Watch out for the credit dealer

Johanna Gornitzki's picture

The ready supply of available credit in the decade up to 2007 saw many Britons become credit card junkies. And not surprisingly, there are now as many credit cards in issue as there are people living in the UK, with an average debt of £1,000 per card.

Carpe diem and buy what you want now was the motto.

Then the credit crunch hit. The economic downturn saw tough restrictions placed on consumer and business lending; the credit card firms' wings were clipped as the practice of offering credit left, right and centre came to an abrupt halt.

Just like mortgages, competitive credit cards have become particularly hard to find for people with poor credit ratings.

Rates on credit cards stand at an average 18.8% (for October 2010), and some of the most attractive credit card deals are now reserved for existing current account customers (there are now 45 credit cards that are restricted to existing customers, compared with just eight three years ago, according to Defaqto).

This is all part of providers' attempts to exclude anyone with a less-than-perfect credit rating, and as a result, many credit card holders with poor credit ratings are finding themselves stuck on deals with a high APR.

While they would previously have sought out 0% balance transfer deals, now they are discovering there are no more cheap credit fixes to be had and are trapped in a dead end.

On top of this, the relatively lenient attitude towards collecting debt has been replaced by a more hard-nosed approach from lenders.

It's getting messy out there; the credit card dealers want to protect their profits from defaulters – and it seems that nothing will deter them.

Guidelines on debt collection set out by the Office of Fair Trading (OFT) seem to carry little weight with the banks.

Worryingly, Moneywise has found that harassment and threatening phone calls are commonplace.

At the same time, loans with massively inflated APRs have mushroomed. Short-term loans, or so-called 'payday loans', have made a comeback, thriving on people's desperation.

While many of these loans are legitimate, albeit unfair, we found that some of them are in clear breach of the OFT's responsible lending guidelines. When investigating this market, Moneywise came across one website called

'Loans for the Disabled', targeting people on disability benefits. Nowhere on the website could we find a consumer credit licence number, strongly suggesting that the company was acting illegally. Its terms and conditions and privacy policy pages were incomprehensible, and there was no physical address quoted. The whole site screamed 'scam'.

Legitimate or not - be wary! Someone selling you a loan or credit card might seem as nice as pie, but don't be fooled into thinking they are your financial friend. All they want is your money, and when the time comes to rake in those whopping interest charges, nothing will stand in their way.

You might not end up in a dark alley with the barrel of a gun pressed to your head, but you could lose a lot of money all the same. Time to kick the credit habit and go cold turkey while you build up your savings stash.


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The Financial Ombudsman appears to find banks treat complaints through them with non respect.

The County Courts appear to complain that the service from banks is not up to standard - I had 2cases yesterday where the judge lodged comments about Nationwide.

The FSA does not seems to be able to indicate where one should complain after normal procedures fail.

Direct Gov website does not indicate who is minister in charge.

So .... where does one go?