Since it first opened up shop in 1993, MBNA has grown to become a significant player in the UK credit card market. The US companies move to the UK has not been without incident, though, and, in December 2010, it was reprimanded by The Office of Fair Trading for the way it treats customers struggling with financial difficulties. The company has also received a high number of complaints regarding the mis-sale of Payment Protection Insurance. In the second half of 2010 MBNA had 3430 complaints referred to The Financial Ombudsman Service for review. Many of these were concerning the sale of PPI. Of the complaints settled during this same period by the Ombudsman 73% found in favour of the customer.
Since the PPI scandal was first unearth by The Citizens Advice Bureau back in 2005 there has been a common theme emerging in complaints made about mis sold payment protection on credit cards. Put very simply, a significant amount of customers have realised they have been paying for the insurance, or it has been added to their account, without their knowledge. Because of the way credit card PPI is sold, some applications required customers to ‘opt out’ of taking the cover. This means customers do not always realise the cover has been automatically included.
On MBNA credit cards, as with most other cards, payment protection is usually calculated on a monthly basis depending on the client’s outstanding balance. The charge for PPI is usually somewhere between 79p and £1.50 per £100 outstanding on the balance. So, for example, if you owe £10,000 on your credit card you may be paying somewhere between £79.00 and £150.00 per month for payment protection cover. If your balance remained consistently at £10,000 for a year this could equal total PPI payments of anything from £948.00 to £1800.00. This is clearly a significant amount of money that can lead to a substantial increase in credit card debt. In addition, the cost of your PPI, when added to your balance, will also attract interest in the same way as other purchases.
Aside from the cost of payment protection sold by MBNA, banks and credit card providers, is it doesn’t always offer the level of protection customers expect. A survey by The Competition Commission found that only 11% of people who try to use their credit card PPI policies are successful in doing so. This is a shockingly low figure, particularly when it is considered that the average payout for car insurance is 79%. Of all the insurance examined: car insurance, mortgage PPI insurance, home insurance, credit card PPI and loan PPI, card PPI ranked the lowest. This means it is quite likely you may be paying for insurance you can never use.
The other scandal to hit MBNA and other credit card providers in recent years has been regarding charges applied to customer’s accounts for late payment and over the limit fees. An investigation by The Office of Fair Trading (OFT) in 2006, found that many banks, building societies and credit card companies were applying fees that were legally unfair.
It was discovered that some lenders were charging as much as £35 on each occasion customers exceeded their agreed limit or made a late payment. Many people felt that this was deeply unfair as it tended to penalise those already suffering financial hardship. In many cases it was felt banks were adding to the financial problems of their customers rather than trying to help them manage their debts. It was also felt that there was a lack of compassion in many cases with fees often applied every single time a limit was exceeded or a payment was made late regardless of whether the limit was exceeded by just a few pounds or the payment was just one day late.
During the investigation, banks tried to justify the high penalty fees by claiming they were necessary to cover the costs incurred. The OFT rejected these claims and, although it did not pursue action against the banks, it declared that, moving forward, any charge above £12 would be deemed unfair. This figure took into account the reasonable costs that may be incurred by the bank including postage and staffing costs.
Following the inquiry many customers remained unhappy that they had suffered years of charges that had now been declared legally unfair. The good news is, if you believe you were charges fees that were unfair you can now make a formal complaint. So far, many customers have pursued action against their bank or credit card company and have received hundred, and sometimes even thousands, of pounds.
If you are interested in reclaiming PPI or making a claim for unfair bank charges, call our team on 0207 471 2000.