The Great MBNA/Virgin Interest Rate Escalator Trick

[phatram]

Can anyone make up anything up to fit this,

C.R.O.T.C.H?

[MacBoy]

Card Rip Off To Cause Havoc?

[phatram]

Very good Mac

[banker_rhymes_with]

Card Rip Off Toasts Consumers Hard Earned Dosh?

 

But this New Revolt does need a good name so, if we can agree on one that will do the trick, one that preferably annoys them too, that would be excellent

 

I'm sure MacBoy won't mind if we keep the suggestions coming until we find the best one.

 

A bit of humour does no harm, and will help to draw Media Attention into the bargain! That'll help to spread the word. The sooner this news gets out and people start to realise they are not alone, the sooner the bankers will have to stop hiking rates in this disgraceful way.

 

Suggest we run with the best name when all agreed we have found it!

 

Once we stop them doing it in the first place, then we can start on getting the worst of the rates reversed and/or claim back refunds on excessive and unjustified levels of interest.

 

We clearly need to extract this particularly nasty Self-Licking Lollipop from their grasping hands.

 

In case anyone thinks this may not affect them, here's a quick reminder (I'd advise you to be sitting down when you read this):

 

1.3852% Monthly = 17.95% Annual

1.4566% Monthly = 18.95% Annual

1.8735% Monthly = 24.95% Annual

2.5292% Monthly = 34.95% Annual

 

Check your Monthly Statement NOW and see where your Monthly Card Rate slots into the above Table. It may well shock you, for which I apologise. But now you may begin to understand why many crafty bankers switched from stating this as an Annual Rate in favour of a less obvious Monthly Rate. It was just a Card Trick.

 

That's why I didn't notice the 7% jump in 2004, but sure did notice the 10% jump in 2008, as by then I was aware of the true cost previously hidden by seemingly low Monthly Rates. I had woken up.

 

Cheers,

BRW

[alvinlwh]

Personally, I just clear my balance on any MBNA issued cards and get over with all these grief.

[banker_rhymes_with]

Hello alvinlwh!

 

Personally, I just clear my balance on any MBNA issued cards and get over with all these grief.

 

Wish we could all do the same, but I'm sure that is what we all wish we could do!

 

One day, maybe we all will!

 

Cheers,

BRW

[loz]

If only I could find £2k to clear my balance...

[alvinlwh]

Actually I just thought of a letter to write to them, since the letter arrived at the beginning of April.

 

Dear XXX

 

I refer to your letter dated ?? April that arrived on 10 April, the same day that Bank of England announced a cut in the base rate. I assume that the ridiculous increase of 9% in my APR is just an April Fools joke and I can just ignore it.

 

Please clearify the matter.

 

Yours....

 

:D

[alvinlwh]

But now you may begin to understand why many crafty bankers switched from stating this as an Annual Rate in favour of a less obvious Monthly Rate. It was just a Card Trick.

 

I thought they are required by law to provide the APR? Which happens to stand for Annual Percentage Rate. Something to take them to court over?;-)

[MacBoy]

alvinlwh

You are correct that lenders are required to declare an APR. However, what b_r_w is getting at, is that they play this down when dealing with customers and give higher profile to the monthy rate because it's a lower number

[phatram]

May I suggest that we start to bombard our MP's with this information.You can find them at the following sites,

TheyWorkForYou.com: Are your MPs and Peers working for you in the UK's Parliament?

 

WriteToThem - Email or fax your Councillor, MP, MEP, MSP or Welsh, NI, London Assembly Member for free

[Sparklez30]

This is a very interesting thread. I've just realised my Cahoot card was altered from a monthly fee of around £16 with no interest (as I signed up for) to a variable rate from 2006 and has been hiked up over the past few years so I am now paying interest at well over double my previous agreed charge!

 

Never noticed back then but upon receipt of my SAR details have spotted it and am disgusted! I have also written to them asking for a refund back to the original rate as I feel such a fundamental change should have involved new contracts as there was a clear choice between the two options when I signed up. Doubt I will get anywhere with it however but I don't see why I should take it laying down.

 

Mine however is not in response to any reclaiming as I have only just started that, I think its simply profiteering on their part.

 

I do believe rate rises should be looked at by the regulatory body as what is to stop them raising rates to 50% plus when they know there is nothing you can do about it cause you can't pay them back?

[phatram]

What about a mass complaint to,

BBC - Consumer - TV and radio

[banker_rhymes_with]

Hello All!

 

WRT Sparklez30...

 

Never noticed back then but upon receipt of my S.A.R - (Subject Access Request) details have spotted it and am disgusted!

