Interest Rate Action

This is the collection of five blogs on the subject:

Immoral Interest Rates
Interest Rate Action 1 of 3 – Complain
Interest Rate Action 2 of 3 – Complain
Interest Rate Action 3 of 3 – Complain
Interest Rate Action – Don’t Forget Your MP

Immoral Interest Rates
July 30, 2008 by debtcontrolman

What are interest rates? Yes, of course, they are percentage charges levied against the borrowing of money. But that is not actually what I am getting at.
My question perhaps should be: What are honest interest rates? But how to sort that one out?
Well there are one or two pointers. Take for example the position of observant Muslims. They regard the charging of interest as immoral and do not do it, just as they are instructed in The Koran. But they still lend money and some make a living from doing so.
Jews and Christians are equally warned against usury in the Old Testament of The Holy Bible. And the truly observant ones avoid lending or borrowing at interest.
Indeed that great book also has no truck with harsh loan conditions at all. Where, for example, a poor man has pledged his coat against a loan the creditor is told he must return it overnight so the poor man may be kept warm.
Clearly an attitude foreign to our western credit industry and specially to many members of the credit card fraternity.
I am raising this because yesterday the Daily Mail revealed the disgusting behaviour of a number of credit card companies in raising their rates to levels that cannot be defended
In Biblical Terms this is usury—as the Oxford English Dictionary puts it this is the practice of lending money at exhorbitant interest. It also defines it as ‘higher interest than is allowed by law. Unfortunately it seems the law in England and Wales at least has little to say on the matter and the regulators even less.
But what figures are we talking of? Well the wholesale loans which the banks take on have interest rates which normally relate to the Bank of England Rate which is normally announced By Mervyn King, Governor of the Bank, each Thursday.
Currently it is somewhere over 5 per cent. In the interbank settlement each night the Banks and other institutions—who must balance their books—borrow from the specialist Discount Houses at rates pretty close to that level (unless there is a short term liquidity crisis). And generally, unless the financial institution is in meltdown, as Northern Rock was, they can find funds at a reasonable rate.
So, bearing in mind that the Credit card operations have to pay for staff and premises and sophisticated computer systems and so on, it is resonable for them to add a bit to the interest rate if they are not going to levy charges. So would we say an extra 5 per cent; let’s be generous and say seven.
So I judge a reasonable and maybe honest and moral interest charge at 12%—but let’s be even kinder and say 12.9%. That, by the way, is about 1% a month.
However, greed having no known limit, it seems MBNA is charging at up to the rate of nearly 36%, that is around 3 per cent a month. And about a third of card holders have had their rates raised in the past year by issuers Egg, Capital One, Lloyds TSB and Barclaycard, according to the Daily Mail. A monthly rate of 2% equals around an annual 24%. Should the rate be more than 18% [1.5% monthly]?
One little trick to pretend they are doing nothing at all is to stop showing the annual rate on the monthly statement, and just show the monthly. Since it is well known that most of us are not very numerate they are relying on our ignorance to deceive us. Dishonest I say. Especially as they most certainly do impose charges.
I also ask where are the regulators.
Well, I want you to do me a favour. Come back here and I am preparing some instructions for what you should do about it. If I can I will put the first up tomorrow. So in the meantime gather pen, paper, envelope and stamps.
Let’s start a borrowers’ revolt.

