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A New Record In Credit Card Interest Rates Is Set. How Long Will It Hold?

June 1, 2009

Credit Cards Thomas Mathew writes: Before I tell what happened to me yesterday let me first go back to July 2006: the Bank of England base interest rate was then 5.75 per cent. I received an unsolicited application form for a Vanquis Credit card that offered me an immediate credit limit of £250.00 with an interest rate of 69.7 per cent APR. I managed to establish that this credit card was being issued by Provident Financial Credit, which was a subsidiary of the Provident Bank Plc based in Bradford, Yorkshire. This bank was regulated by the Financial Services Authority (FSA).

In my opinion this was a classic case of loan sharking and as a result I wrote to the FSA and to my local MP, Malcolm Rifkin, pointing out that the rate of interest of 69.7 per cent was higher than the loan sharks in the East End of London were charging at the time. The FSA later informed me that they had noted my complaint but that it would not be investigating this matter unless at least another 1000 people wrote in to complain about the rate of interest in question. Mr Rifkin acknowledge my letter and thanked me for drawing the matter to his attention. I also wrote to the Provident Bank and received a response from the CEO who tried to justify this extortionate rate of interest by explaining that it requires an ‘enormous amount of investment to launch a credit card’. The CEO also assured me that my name would be removed from their mailing list and that I would not be sent any further promotional material.

Since then I have been sent no less than three further unsolicited application forms, which I binned. But yesterday I received an unsolicited e-mail from appl.creditcardsinstantly.co.uk headed with these words:
‘Get the power of credit. Credit cards instantly,’ accompanied by an image of a credit card. Written underneath were the words: ‘Let us match you with the perfect credit card. Click Here.’ Underneath, in much smaller type, was written: ‘This is an ADVERTISMENT. To be removed from the offer, write to: Credit Cards Instantly, 10300 W. Charleston Blvd, #13-409, Las Vegas, NV 89135.’

On turning the page in large lettering were the following words: ‘Get the Credit you deserve. EVEN IF YOU HAVE LESS THAN PERFECT CREDIT HISTORY. APPLY NOW. IT’S SIMPLE! Just fill out this form. First name, surname, email address. You can choose to describe your credit rating as 1. Excellent, 2. Good, 3. Fair, 4. Adverse.’

I was then told to SUBMIT. On the left hand side of the page were the words: ‘Let us match you with a credit card provider today!’

The next page it was headed with these words: ‘Apply on line – Provident Personal Credit. If you are interested in applying for a loan, please complete the application form below. A decision in principal will be displayed on your screen within minutes.’ Then on the left of the page were these words: ‘Example: Loan amount: £300, 50 weekly repayments of £10.50; Total amount payable £525 Typical 254.5% APR.’

If you went further you discovered that you are being offered a Vanquis Credit Card – the very same card that was offered to me in July 2006.

The current base rate set by the Bank of England is 0.5% which is 5.25% lower than it was in July 2006. Yet, it makes no difference to the rate of 254.5 per cent APR whether you choose to state your credit rating is Excellent, Good, Fair or Adverse. We should not forget savers at the moment are getting around 1-1.5 per cent interest on their savings. So what the people at Vanquis Credit Card are offering is simply insane. I would not be at all surprised to learn that the banks are lending the deposit money out through their credit card operations and are pocketing the enormous profits made from this kind of lending. So when will our politicians start to take action against these loan sharks?

I doubt very much that the toothless FSA even give this a moment’s thought. I would not be surprised to learn that the banks will claim that since the Usury Laws were repealed by parliament in 1854 they are free to charge interest at any rate they want and therefore would be acting legally and within the rules.

So, 254.5 per cent is considered quite acceptable by these people. I wonder what the 0.5 per cent stands for?

– End –

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One Response to “A New Record In Credit Card Interest Rates Is Set. How Long Will It Hold?”

  1. Chris Stubbs on June 24th, 2009 4:55 pm

    Interesting article….I applied for a Vanquis Credit Card as I understood my credit rating “required improvement”. I was told that the high interest credit card was an ideal product to help improve my credit rating. Interestingly, I was turned down because I did not meet their (unspecified) critera. Also, I was advised to resubmit an application in 6 months on condition that my circumstances have changed, Vanquis did not tell me what circumstances needed changing nor by how much.

    Let me explain what my circumstances are. I have just returned to UK after being away for 16 years. I have maintained a bank account (with Abbey) throughout that time. I have just applied to go on to the voters’ roll. I have no debts in UK. i have no credit history (which is why my credit rating is showing as “requires improvement”). I have just been approved for a high net worth private banking account with Nat West. Minimum qualification for that was an annual income of £75,000 or more.

    Vanquis did suggest I apply for the loans described in article. The usurious rates of interest astounded me. I don’t know how the bank can get away with this. I have not (and will not) apply for those loans, even though I am I need one to buy a car.

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