 

It's a disgrace, I also did not spot the significant Rate rises, as it was effectively disguised when they elected to use a Monthly Rate. I think this is a major issue, and the more people that go back and check their Card Rates, the better. Just to remind people what to look for:

 

1.3852% Monthly = 17.95% Annual

1.4566% Monthly = 18.95% Annual

1.8735% Monthly = 24.95% Annual

2.5292% Monthly = 34.95% Annual

 

I'm pretty sure I had an MBNA Card Rate Jump in 2004, to get me lined up for an MBNA Loan with PPI Offer in 2005. They ramped my Card Rates from around 17.9% to 24.95%, and I just never really noticed. There was no reason for this, as my Payments had been regular for many, many years. So, I paid many a day or so late, but always did. They never moaned at me.

 

Looking back, I can now see it was just part of a Longer Term Strategy for my Card.

 

In 2004, for no reason that I could see (then), the Rate shot up. Then, in 2005, after that 24.95% Rate was starting to bite after about a Year of being penalised by it, I was offered a Loan with PPI from the same people. The timing was perfect.

 

So, whilst Loans are one reason for this Rate Ramping, I think the real reason for Rate Ramping is because this is just part of a Long Term Strategy. Their aim being to Milk the Card while Engineering it into a position when the Balance is significant and stops going down.

 

Why?

 

Well, it's clear that Engineering a Card to that stage means it becomes a Cash Cow for them. Likewise, despite many Years of Payments, it will no doubt end up with a nice fat Debt balance as well. Think about that for a minute...once the Card is close to the Limit, they virtually stop spending any more money. Minimum Payments keep the Debt high, and every Payment you make from that point eats away at their Core Debt and steadily changes the ratio of Actual Core Debt to Paper Debt (Interest, Charges and Excess Interest from Rate Ramping). Thereafter they Milk it with little or no further outlay. The sinister aspect is they want the Paper Debt to grow and grow as well, so will keep increasing the Limit too.

 

There are three reasons for them wanting a high Paper Debt:

 

(a) A big fat Paper Debt looks good on their Balance Sheet, and can always be written off against Tax should the Debt turn sour (which they know it will eventually)!

 

This means it is sitting in the background ready to be used to write off against Tax when the debtor struggles and wiggles in the Debt Net towards the end.

 

(b) A big fat Paper Debt looks attractive to Debt Collectors!

 

A DCA will pay maybe 10%-25% to Buy it. So, the larger the end Debt Balance, the more Hard Cash a DCA will Pay them to Buy it.

 

© A big fat Paper Debt suggests the Debtor is an irresponsible cretin who has clearly spent a huge sum. The OFT, Information Commissioners Office, TS, Police and Judges will all see this in a bad light, and will have little or no sympathy for the fool.

 

So, once they have Milked a Cash Cow Credit Card for maybe 5-10 Years, they've earned a lot of Interest, and have not really paid out a great deal in comparison to the final level of Debt.

 

The whole point is that this Strategy has to come to an end. It cannot go on for ever, but they will try to keep it going for as long as possible.

 

Whilst they will try to Milk the Card for many Years, all such manipulated Card Accounts (with very few exceptions) will reach the End Phase, it's just a question of when, not if.

 

End result: just as the Card Cash Cow's Nipple runs dry, they move straight on to wrap it up with a final Rate Ramp. The Account is now ripe for the End Phase Tax Write Off and Debt Sale. The final Rate Ramp is to force the debtor to miss Payments and/or Default on the Debt. They would be right in assuming that most debtors will not know about the Consumer Credit Act 1974 and be aware of the akward issue of them needing an Enforceable Agreement to hand to the DCA.

 

They know the System is on their side, and no matter what the pip-squeak debtor comes up with, they can still press on and Default and Sell the Debt to a DCA. Even if that does not work out, the Tax Write Off is going to make up for any problems Selling the residual to a DCA.

 

WRT Phatram...

 

What about a mass complaint to,

BBC - Consumer - TV and radio

 

I think that could be a good idea. More so if people can set out their own figures to show how their Card Debt grew. Highlight Rate Rises and Credit Limit Rises, and also Highlight all Penalty Charges as well.

 

I think this could be better presented in the form of a coloured Graph, i.e. showing the Core Debt v Interest/Charges Debt mix over the Years, with annotations as this grows to show when Limits were raised, Rates were Ramped, and perhaps with some other Marker that showed any Loan Offers that popped up 6-18 Months after a Card Rate Ramp.

 

I'll try and put all of my own figures into a Spreadsheet to see if I can generate the visual Summary that I have in mind. Something elegent that you can take one look at, and see how the Card Account has been inflated and manipulated from Day One until the End Phase when the rapidly inflated End Stage Debt is Sold off to a DCA!

 

It's no coincidence that all such Debt Balances shoot into orbit at the end.

 

I hope this helps, any comments welcome.

