MBNA Announcement To Help Customers In Financial Difficulties

MBNA has announced that it is changing its policy on interest rate hikes effective from new year 2009. This is the excerpt from the announcement:

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Over the past couple of weeks, MBNA has been working with the Government and our industry groups on two initiatives:

To provide further help for customers who are in financial difficulty, and;

To put in place some principles - that all credit card companies agree to - about how we make changes to the standard interest rates on customers’ accounts, known as “risk-based re-pricing”
The Government and the credit card industry have jointly announced the outcome of our discussions. MBNA fully supports this outcome which we believe benefits our customers and our industry.

Further help for customers in financial difficulty

Where a “not-for-profit” debt advice agency e.g. Citizen’s Advice Bureau, The Consumer Credit Counselling Service (CCCS) has formally notified us that a customer is in serious discussion with that agency on a draft debt repayment plan, we will suspend collections activity whilst these discussions continue, as long as they are concluded within 30 days. Also, if progress has been made, we can extend this for a further 30 days.

Above all, we’d always say that if you are experiencing difficulties then the best thing to do is to talk to us because, if you don’t, then we can’t help.

Principles on risk-based re-pricing

The industry has developed these principles to cover the circumstances, alternative options, frequency and transparency of an interest rate increase. MBNA will apply them from 1 January 2009.

Where we increase a customer’s interest rate, we will provide him/her with options. These will always include the option to close the account and repay the remaining balance at the existing rate of interest, within a reasonable period, having regard to the existing level of minimum payments and the customer’s financial situation. Where we offer alternative lending products, we may also provide the option to transfer the balance to such a product at the existing (or lower) interest rate.


We will not increase interest rates in the following circumstances: • Where a customer has failed to make the minimum contractual payment requested on the last two or more consecutive monthly statements; or
• Where an agreed repayment plan is in place in respect of the account; or
• Where we have been formally notified by a not-for-profit debt advice agency that the customer is in serious discussion with it.


Provided a customer manages his/her account in accordance with the product’s terms and conditions we will not: • Increase interest rates within the first twelve months of a customer having a credit/store card;
• Increase interest rates more often than six monthly beyond this period.


We will always give a customer at least 30 days notice of an increase in interest rates, so that the customer can make other arrangements, should they so wish.


If the customer asks, we will ensure that our staff are able to provide the customer with an explanation as to why an interest rate may have been increased.

THESE PRINCIPLES WILL COME INTO EFFECT ON 1 JANUARY 2009 AND WILL APPLY TO ANY INTEREST CHANGE NOTIFICATIONS AFTER THIS DATE
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There is no indication as to what the policy reflects on the existing hiked cards. I will try to post more details on this as soon as I gather.