Call for information from cancelled Egg card holders

[Marlowe52]

I realise the cancellation of 161,000 Egg cards last year is old news, but I guess many, like myself, still have not paid off the outstanding balance yet.

 

I am almost there, but have been complaining to Egg about the very high interest rate they have been charging on the balance. This led me to look at the history of interest rates on the account and I found that they raised the interest rate significantly 1 month before cancelling the card. Coincidence?? Well, I spoke to a couple of other ex-card holders. Guess what??

 

I would be very interested in hearing from any CAG members who also had an Egg card cancelled - and whether there was an interest rate increase shortly before the card was cancelled.

 

If there is enough evidence that a policy of increasing the rates on cards they were about to cancel was in place, there may be a case for taking this matter to the OFT. The OFT don't deal with individual claims - but can act if an organisation has operated in a way that might unfairly affect a large number of consumers. There was talk at the time of an OFT investigation - but I never heard anymore on the subject.

 

Many thanks

[MARTIN3030]

Good points I will move your thread.There are ongoing investigations I think-credit card charges and interest have been the centre of much focus in 2008

[Marlowe52]

Thanks Martin

 

I've subscribed to a couple of other threads - the MBNA great interest rate swindle was an interesting discussion and very informative. With Egg, the OFT promised an investigation - I will contact them and see where they got to.

 

Regards

[Mistermind]

http://news.bbc.co.uk/2/hi/business/7778218.stm

 

The government says anyone who believes a previous rate rise was unfair should take their case to the Financial Services Ombudsman Service which can order compensation to be paid if the increase was unjustified.

[MARTIN3030]

best to call them and request a complaints pack.

0845 080 1800

[thekat1979]

I'm waiting for my SAR from Egg - time is up early January. But my Egg card was cancelled. I only had a card for 2 years, and when I look at my CCA on their website it says I signed up in 2006 to an APR of c15.9%. I was still on that interest rate as far as I can tell until they cancelled my agreement - I'm still confused about this as they issued me with a card with a completely new number and it appears twice on my credit file), but the interest rate is now 26.9. Unlike you, I am NOWHERE near paying it off, I can only afford minimum payment and since they hiked up the interest rate, I am only paying off a coupe of pence from the balance each month, the rest is purely interest. Due to a load of charges being applied to my Barclays account, I've now had a late payment charge applied to my account and a failed DD so now I am over my limit and being charged each month for that and I cxan't catch back up again. I'm on Income Support and simply cannot afford a lump sum, but they are about to default me because of being over my limit persistently, but I'm only over it because of their charges. . My balance is more now than it was when they cancelled the card! Eeep! I'm just going to have to suck aup and deal with the default I think, as I can't do anything until they comply with my SAR so I can ask for any charges back. As I was never late before the last few months, no late payments at all, I should find it is only thefees they have put on recently which will reduce my balance by a small amount. Fingers crossed. Although thinking about it, they are the new charges of £16.00 so I probably wont be able to claim them back. May just have to suck up and deal with the default and hope I get a lump sum payment soon from somewhere!

[Mistermind]

Newstyle £16 Overlimit or Late Payment penalty charges CAN be reclaimed in full plus 8% p.a. interest, and Egg does not put up much resistance. Usually a sequence of 2 letters in plain English is sufficient when you have your itemised list of charges -- see V-E Day thread page 5, at the Egg top "Sticky threads" section.

 

Card companies have specifically agreed not to hike interest rates for those in payment distress. The scheme is due to start on Jan 1 2009, but retrospective reclaims will be handled by FOS, as per the posting 2 above yours. More likely just the mention of the FOS (each case costing Egg £400 win lose or draw), quoting the aforesaid new government arrangement should be enough to persuade Egg to cool it. As for defaulting yourself for nonpayment that would seem harder to resist.

 

Egg does not put up a stubborn resistance when you know which buttons to press, as learnt from others' experience. Good luck.

[thekat1979]

As for defaulting yourself for nonpayment that would seem harder to resist.

 

Thanks for that - not sure what you meant by the bit I quoted here, do you think they will default and if they do will i have a position which I can take to make them remove that from a CRA file if they file it?