 

Cheers,

BRW

Edited May 8, 2008 by banker_rhymes_with
Clarity

[phatram]

Extortionate Credit

 

London North Securities Ltd v Meadows (2005) which was confirmed at appeal, where the lender charged £50 for every arrears letter and added this to the loan balance, which was being charged at 36.9% APR. It was held that this was extortionate since the charges levied did not represent the lender's costs over the arrears. However, the original loan was held not to be extortionate.

 

To me, if 36.9 % is extortionate, so is 34.9% !

Edited May 12, 2008 by phatram

[banker_rhymes_with]

Hello All!

 

I'm plodding though a plan to try and show my Card's cash flow history over a decade or so, and it's not a pretty sight.

 

In bald terms, even starting off with a high Credit Limit that I took near the Limit fairly early on...any hard Cash they Paid out was fully covered within 2-3 Years. Plus I still owed the Full Limit at that point.

 

I think the first Rate Ramp kicked in when they had recovered their outlay, and had Milked the Card for a Year or so afterwards to make sure.

 

After that, it was a clear Strategy of Limit increases and Rate Ramps to get the Limit ever higher and me operating at close to the Limit at all times.

 

Actual Cash out following a Credit Limit Increase was always fully recovered by them within 2-3 Months of a Credit Limit Increase, after which they were back on the Milking Phase for the next 9-10 Months...and beyond!

 

I also feel that some of the UK Banks are probably less guilty of Rate Ramping, but for one reason only...they usually also earn money from the other side, i.e. from Retailers. The PDQ Machines earn them between 1.5% and 5% every time Punters Spend and Pay via one of their Merchants.

 

So, UK Banks want lots of Cards that are comfortably at their Limits, but don't push them too hard.

 

Whereas, the import Banks, who have almost zero presence in the Merchant Facilities sector want all they can get from the Card Holders, so are more prone to blatant Rate Ramping and rapid Credit Limit increases.

 

It's a bit like Farmers...the old money-grabbing Traditional Farmer with a Tweed Cap that can Milk a Cow for 30-40 Years 'till exhaustion, and the more modern Intensive Farmer with a Cowboy Hat who gives his Cows Drugs and Boosts to go for maximum Yield and to hell with the life-expectancy of the Cow. Milked to Death in 10 Years...but boy does he see some Milk! And he gets to sell the Cow's Corpse for mega bucks as it ends up 1.5 times the size it should be!

 

Looking at all of my Cards over the Years, that seems to be a valid point. The UK Banks Milk more gently, but still Milk, whereas the Import Banks Milk like there was no Tomorrow!

 

This is what makes the Credit Industry's bleating about end stage Card Debt so nausiating. They point their chubby fingers at the Debtor, saying look at how much they owe, they spent it, they owe it.

 

...when completely overlooking the fact that over the Life of the Card, they have probably received 3++ times back anything they ever paid out, and they still end up with an inflated End Stage Debt as well.

 

Let's not forget that they would also have earned interest on any Cash coming back in via Minimum Payment in excess of Interest each Month, so you can see how a single Credit Card can earn them a small fortune. Add to that any opportune Loans plus PPI they can Engineer into the mix and it all looks very grubby and sordid indeed.

 

I think I will take my Cards outside and shoot them.

 

Cheers,

BRW

[loz]

I have a response from MBNA:

The factors we consider in such reviews include the way in which an account has been managed over a period of time ie. the number of late payments on an account. We also consider information provided by external credit bureaux.

They are basically admitting that if they see somebody has had some financial problems (usually the cause of late payments etc), their response is to make things worse - hence my new rate of 34.9%.

In my case there were a series of late payments because they brought the payment date forwards so that it fell on or before pay day. I've finally got that reversed but the damage is done it seems.

 

Loz

[banker_rhymes_with]

Hello Loz!

 

They are basically admitting that if they see somebody has had some financial problems (usually the cause of late payments etc), their response is to make things worse - hence my new rate of 34.9%.

 

That's it exactly. They absolutely do not give a Monkey's about you.

 

If you've had a Card for a long time, and they've ramped you up where they wanted you for several Years, then, once they see you wibble on Payments, they just assume you have reached the end of your productive life as a Credit Card Cow for intensive Financial Milking.

 

They are not about to prolong your financial life, ease your suffering or smooth your passing. They just regard you as being close to burn-out and so financially redundant. All they want at that stage is to ramp up the Debt as high as possible, to claw in any last Payments they can get, but mainly to boost the Paper Debt Value for their own Tax Write-Off and residual Cash Sale Value to a DCA.

 

Far better to push your Debt up a couple of thousand at the end, as then they get to save more Tax and also get a slightly larger Pay-Off when the greediest DCA Buys what looks like, to him, a nice fat Debt to buy and hound into submission.

 

Clearly, anyone stiffing you for 34.9% when you are having a hard time, just reveals what sort of a low life money-lender you are up against.

