Are credit card rates illegal?
March 15, 2010
It was announced recently that the Bank of England base rate was being kept at its all time low level of 0.5 percent for the twelfth consecutive month, and this news will have been welcomed by many consumers who have been hoping that their borrowing costs would not rise.
However, despite the all time low base interest rate credit card interest rates are said to have soared and have now reach their highest level in over a decade, with the average rate coming in at 18.8 percent.
There has been outrage and concern over the huge gap that now lies between the average credit card interest rate and the base interest rate. One report has now suggested that the level of interest that credit cards are charging consumers on their borrowing could even be illegal, and that because of this card providers may have to reduce interest rates and in some cases even make refunds to borrowers.
The last Consumer Credit Act was brought in two years ago, and lawyers have said that there are parts in this Act that could mean the level of interest being charged on credit cards is actually illegal. Lawyers have said that the rules of the Act are not well known by consumers, and that card providers are terrified that someone will realise that they may have a case and may take the card provider to court over the level of interest being charged.
One consumer credit lawyer stated: “Bank executives are terrified that someone might take this to court and win, opening the floodgates for millions of other card holders.”
”In a test case in 2001, a court established that the lender would have to show they had not acted unreasonably. But the 2008 change brought in a rule preventing lenders imposing an ‘unfair relationship’ with their borrower.”
”The old curb on credit charges said consumers could only contest them if they were ‘extortionate’. The onus has moved to a situation where it’s up to the card provider to prove they are not being unfair – and there appears to be a strong argument they are when the base rate is so low.”
Written by Peter · Filed Under News Credit Cards
I recently received yet another interest rate rise on my Halifax One account and remembered that a few months ago they jacked my rate up by 5% in one go. I decided enough was enough and wrote a letter to complain. I then received a call from them where they agreed in a matter of seconds to roll back my rate to what it had been last August! Today I notice that £173 in interest has been credited to my account. It just goes to show that they are trying it on and unless anyone objects they just get away with it. My guess is that they are banking on the fact that most people will just accept this on the chin without a fight but clearly they have a policy to deal with anyone who complains very swiftly to avoid a wider public outcry. They did seem very wary when I asked them to confirm everything in writing as clearly they would prefer to handle this in a call without anything being recorded in case the press gets hold of a copy of this instant u-turn in a letter.
I hope someone hammers this home and they have to repay billions in over charged interest