[Mistermind]

Thanks for that - not sure what you meant by the bit I quoted here, do you think they will default and if they do will i have a position which I can take to make them remove that from a CRA file if they file it?

 

As Late Payment penalty charges are now reclaimable, Egg no longer has this as a persuader for those who do not keep up with minimum monthly payments. Themselve now hard up for cash, they have racheted up the threat (and practice) of issuing Default Notice to make an example of one to encourage the others. My impression from reading forum threads is that they have speeded up on issuing DNs.

 

Once issued, word from the front line despite brave talk, is that DNs are extremely difficult to roll back, so discretion is the better part of valour. If you reclaim asap all charges you are due (reclaim of unreasonaby raised interest level is a new fight for which there is no past form), and make a convincing case to Egg (e.g. income and expenses listing) that what you pay is all you can pay, Egg cannot sqeeze blood out of a stone. They want to be convinced, that issuing the DN cannot encourage you to pay anything more than you are already paying.

[Marlowe52]

Hi Kat1979

 

...and many thanks for sharing your case on this thread. I understand and empatise with your position entirely. Whilst I may have mearly cleared my Egg balance, I have several other debts that will take considerably longer to sort out.

 

Regarding the late payment penalties and Egg, I wrote and asked for these to be refunded. So far they have offered to pay the differnece between the £20 they were charging and the £16 they now charge - but no interest. I have declined their offer! I agree entirely with Mistermind - stick at it. There are many other threads here that I have found really helpful.

 

As Mistermind says, however, on the issue of interest rates "there is no past form". Mistermind is also correct in pointing out the recent government statements on this issue raise some hope and certainly, applying to the FOS (althouth this is not quick!) sounds a very good idea.

 

I'm still interested, however, in seeing how big this issue is. Here's the possible scenario. A credit card company has built up a portfolio of unprofitable (because the the holders don't use the card) and risky (because the holders are overextended) accounts. They decide to clear out this part of their portfolio - Fine, that's their call. Some would even applaud their action saying this is prudent and responsible partfolio management.

The trouble is - this portfolio isn't worth much - the unprofitable part is unprofitable and the sub-prime part (you and me!) may not be able to pay the balance off - we might even default. So what they might decide to do is increase the interest rate on the whole portfolio - say to a healthy 26.9% APR. There's no risk to them doing this. If the account holders don't like it, what can they do? Cancel the account - that was the whole point of the exercise. The unprofitable bit will just pay off in ful. They would know, however, the sub-prime bit won't be able to pay the debt off - so the increased interest rate is a nice way of revaluing the portfolio.

However, this pratice may be considered unfair under the Unfair Terms and Conditions legislation. It may be OK to reassess an individual's crfedit risk and argue the case that an increased interest rate is appropriate (I'm sure there will be much more to come on this argument!) - But a collective interest rate hike seems more difficult to justify - particularly if you are withdrawing the services offered!

 

The OFT are not set up to look at individual cases - that's the job of the Financial Ombudsman Service (FOS) - but the OFT (under a section of the legislation referred to as Section 8) can take action if the organisation concerned has acted in a way which affects the interets of a large number of consumers. If it could be show a credit card company acted in the way I have described then there would be a string case for teh OFT to act.

 

Sorry for the length of this posting - but I wanted to explain why I'm still interested in hearing from other Egg customers - not that I'm saying this is what Egg did of course - that would be libelous!

 

Good luck, by the way... happy to help if I can

[bathgatebuyer]

Hi all, I checked my statements last night and it appears that the last interest rate rise I had was in Dec 07 prior to the closure of my card in Feb 08. Looks as if it went from 16.9% to 21.9%. The cheek of them Will certainly be raising this with them, and ultimately the FOS if need be.

Edited December 19, 2008 by bathgatebuyer

[Marlowe52]

Thanks bathgatebuyer!

 

This certainly seems to be the pattern.... Any more CAGer's who can help with further examples??

[bathgatebuyer]

Marlowe, have you taken any action on this so far? Would it be best to go through the standard complaints form process with the FOS about this?

