Chiltern Debt Management » credit card

Barclaycard declines half of applicants over debt problems fear

Nathan Cameron — Mon, 03 Aug 2009 10:20:13 +0000

Barclaycard is expected to announce that it is turning away more than half of people who apply for a credit card, over fears that they may have debt problems and would have difficulty repaying their balance.

As its parent company prepares to release their first half results, the credit card provider is widely tipped to announce that half of applicants are being refused cards as recession and debt management fears are stoked.

Over the last two months the credit card provider has warned around 11,000 cardholders, that they could be in financial difficulty, and the provider has admitted they may have to increase interest rates to reflect the risk associated with extending customer’s credit.

Antony Jenkins, chief executive of Barclaycard, said the company was moving more quickly to identify when customers had debt problems.

Rather than just becoming concerned when a customer was struggling to pay, they were now: “starting to look at when they used to pay us off in full and were now making only a minimum payment or their spending on the card is rising”.

Debt advice organisations suggest customers deal with their debt problems before they get out of hand and ask people with loans and credit card debts to watch out for tell-tale signs that debt problems may be starting to develop.

Ivan Cooper, Chairman at debt management specialists Chiltern said: “Signs that debt problems may be developing include using credit card debt to pay for fuel or food, going further into the red each month, or simply struggling to maintain all of your commitments.

“Quite often, we hear of people who juggle their finances and ‘rob Peter to pay Paul’. This just means that they use one credit card to pay for another, or use an overdraft or loan to repay other store card or credit card debts.”

Debt help firms can provide budgeting and debt advice to assist customers struggling with their unsecured balances (overdrafts, personal loans, store card and credit card debts etc) to become debt free.

Where necessary, debt advice organisations can also suggest a number of professional debt help solutions to help consumers regain control of their finances.

Professional solutions include Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs) and Trust Deeds.

Barclaycard declines half of applicants over debt problems fear is a post from: Chiltern Debt Management

Plans to cut US credit card debts

Nathan Cameron — Fri, 22 May 2009 16:26:47 +0000

New laws in the US that will make it deliberately harder for people to develop too much credit card debt, will be agreed today by President Barack Obama.

The new restrictions, that are to be introduced next February, will put an end to some of the practices currently employed by credit card companies which have been accused of encouraging debt problems.

Among the main changes to the existing laws are ones that:

• require that cardholders be told how long it will take, and the total amount of interest costs involved, in paying off a card balance if they only make the minimum payments each month

• stop arbitrary interest rate increases and “universal default” on existing balances. When an account is placed in universal default, a lender can change the cardholder’s account to more expensive “default” terms when the lender learns the account holder has missed a payment on an account with another lender – even if the cardholder has not defaulted with the first lender

• require that promotional rates must last at least six months and stop lenders from raising rates for a cardholder in the first year after an account is opened

• require any penalty fees to be “reasonable” and “proportional” to the cardholder’s violation

• stop issuers from charging fees for spending beyond their limits, unless the cardholder chooses to allow the issuer to process the excess spending, and restrict any “over-limit” fees

• and require that cardholders must get 45 days’ notice of interest rate, fee and finance charge increases.

Where the US leads the rest of the western world quickly follows, so the new provisions could end up helping those looking to get out of debt across other parts of the world too. Although according to Sandra Quinn of UK card association Apacs: “Many of the new US policies already exist in the UK under the Banking Code and have done for four years.”

She also added that Apacs will “watch to see how the situation in the US develops.”

People who are one month or more behind with their repayments however, are the exception to the new restrictions on rate changes.

American borrowers who find themselves in this position will continue to run the risk that their card provider could decide to levy a higher interest rate if they decide are now a bad risk.

This could increase their risk of developing further debt problems as they struggle to keep up with repayments.

Debt help organisations recommend anyone in the UK who is in a similar position, and is finding their unsecured balances difficult to manage, to contact them for some free and impartial debt advice.

Reputable debt help companies, such as Hamilton Locke, Chiltern and The Debt People, offer a number of professional debt solutions.

These include Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs), Trust Deeds amongst others. Debt Management Plans, IVAs and Trust Deeds enable repayments towards multiple unsecured balances to be gathered into one manageable payment.

For information on a number of debt help programmes, or for immediate debt advice, please call the number at the top of this page.