 

They know you have zero chance of maintaining that level of Payments.

 

They also know that 34.9% is just about high enough to shoot the final Debt Total into orbit without attracting too much attention from our tame Regulators.

 

It may be sobering to think of the 34.9% as being the Bolt between the eyes at the Knackers Yard for spent Cash Cows. Once they've spiked you with that, they do not expect you to come back to financial life again.

 

"Listen. And understand. That banker is out there. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fun. And it absolutely will not stop, ever, until you are broke..."

 

Cheers,

BRW

[loz]

Anybody any suggestions what my response should be? Or where I can get my hands on 2 grand to pay these bottom feeders off?

[phatram]

Looks like I'm getting my chance to challenge them in court !!

http://www.consumeractiongroup.co.uk/forum/general-debt-issues/122431-me-mbna-abbey-mbna.html

[Molesome]

 

How I've succeeded in putting a stop to it on my account

 

• Call the contact centre - remain calm and friendly at all times - try not to lose your temper.
  

• You will be put through to an operator. Explain that you are calling because you received an rate-increase letter and you would like to know the reason why (as the letter doesn't give this)
  

[...]

 

It is at this stage that they have backed down on every occasion.

 

Got the letter this morning stating increase from 15.9% pa to 29.9% pa and found this site almost immediately afterwards. Wrote down all my own details on a one-sheeter and sat on hold for 15 minutes.

 

Followed your script almost to the letter, and they followed their side including "current economic climate" which I countered with the recent rate cuts and attempts to stimulate growth, "across the board" which I said I looked forward to hearing about on the news considering the bad press Egg got for shedding it's high risk customers.

 

Brief pause for "account review" (I imagine a little help flag went up at this point in the call center) before the rate was verbally guaranteed to stay at 15.9% for the next six months. All told from reading the letter to getting that result probably about an hour spent out of my Saturday.

 

You guys are providing an invaluable (well, I could calculate what you saved me but lets not quibble) service here and I thank you.

[banker_rhymes_with]

Hello Molesome!

 

Excellent!

 

I just wish a better informed version of myself had been around to tell myself this when they Ramped my Rates over the last 30 years or so!

 

I never spotted the Ramp to 25%...nor the one to 35% until I wondered why money was getting tighter and tighter!

 

Hindsight! If I could only Bottle that up and Sell it.

 

Cheers,

BRW

[TrueMisterSix]

I am watching this thread with a great deal of interest (No pun intended!) - I too am the victim of Virgin/MBNA rate increases steadily over the last few years - I am now sitting on 34.95% APR.

 

my minimum payment (which I can barely afford to pay as it is!) is now barely paying for the interest - £141.78 bill against £116.63 interest, leaving only £25.15 to come off the balance; which is probably mostly made up of interest anyway!

 

My full strength support on this one!

 

Has anyone contacted them and followed the script some time after the last rate increase letter?

Edited June 29, 2008 by TrueMisterSix
Missed something out.

[loz]

I have my final response from MBNA - they repeat their claim that their 34.9% is a fair rate for the product and service they provide. They have quoted the T&C and basically told me to #^&$ off.

 

In the meantime I have been fortunate enough to have moved the balance elsewhere, so they can't rip me off any more, but this has left a very sour taste in the mouth

 

Is there anything to be gained from taking this to the FOS or whoever?

 

Loz

[lexis200]

Hope you don't mind me butting in on your thread, but it's not just MBNA/Virgin doing this...

 

In October '06 I had a lovely letter from Lloyds, informing me that "We are changing the monthly interest rate on your purchases from 1.094 to 2.210% (26.520% Simple Annual Rate) and on your cash advances from 1.496 to 2.210% (26.520% Simple Annual Rate). These changes are made under condition 17.1 of your Advance Credit Card Conditions."

 

I had had the accounts for about 7 years for one, and about 5 for the other. In that time I had run the accounts very well, albeit only making minimum payments (DOH DOH DOH). Unfortunately, a little while before they did this I became pretty ill and my OH had to leave work as he was taking too much time off to look after me, so our income had vanished. This was the icing on the cake.

 

My minimums now didn't cover the interest (how the hell do they get away with that:confused:), and as these were large balance cards this was catastrophic. The upshot was I obviously couldn't pay and had to go on a payment plan with them. Having had a cracking bit of advice from banker_rhymes_with in my thread, I will now be checking to see exactly what I've paid over the years, and then seeing about CCA'ing them.

 

I didn't get anywhere when I queried it though. The man was very nice and extremely sympathetic, but according to him it was an 'across the board' (bollards - my dad's card had no such increase) rise and was in 'no way personal'. Had I known about CAG then I may have had the bones to challenge them more, but sadly I didn't.

 

If anyone has any luck proving these are penalties and can be claimed back as such, I for one would be very interested!