Credit card provider ‘tortured’ customer

Robert Powell

Paying credit card bills can often be torturous. But not paying them is usually worse.

It certainly was for one MBNA customer who was said to have been tortured by the lender after a dispute over his credit card bill ended in a court case.

A judge ruled that the borrower was "hounded" by both MBNA and the debt collectors Link Financial in calls that were described as "a form of torture, oppressively frequent in amount and often without attribution to an identifiable number".

Ultimately, MBNA customer Keith Harrison had his debt of £20,270 written off by High Court judge Nicholas Chambers QC at Mold in north Wales.

But this judgement was not reached solely because of the frequent calls made to Mr Harrison...

Boom years

The court case was actually started by the borrower who contended that MBNA had never sent him the necessary terms and conditions when he applied for the account or when he was sent the card. MBNA said it would have done so but could not prove to the court that it did on this occasion.

As a result the judge ordered that the outstanding debt owed by Mr Harrison was to be written off. A total of £20,270.

MBNA's downfall in this case stems right back from the late noughties credit boom years when the bank sent out a mailshot to five million people advertising its Platinum credit card. Mr Harrison received one of these mailshots, applied for the card and was promptly accepted. But after getting into financial difficulties in 2007 he began to run up a large debt and stopped making any repayments.

MBNA argued that it continually tried to contact Mr Harrison to establish why repayments had stopped, but was ultimately unable to have "meaningful dialogue" with its customer.

Rising interest rates and default charges quickly spiralled out of control on Mr Harrison's card before he entered into a court case with the bank over the apparent lack of any terms and conditions.

Be prepared

I do feel a degree of sympathy for MBNA in this case. After all, we all know how credit cards work — if you borrow the money, you're going to have to pay it back at sometime, with interest. To coin an old phrase; buy the ticket — take the ride.

But after looking through the hearing notes for this court case it seems that this dispute was less a battle between guilty and innocent and more a fight between the careless and careful.

Mr Harrison had photocopied, filed and annotated all the correspondence between himself and MBNA stretching right back to when he received the very first mailshot in 1998. It was this fact that helped the judge to decide that if MBNA had (as it claimed) sent through terms and conditions, Mr Harrison would certainly have kept them.

On the other side, MBNA's defence of the charges was littered with small, but important inaccuracies. A leaflet titled 'terms and conditions' did not contain sufficient information, important facts about repayments were inaccurate and the bank claimed to send a default notice to Mr Harrison business class when in fact it was sent second class.

The impression I get is that this case really could have gone either way, but it was Mr Harrison's organised and thorough manner that swung it and saw him walk away £20,270 better off.

So to help you fight back against the banks trying to pull a fast one, I'm going to go over a few common card rip-offs and explain how to avoid them:

Rate-jacking

Rate-jacking is when your lender ups the interest rate on your credit card — sometimes by up to 10%. This can turn a previously competitively priced account into a major rip-off over night. But you can fight back!

New rules mean that credit card providers must give you 60 days to accept or reject rate hikes. If you reject them, you'll have to either pay off the whole balance in one lump sum or clear it within a 'reasonable period' at your existing rate. One way you can do this is to take out a 0% balance transfer card and cut the interest on your outstanding debt; Barclaycard is currently offering a whopping 18 months at 0% on balance transfers (2.9% fee).

It's also worth mentioning that credit card providers aren't allowed to up your APR within the first 12 months of the account opening unless they have specified otherwise in the terms and conditions. So make sure you check all the small print and keep a copy when you apply for any card!

Apply for a top 0% credit card

PPI mis-selling

The mis-selling of payment protection insurance (PPI) was the most frequent complaint made to the Financial Ombudsman Service in the second half of 2010. PPI is designed to cover loan, card and insurance payments in the case of sickness or unemployment and is no bad thing, if you need it that is! But for a while now, lenders have been sneaking in expensive PPI plans with loans and credit cards.

Fortunately, after a crackdown by the FSA, most firms now make it clear that PPI is optional and will offer refunds if a PPI plan has been mis-sold. But you should still be careful to check all the small print any time you take out a new card, loan or insurance policy to make sure the provider hasn't put in anything you didn't ask for.

Negative order of payment

The government actually banned the sneaky credit card trick, negative order of payment, earlier this year (where your cheapest debts are paid off first, leaving your most expensive debts to rack up interest). However, some banks including HSBC, MBNA, Lloyds and Virgin are still not completely playing ball.

What do you think?

Should Mr Harrison have had his debt wiped out by MBNA? Or was it right to 'hound' him with calls in order to recover its money?

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