Joseph Harris
Debt Control Man

Interest Rate Action 1 of 3 – Complain

July 31, 2008 by debtcontrolman

Creditor Complaints Procedures and FOS

We have got so used to being told what to do by big companies, and have placed so much trust in them that it comes as a shock when we find their feet are of clay. Similar to the day we realised our parents do not know all the answers to everything!
So realising that the credit offering companies are more concerned with their profits and bonuses than with our needs is a bit of a culture shift. Alright I exaggerate a bit – but not as much as you might at first think.
The question then is what to do about it.
We have more power than you might think in this. And that power is in complaint. Not at the pub across a pint of beer, or in bed at night to our partners.
To be effective complaint has to be focused and clearly thought through. So let us start with the companies’ own complaints procedures.
We start there because it may be that we can get a quick result, and save the further effort. But don’t count on it!
There is a second reason. Only after we have completed that procedure can we take the issue to the Financial Ombudsman Service (FOS); and this latter is worth doing.
If you are being charged an interest rate that is higher than 18% a year on a credit card [that is 1.5% a month] or than 9% for a term loan, or 18% on direct mail you do, in my opinion, have cause for complaint about that interest rate.
Even those cut off points are high rates to me, but we have to find points that are not themselves going to be cause of argument. Anything above these levels while Bank Rate is below 6% is usurious, and therefore immoral in the terms accepted by three major western religions for thousands of years.
Somewhere on your statement should be information about the complaints procedure of that company. It is a requirement for all members of the Banking Code and even non-members are expected to conform by the FOS.
The main points to get across about any sharp upward change in your rate at any time recently is that it is unfair and unreasonable. ‘Unfair’ is an important term in the Consumer Protection Regulations 2008 and the test of reasonableness is basic to British law.
You will need to make sure you put both the old and new interest rates in and point out that Bank Rate has not increased by even one percent in the period and therefore there is no case for this force majeure change to the rate charged to you. In part you should remember this letter will form part of what the FOS will work from so it needs clear information in it.
Send this letter off and wait for the answer. You should get an acknowledgment and usually about eight weeks later a final response.
If the final response does not reduce your rate to a sensible figure you send a formal complaint to the Financial Ombudsman Service. This will take a long time because the service is terribly overloaded already. But wait patiently and you should get a positive response. The FOS has the power to force the creditor to change the rate and/or make the company pay compensation.
Get the appropriate forms from the FOS website.
A lot of such complaints will encourage the FOS to raise the matter with the regulators.
See also the next two blogs I am preparing Interest Rate Action 2 of 3 – Complain which deals with contacting the Office of Fair Trading and Interest Rate Action 3 of 3 – Complain Which deals with the Financial Services Authority.

Joseph Harris
Debt Control Man

Interest Rate Action 2 of 3 – Complain

August 1, 2008 by debtcontrolman

The Licence and The Regulations

The Office of Fair Trading (OFT) is responsible both for licensing operators in the credit industry and for the development of the Consumer Credit Regulations 2008. Both these are very important to us.
There are two licences, the Consumer Credit Licence and the Business Credit Licence. My concern is with the consumer variant, though I imagine the differences are of detail rather than principle.
Credit Licence. No company may be involved with lending or recovery without a licence, and no person may offer personal advice without being covered by one. And the OFT does revoke licences, so the terms of the licence are important.
It is worth writing to the licence section of the OFT complaining of the hike in rates that you have experienced and again using the terms unfair and unreasonable. If you want to specify any particular part of the licence you feel has been breached it is worth going to the OFT website and reading the guidelines. But it is essentially enough to point out this action is a misuse of any powers the company has, and the matter needs to be examined by the OFT.
Any complaint is taken seriously by them, but a lot of complaints is even better!
Regulations. The regulations arm of the OFT is very concerned with the concept of unfairness in relations between companies and customers, and this applies right across the world of business activity, not just finance.
It does recognise unfair advantage as being a very bad thing for companies to make use of. The Consumer Protection Regulations 2008 are pretty comprehensive and have 31 practices that are out and out considered not acceptable, and has a deal of other regulation with the emphasis that the regulations are not limited to the letter of the paragraphs but are concerned with the spirit of them.
This is a tremendous advance on petty legal approaches; it means that companies are expected to acknowledge a moral sphere to their actions. Not just what the words say, but the underlying meaning too.
In contacting this section you should emphasise that the company has taken unfair advantage by its force majeure imposition of an interest hike that is not justified by anything you have done, nor by any national change in interest rates.
The address of the OFT is
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4 8JX

Mark the outside of your envelope Credit Licence or Regulations 2008 and the letter will find its way to the right section. You will probably get a letter back saying the OFT does not deal with individual cases, but that the complaint has been logged on their records. And that latter is what you want.
The more the better.
See also Interest Rate Action 1 of 3 – Complain which deals with the complaints procedure of the creditor company and Interest Rate Action 3 of 3 – Complain Which deals with the Financial Services Authority.

Joseph Harris
Debt Control Man

Interest Rate Action 3 of 3 – Complain
August 3, 2008 by debtcontrolman

Financial Services Authority (FSA)

The FSA has considerable powers in the financial world, and as the eight recent arrests to do with insider information trading shows does bite as well as bark. While for immediate consumer/company relationships the OFT is the main regulator, the FSA is more concerned with the policies and how the policies are employed.