[militantconsumer]

How do you know they didn't increase the continuing customers' rates at the same time?

 

I have held an Egg Card for many years, which has never been cancelled. I have never paid any interest on the balance either, always paying off in full every month.

 

I logged onto my accounts but couldn't find historic interest rates. Mine is currently 10.9% variable.

 

I would be happy to try and find out my rates if it was useful to anybody.

[Marlowe52]

Hi Militantconsumer

 

Many thanks for your posting and offer of help. You raise a very good point about interest rates for continuing customers. However, I suspect at 10.9% APR you would probably have noticed a suddden increase of an extra 5% and at least been a bit worried about it even if, as you say, you pay the balance in full every month.

 

The limited evidence I have so far seems pretty consistent. ALL Egg customers that have contacted me had a 5% rate increase in December 2007 prior to a letter cancelling their cards in January - including myself. I suspect all of us were in the "sub-prime" part of the Egg customer portfolio. i.e. we had all made late payments at some stage and our credit ratings are poor. (I don't know this - so apologies for anyone contacting me where this is not true!).

 

I would be very interested to hear from any Egg customers who had their card cancelled and did not fall into this category. There was a strong suggestion, at the time, that Egg were clearing out unprofitable cards as well as "risky" accounts.

 

There is nothing intrinsically wrong (legally, at least - morally, perhaps!) with Egg operating a "risk-based pricing policy". Most card companies do so i.e. the less money you have and the greater your need for credit - the higher the charge for that credit will be. However, there is an interesting debate to be had (probably in Court) as to whether the actions of card companies operating such a policy have been "fair" under the Unfair Terms and Conditions Regulations (UTCCR's).

 

If you are a high risk card customer, you are penalised in two ways - firstly by penalty charges for late payment, overlimit balances or returned (bounced) payments. These penalties are allowed because, basically, you breached the contract. The charges, however, MUST be proportionate to the actual costs incurred by the card company resulting from the breach. This, of course, is the argument currently going on in Court over bank charges.

 

With credit cards, the Office of Fair Trading (OFT) investigated the charges back in 2006. Their conclusion was that “On the analysis we have undertaken we have concluded that generally credit card default fees have been set at a significantly higher level than is fair for the purposes of the UTCCRs.”. The OFT went further to suggest that a charge of £12 might be a "guideline" figure for such charges above which there may be a case for complaint. Most companies have, therefore, redued their charges to this level (except Egg who reduced its charges from £20 to £16!).

However, the second way high risk customers are penalised is through increased interest rates ("risk-based pricing"). i.e. if you default - or there is a risk you might default, the card company can cover its costs by increasing the interest rate on your account.

But here comes the rub! The OFT is very clear in its guidelines and cautions card companies against "double recovery". In section 3.18 of the 2006 guidelinesit points to benefits "arising out of operating a risk-based pricing policy". It goes on to say that "A credit card company should ensure that there is no duplication between such benefits and the money recovered by way of a default charge." i.e. in assessig the "fairness" of default charges the OFT believes the Courts should take into account other measures - such a rate increases for high risk customers.

The question is really whether Egg acted "fairly" in applying a 5% rate increase to customers - knowing they were about to cancel their cards. I suspect Court action to prove the case one way or another would be very long and difficult. Hence a referral back to the OFT to investigate might be the only option here for collective action.

Regards

PS - Still would like to hear from other Egg customers!

[militantconsumer]

I called Egg to find out my historic interest rates. Here they are:-

 

June 2000 - opened account - 16.9%

September 2006 - rate changed to 9.9%

March 2007 - rate changed to 10.9%

 

As I have never made a late payment, gone over my limit or had any other penalty charges, and I was NOT one of the customers whose account was closed, this would suggest that Egg Card chose to raise the interest rates for the so-called "sub-prime" customers but not for the customers they wanted to keep.

[bathgatebuyer]

marlowe, thanks again for all that info. In practical terms moving this forward, what are we going to do?

 

Do we all individually write to Egg, get responses and then go to the FOS? Or should we do a mass complaint al signed by the individuals concerned? Or can we go straight to the OFT with this?

