- A new credit card aimed at millions of low-income families
is to charge interest at up to 70% - the highest ever charged by a credit
card company. Marketed under the slogan: "Stay in control of your
budgeting", the typical interest rate on the new Vanquis card will
be 49.9%, but for some customers the company judge as high risk, it will
be 69.5%. MPs and debt campaigners yesterday condemned the rate, which
is 15 times the Bank of England base rate and triple the standard rate
on other cards. The card also has an annual fee of £19.
- Norman Lamb, Liberal Democrat MP for North Norfolk, who
recently completed a Treasury select committee investigation into credit
cards, called the rate "staggeringly high". He added: "People
on a low income tempted by it need to be given a clear financial health
warning." Debt on our Doorstep, an umbrella group that includes Oxfam,
credit unions and Church Action on Poverty, said: "It's an absolute
disgrace that Vanquis should even be suggesting people borrow money on
a credit card at that rate."
- Vanquis is a subsidiary of Provident Financial, the biggest
doorstep lender in the country, and is the subject of an industry-wide
investigation by the Competition Commission into the home credit market.
- To find customers, Vanquis will trawl through the files
of private credit rating agency Experian - it holds data on almost everyone
in Britain - to identify individuals rejected by other lenders often because
they have run into debt problems in the past.
- It expects the typical customer to have an income of
half the national average. Provident Financial's executive directors last
year earned from £376,000 to £583,000, while the chief executive
saw his pension fund rise from £916,000 to £1.3m.
- Vanquis managing director Les Stillwell yesterday defended
the national launch of the card, which was successfully piloted in part
of Scotland last year. He said: "The big problem with credit card
lending is not the interest rate but the amount of credit that is granted.
We are only looking at that part of the market where we can lend responsibly.
- "People will have to have an income of at least
£5,000 a year, and will be given a credit limit starting at just
£150. If they keep their payments up, the rate will be reviewed,
typically falling by 3-4% a year."
- But Debt on our Doorstep said it will now increase pressure
on the government to amend the consumer credit bill to include a clause
allowing the government to impose a maximum interest rate cap.