In my opinion if the FSA is made aware of the imposition of vastly increased interest rates on customers who have done nothing to merit any change at all it will examine the companies acting in this way in fairly minute detail; my euphemism for possibly threatening them with major legal action. My opinion let me make clear.

To bring that about the FSA must receive a lot of letters complaining about the practice so it both knows it is widespread and can see which companies are engaged in this unfair practice.

So why should this body help our cause in getting sensible interest rate limits set? Well, in its High Level Standards, the FSA has some clear pointers as to the attitudes a company should have.

For example no.6 says ‘A firm must pay due regard to the interests of its customers and
treat them fairly.’ No equivocation. Notice again that word fairly.

Seven talks of communication and that it must do this and in a way that is ‘clear, fair and not misleading.’ The next standard tells the company to ‘manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.’ No excuse for not being aware of the effects of an action in its customers!

No.9 is very interesting. Although it may be mostly aimed at the investment arms of banks it nonetheless is a clear message for all the activities of these institutions. Here is the whole sentence: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

There is also the FSA’s Statements of Principle and Code of Practice for Approved Persons. Just glance at some of the expectations in the seven statements of principle.

‘An approved person must act with’
-due skill, care and diligence;
-take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function is organised so that it can be controlled effectively; and
-must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the relevant requirements and standards of the regulatory system.

So the letter needs to be very similar to the one to the OFT, but this time we are challenging the way in which the business is run in relation to the duties in forming and carrying out policies. Once again the question of fairness plays a big part, but here we can also ask if due care is being exercised, if the interests of customers are being fairly assessed and acted upon and if the decisions that have brought this about are within the expectations for an approved person.

You should write to them at:

Financial Services Authority
25 The North Colonnade,
Canary Wharf,
London E14 5HS

Joseph Harris
Debt Control Man

Interest Rate Action – And Don’t Forget Your MP
August 5, 2008 by debtcontrolman

The Legislators And Others

To really get some action on all this and to start a real scrutiny of the behaviour of the credit industry we need to stir a lot of people up. This includes the people we elect to parliament, the bodies active in the field of relations between companies and customers, such as Citizens’ Advice, and special interest groups such as Age Concern, Mind and those other countless organisations that do so much to help people at a disadvantage. The regulators I have dealt with in the previous Interest Rate Action articles.

Most of these will be those that you think can make a difference, or already have contact with, or have long thought you ought to have contact with. And they will want to have a fairly clear idea of the nature of the problem and how it affects you and what you think it affects many others. In other words why they should spend some of their hard-pressed time on it.

In this group I think you are best placed to work our how and who to contact and to sort out their address.

I will here only offer a few words of advice about contacting your Member of Parliament. Now although we like to be rude about them and may have views about some activities, I believe it is true to say that practically all MPs are conscientious and concerned to help constituents.

But they are busy people and concerned with the whole gamut of legislation. So it is important to offer as much clarity as possible in writing to them.

It is also true that most of the legislation they are involved in passing has large elements of rubber stamping EU directives. Whatever your opinion here it happens that the EU is a motor for more fair legislation and regulation. So in our matter of over-high interest rates this works for us!

Just now of course there is high activity and diversion for MPs in England and Wales as the Labour MPs wonder is they can hold on to their seats, and Tory MPs joust for potential office; LibDems have equally busy calculations and preparations to make and worries of being squeezed.

All good grist to our mills as they will be concerned to gather in votes with popular and not politically contentious activity.

Address them by name if you know it, or

To the MP for …….. Constituency
House of Commons
London SW1

And if you don’t know your constituency contact the council or the local paper.

If my chief purpose was this campaign I could go on with address after address to contact to make this matter high on the public agenda.

But I am interested in helping people already facing debt disaster. In this particular matter of suddenly higher interest rate charges and unmerited fines and penalties, my concern is to stop people being pushed into disaster by unfair, unreasonable and immoral behaviour.

Joseph Harris
Debt Control Man

2 Responses to “Interest Rate Action”

  1. BigBan Says:

    Oh, Thanks! Really funny. Greets.

  2. BigBan Says:

    Oh, Thanks! Really interesting. Big ups!

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