Is MBNA guilty of coercing and bullying non payers?
The CEO of MBNA Europe is having dinner with a top banking executive, and up pops the question, "How's business then?"
"Err... okay", the stifled CEO replies. "Slight problem with the UK City regulator, nothing too much really".
Well if I was that CEO I would be very concerned. Following an investigation from the Office of Fair Trading it appears that MBNA has been ignoring UK debt recovery guidelines, which many see as bullying and intimidation of the credit card holder.
The official story is that the OFT has ordered MBNA to improve the way it deals with five million of its customers should any experience a problem repaying their credit card debt.
Cutting to the chase; it has been told in not so many words to stop pressurising confused customers and start acting within UK guidelines. If it wasn't for the Citizens Advice Bureau raising the issue, then how much longer would MBNA have been able to get away with it?
What the OFT uncovered...
Having been tipped off by the CAB, the OFT found that MBNA had not being sufficiently clear when communicating with customers in financial difficulty who were offering token payments, even though it had been agreed that this was all they could afford.
Also in some instances the company was failing to follow its own policy or procedures by bypassing customers' appointed representatives.
By ignoring the customer appointed representative, whose job it is to negotiate a smaller debt repayment, this meant that the likes of me and any other debt advice firms or debt charities would be disregarded.
Own policy? What about the OFT Debt Collection Guidelines? The MBNA policy is derived from these guidelines and arguably MBNA chose to breach them. It has nothing to do with their own policy which has been found to be somewhat lacking.
He who shouts the loudest gets paid!
It is well known in the debt collection industry that the lender or debt collector that puts the most pressure on borrower/debtor for payment is the one that usually gets paid.
This means that if the lender can badger, confuse, intimidate, hoodwink or simply bully a customer who isn't aware of their consumer rights then they are going to get paid.
Ray Watson, Director of the OFT's Consumer Credit Group, said: "Our investigation found problems with the way MBNA communicated with customers in financial difficulties. MBNA has agreed that it will make its debt collection letters clearer and clarify its policies and procedures for dealing with appointed representatives."
It's a shame the OFT did not ask me for a comment, because if they had, I would have said something along these lines; "What the OFT is basically saying to MBNA is stop pressurising customers into paying back what they cannot afford. MBNA were doing this when they ignored any appointed representative of the customer; usually a debt charity or commercial firm.
"This action left the borrower / debtor in a more vulnerable position and under pressure to pay more even though it had been proved they could not. Step out of line again and we will put restrictions on your licence to trade, plus hit you with a £50,000 fine for each breach."
What's difficult to understand in that?
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.