[Mistermind]

http://www.consumeractiongroup.co.uk/forum/egg/172952-january-1st-government-deal.html

 

The OFT make industry-wide pronouncements based on industry-wide research, so they take an inordinate amount of time to do anything. The government have now pulled the card companies in line effective Jan 1, but retrospective claims for rate reduction and compensation will also be handled by FOS who are better equipped than OFT for this.

 

The nub of the question is, what will FOS rule as an unfair interest rate rise?

 

Is it a rate rise which cannot be parried by cardholders without the money to pay off the outstanding balance? Is it a rise even as inflation and BOE Base Rate stayed constant?

 

To gauge the lie of the land, cardholders could do with a history of fluctuating Egg rates, for themselves and for others.

[thekat1979]

I should hopefully find out how my interest rate has increased since opening the card when Egg finally reply to my SAR. There 40 days is up today, and I've had nothing. Will send an LBA to them early next yer = 5th Jan probably, to allow them a couple of days extra 'cos its Christmas!

 

I know when I opened my account in 2006 my APR interest rate was 15.9. It currently stands at 26.9, which is almost double. When they cancelled my card, I hadn't missed ANY payments at all, was proud of the fact that I had a card I WAS keeping control of, and was determined to stick to it. The new interest rates though have completely ruined that, I now have late payment markers on my credit file. I can only afford the minimum payment, but often that isn't even enough to cover the interst charged on the account!

 

Once I get a reply to my SAR I will let you know when my interest rate increases were changed.

 

I'm up for anything with regards to this, so just point me in a direction and I'm off1!

[militantconsumer]

Well, if you can believe what Egg told me this morning, you now have 8 years and six months' worth of fluctuating rates for a "normal" customer.

 

Nothing to stop somebody making a complaint to the FOS about an unfair interest rate rise on their own account.

[Mistermind]

I should hopefully find out how my interest rate has increased since opening the card when Egg finally reply to my Subject Access Request. There 40 days is up today, and I've had nothing. Will send an LBA to them early next yer = 5th Jan probably, to allow them a couple of days extra 'cos its Christmas!

 

I know when I opened my account in 2006 my APR interest rate was 15.9. It currently stands at 26.9, which is almost double.

 

Egg monthly printed statement shows the debit interest rate applicable that month, and you will get these if you paid £10 for the fullblown SAR, i.e. a pile of papers one inch thick.

 

But if you had paid £5 for Egg's list of itemised charges only, I am not sure if that version will say what the prevailing interest rate was. I am not sure that version would even list the monthely interest charged, say "£x.yy interest at 2.1%". Many CAG members received the £5 version, so they could confirm. Until now nobody that I know of retrospectively challenged the debit interest accrued on purchases.

[thekat1979]

I've asked for the £10 one. So we shall see.

[Marlowe52]

I think a multipronged attack is the way forward. I have already written again to Egg requesting repayment of ALL late payment charges pointing out that the interest rate increases they applied were effectively additional default charges and that their defence of the £16 charge looks a bit shaky.

 

Once I get their reply I intend to raise a compliant to the FOS about the interets rate rises (I'm assuming that, as with other compliants to FOS, you have to show you have tried to resolve it with the company first?).

 

In the meantime I will write to the OFT asking them what the outcome was of any investigation they did when Egg cancelld the cards and suggesting they have a obligation to investigate the 5% interest rate increases under their powers covered by Section 8 of the Enterprise Act 2002...

 

Worth a try!

 

PS Merry Christmas and thanks to everyone on this forum. Throughout 2008, it has been a great source of inspiration, good advice and a huge reassurance that I am not alone and that a lot of people do actually care!

[militantconsumer]

Hi Marlowe,

 

Have you seen this thread:?

http://www.consumeractiongroup.co.uk/forum/egg/136848-termination-egg-credit-card.html

 

I think you will be interested.

[militantconsumer]

Hi Marlowe,

 

Have you seen this thread:

http://www.consumeractiongroup.co.uk/forum/egg/136848-termination-egg-credit-card.html

 

I think you will be interested.