes. And they do at least have the decency to mention that you can opt out of it and close your account now.

I guess I'm just disappointed that after seeing the recent improvements in the credit card market from the consumer's point of view, HBOS are taking a step backward and sticking fingers up at us again (but yes, I know they're not a charity).

If I'm one of only a handful of MoneySavers concerned about this then it's pointless to mount an opposition campaign, but MSE's "Rate Jacking" guide will probably need to be updated with these changes.

opinions4u

I guess I'm just disappointed that after seeing the recent improvements in the credit card market from the consumer's point of view, HBOS are taking a step backward and sticking fingers up at us again

One of the problems with customers having the option of rejecting a rate rise is that it means the higher risk customer is benefiting from a lower interest rate when compared to the lower risk customer. That is basically bonkers economics and is also unfair to the "loyal" customer who continues to actively use the card.

It's a change. Some people win. Some people lose. Most are unaffected by it. Those who might lose have a month or two to do something about it (and if it curtails their future spending it might be a good thing for them in the long run).

The decision makes good economic sense, any customers who should be alienated by it are higher risk, and for most people - the overwhelming majority of credit card users - life will go on with nobody even noticing it.