October 13, 2009
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News: UK Banks Raising Rates
Banks across the globe have been struggling in the wake of a recession and rising credit card and home mortgage defaults. Historical and record breaking losses have taken huge chunks of profit from banks and significant reduction in earnings. Greed has driven many financial institutions to attacking credit card customers to pay what most would label “loan sharking” practices. Some nations have implemented new legislation and rules that would restrict the unfair practices of financial institutions. In the United States (U.S.), Americans have been outraged by banks who have found loopholes to implement new penalties and fees prior to the enactment of the new law. Another country undergoing the same scenario, the United Kingdom (U.K.) has found its citizens also being pounced by credit card companies trying to get a jump on new rules.
The most recent U.K. banks to announce credit card rate increases were First Direct and M&S. Both organizations will be raising fees on cash advance, foreign exchange fees on debit and credit cards. First Direct will be raising card cash advance fees from 2.5 percent to 2.99 percent. Its balance transfer fees have been low compared to the U.S. standard and will be increasing from 2.5 percent to 2.9 percent. First Direct will also be increasing the foreign currency transaction fee on all cards from 2.75 percent to 2.99 percent. Earlier this month, M&S raised the balance transfer fee on its cards from 2 percent to 2.9 percent and the foreign exchange fees from 2.75 percent to 2.99 percent.
The new European Union (EU) law labeled the Payment Services Directive (PSD) was officially released to the European nations December 5, 2007, requires all European nations to comply with new regulations by November 1, 2009. The PSD calls for a standard set of easily understood and plain language set of terms and conditions as well as places additional restrictions on raising interest rates and fees. Similar to the credit card companies in the U.S., U.K. banks have also found loopholes allowing them to implement rate increases. However, both First Direct and M&S maintain that the changes are being made to meet the financial needs of the increasing cost of business.