MP takes action as residents hit by soaring interest rates

November 20, 2008 12:26 PM

David HowarthCambridge residents have called for help from city MP David Howarth after being hit by soaring interest rates from credit companies.

They have been left facing highly inflated monthly charges after, in one case, the rate more than doubled overnight.

The hike in payments comes despite the Bank of England base rate being at its lowest for more than 30 years.

Now they fear they are being penalised so that the credit companies can claw back some of the money lost from those who are defaulting on their loans.

Father-of-three, Edgar Blanco discovered GE Capital Money had increased the interest rate on his £18,000 loan by more than four per cent.

Columbian-born Mr Blanco, of Peverel Road, Cambridge contacted the company after the latest drop in the Bank of England base rate to find out how much he would save on his second mortgage - but was told his rate was going up from 8.9 per cent to just over 13 per cent.

The company has left him to find around £40 extra a month, even though he has paid off more than two thirds of the loan.

"This is profiteering," he said. "I am really angry that they can get away with this. This has been done because other people are having difficulty paying."

A single mother, who asked not to be named, has seen her credit card interest rate more than double overnight, leaving her to find an extra £90 a month.

Staff at card provider, Richard Branson's Virgin, blamed the hike, from 9.9 per cent to 20 per cent, on the "credit crunch".

She ran up her £15,000 credit card debt after illness forced her to take time out from her career. After the interest rate rise, her payments increased from £160 to £250 a month.

"This is blatant economic commercialism," she said. "This company is creaming off an economic rent and it is staggering that it is blaming it on the credit crunch.

"A credit card with a flexible APR should not mean that it can be more than doubled over night. What's to stop it being raised even further? This cannot be legal.

"I was told Virgin does not have a written complaints procedure so, effectively, there is no redress."

Mr Howarth, who has promised to take up the issue with the companies, said: "It is appalling that credit companies can increase their rates to this extent at a time when the Bank of England base rate is falling.

"Nationally, people are struggling to make ends meet and credit companies should be doing all in their power to ensure that customers can manage their payments not take advantage of the situation in this way.

"The Liberal Democrats are advocating a comprehensive network of free financial advice centres, funded 50-50 between the banks and the Government, to ensure everyone has access to impartial information and advice - somewhere they can turn to in exactly this situation."

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