Plans to cut US credit card debts is a post from: Chiltern Debt Management

Credit card debt claims frozen by Judge

Nathan Cameron — Fri, 08 May 2009 13:23:38 +0000

A County Court Judge has frozen over 100,000 claims by indebted consumers who are trying to have their loans and credit card debts written-off.

He ruled that borrowers who were overwhelmed with debts are unlikely to be able to write-off credit agreements due to unenforceability.

The loophole in the law, which could make credit agreements unenforceable, has been exploited by some companies to offer a lifeline to people wanting to get out of debt quickly.

However, more than 100,000 claims currently being handled on behalf of overstretched borrowers have been temporarily put on hold, pending the outcome of “a few carefully selected” test cases in London’s Commercial Court.

This means that, until a judgement is made, indebted consumers will have to carry on repaying their loans and credit card debts.

Borrowers have also been warned not to fall victim to Claims Handler’s promises, made on their adverts which claim to wipe out credit card debt, alleging that contracts put in place before April 2007 are potentially unenforceable.

Daniella Lipszyc, a solicitor at Ultimate Law said: “The ruling by His Honour Judge Halbert is a landmark decision that will have massive implications on cases involving the enforceability of credit agreements.

“After a number of early wins, many claims management companies have jumped on the band wagon, promising desperate consumers that they can write off credit card balances.

“In reality, cases have simply ground to a halt as banks and lenders up their game and become more clued up on the Consumer Credit Act and subsidiary legislation. It’s now extremely inappropriate and misleading for any company to promise to write off balances in light of this judicial move.”

A more legitimate way to resolve any debt problems would be to seek advice from a reputable debt help organisation – such as The Debt People, Hamilton Locke or Chiltern.

These companies all offer a range of professional debt solutions which can help you to regain control of your finances whilst affordably still repaying debts.

The debt help programmes they offer include Debt Management Plans, Individual Voluntary Arrangements (IVAs) and Trust Deeds amongst others.

For help with any debt problems, or for immediate debt and IVA advice, please call the number at the top of this page.

Credit card debt claims frozen by Judge is a post from: Chiltern Debt Management

Withdrawal symptoms: higher credit card debts

Nathan Cameron — Tue, 05 May 2009 15:52:42 +0000

People using their credit card to take cash out will be charged more, as banks increase their transaction fees.

The already expensive process of using a credit card for a cash advance is about to get even more expensive, as Egg is increasing its minimum cash withdrawal fee, meaning credit card debts could worsen.

The provider, which has around two million credit card customers, has announced that from 28 May they will raise the minimum cash withdrawal fee from £3 or 3% of the amount withdrawn (whichever is greater) to £5 or 3% of the amount.

An Egg spokesperson said: “The aim of this move is to discourage people from making small cash withdrawals. Those who tend to do this are often facing financial difficulties and might be having problems obtaining cash, therefore they pose a higher risk of being unable to repay the money.”

So if you were to withdraw £20 from a cash machine with your credit card, you’d be charged an extra 25% of the amount you took out – just for the privilege! This charge also applies to withdrawals made overseas, which also incur an additional 2.95% foreign exchange fee.

As it is generally people who are desperate for cash that use their plastic in this way, there are concerns from debt advice organisations that they will see increased numbers of people seeking professional debt solutions as a result.

Debt advice organisations have expressed their concern that not only will people with debt problems be punished initially with the expensive withdrawal fees, but they will then face ongoing interest at a high rate for using their card in this way. Some of the lowest rates for cash withdrawals on a credit card are still over 22% higher than the current base rate of interest – with the average interest on cash withdrawals being charged at 26.7%.

Many debt help organisations offer help and advice for people who are struggling with their finances, and provide solutions such as a debt management plans or IVAs to help combat credit card debts.

Debt management and IVAs offer a way for people with financial difficulties to regain control of their finances whist still repaying their unsecured balances. These debt solutions enable outstanding amounts on personal loans, overdrafts, store cards and credit cards to be gathered into one affordable monthly payment – which is rescheduled over a longer period to make it more manageable.

Following our free debt and IVA advice, we may recommend an Individual Voluntary Arrangement (IVA) as the most appropriate solution. This means that you could be clear of all unsecured debts once the IVA is complete (usually within five years).

Alternatively one of our other debt help programmes may be more suitable – such as a debt management plan. This would still enable debts to be repaid at a more affordable level.

Egg is not alone in raising charges and other banks are increasing the minimum withdrawal fees accordingly.

Withdrawal symptoms: higher credit card debts is a post from: Chiltern Debt Management