Credit Card Overview
Fact: there are more credit cards than people in Britain and the country's debt problems are amongst the worst in the world.
When choosing a card provider, its policies on responsible lending and debt advice provision are of key importance. The green and ethical concerns you bring to who you bank with, concerns about equal opportunities or the environment, are just as applicable to who you get your credit card from.
This section also looks at the green or ethical worth, as well as the practicalities of charity affinity cards.
Does your credit card provider treat its customers responsibly?
What are charity affinity cards and how do they work?
Does your credit card provider treat its customers responsibly?
Responsible lending
According to the British Banker's Association (BBA), responsible lending means 'providing credit, based on background checks and professional judgement, to people who can accommodate repayments without getting into financial difficulty'. As the sheer number of people in debt today shows, these principles are not always well applied by credit lending institutions. In 2008 our credit card debt hit £54.4bn and continues to rise.
Transparency is key - credit card customers should be presented with the terms and conditions attached to their card up front and in plain English. It is important to check whether your provider has a responsible lending policy in place, and how it is implemented if it does exist.
Debt management
Credit card debt is all too common in the UK. Some financial institutions offer basic in-house debt advice services, the scope of which can vary greatly. Often providers will refer customers to free advice services including the Consumer Credit Counselling Service, the Citizens Advice Bureau and others.
Use our search tool to find details of your provider's debt management services. Information on this subject can be found under 'Responsibility toward Customers'. Alternatively contact your provider directly for further information.
What are charity affinity cards and how do they work?
Affinity card providers make a small donation on behalf of the card holder to the charity it is associated with.
Such charity donations average around 25p per £100 spent. So, in order to donate £100 to your charity of choice you'd have to spend £40,000 with the card. Most providers also make a one-off donation of between £5 and £25 on each new card account.
In their analysis of charity affinity cards moneysavingexpert.com suggest that a more effective way to donate money is to use cash back cards. Cash back cards operate in much the same way as affinity cards except that instead of a charity, additional money goes to the card holder and this money is usually considerably more than a standard charity card donation. The cash back card holder can then donate the money they have earned to the charity of their choice and if eligible, Gift Aid it, so rather than £1 the charity will receive £1.28. Donations on affinity cards are not eligible for Gift Aid.
View the range of charity affinity cards available on the market click here.
Your next steps
See our guide Next Steps - Credit Cards for more suggestions on how to find out about your credit card provider's green and ethical policies, how to contact them and how to find the right credit card for you.
Credit Card Search
Credit Card Provider
Bank of Scotland
Green/Ethical Products
- Basic Bank Account (Easycash)
- Secured mortgage lending in deprived areas
- Community banking current account and lending
Ethical Lending or Insurance
We found no public data on having an ethical lending policy in place, although the parent company, HBOS, identified the need to implement such a policy in 2004, i.e. 'Future challenges for HBOS include widening the scope of its corporate responsibility to start dealing with issues such as third world poverty or lending to companies involved in supporting the arms trade' as in Corporate Responsibility report 2004.
Responsible Lending
1. Credit Lending
Bank of Scotland offers LTV (loan-to-value) mortgage rates of 60% to 95% depending on mortgage product. The 95% rate does not compare favourably with the FSA’s Turner Review suggestion of a maximum LTV of 90%, i.e. the borrower should have at least a 10% deposit.
The LTI (loan-to-income) rate is not specified.
With regard to unsecured loans the bank uses credit scoring based on information submitted by the applicant and provided by credit reference agencies to assess the borrower’s ability to make repayments.
On the subject of credit limits, the bank says that it is happy to review a customer’s credit limit based on an assessment of their ability to pay the new amount. Additionally, the customer must have held the card for at least six months. However, the bank says that is may increase a customer’s credit limit automatically from ‘time to time’ and that the customer will be advised in writing when this occurs. The customer can cancel the credit extension by calling customer service.
2. Debt Warning
The bank suggests customers look out for ‘warning signs’ of possible problems with their finances such as only making the minimum payment on credit cards, borrowing cash from family and friends, borrowing or using credit cards to pay off debts, using a credit card to pay for utilities and groceries but not clearing the monthly balance or being declined credit.
It also highlights the negative effect missing credit card payments may have on a customer’s credit rating.
The bank links to an interactive budget calculator provided by the FSA which calculates the percentage of monthly incomings spent in different areas – household, leisure etc. Neither warnings nor advice are provided alongside the end calculations. The bank does not refer customers to the FSA’s Debt Test which is designed to help them find out whether they have, or are likely to have, problems with borrowing.
It uses a generic warning with regard to mortgages: ‘Your home may be repossessed if you do not keep up repayments on your mortgage’.
3. Debt Management and Advice
The bank does not provide a clear set of steps with regard to the repossession process, nor does it outline how it may help customers restructure their mortgage payments.
It does offer payment holidays ‘for a period of between one and six months over the life of the mortgage’ and for customers you have had their mortgage for at least three months and who are up to date on their payments. Interest is still charged interest on the mortgage balance during this period. Payment holidays are not available on unsecured loans under £25K.
Additionally, the bank, through its Money Management Team, suggests customers in financial difficulty consider a number of external options, including:
- Temporary Repayment Plans – the customer’s budget is calculated and the money they can afford to pay creditors is divided up fairly between them, based on how much is owed to them
- Individual Voluntary Arrangement (IVA) - this is an alternative to bankruptcy and is a formal arrangement between the customer and their creditors to pay an agreed amount of the debts over a set period. An Insolvency Practitioner is required to set this up and they usually charge a fee
- Bankruptcy – this comes with a warning as to the seriousness of choosing this option and with a recommendation to seek professional advice
- Trust Deeds – these apply to customers in Scotland and are a way of setting up a monthly repayment schedule based on what a customer can afford to pay. A deed will typically last for three years, after which any remaining debts are normally written off. The potential damage to the customer’s credit rating in choosing this option is highlighted
No evidence was found that the bank offers re-housing advice or liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with mortgage customers facing repossession.
Financial Exclusion
The bank offers a basic bank account to low income customers and offers secured mortgage lending in deprived areas.
In terms of access provisions, Bank of Scotland offers documents in large print, Braille, and on audio cassette. Other provisions include Typetalk, wheelchair access, low-level counters and accessibility measures on its website. The bank also runs some mobile units to provide a banking service to underserved communities.
Environment
The HBOS Group’s environmental policy addresses the key issues of energy efficiency and waste management and shows a commitment to continued improvement of its environmental performance.
Carbon Neutral
The HBOS Group’s business operations became carbon neutral in 2007.
Equal Opportunities
The Group’s policy addresses the key areas of gender, race, disability and sexuality.
Women on the Board
25% of the HBOS board is made up of women according to 2007 figures.
Voluntary Standards & Initiatives
Parent company, HBOS, is a signatory/member of:
Bank of Scotland
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Health, Pet)
- Student Current Account
Bank of Scotland
Bank of Scotland
Customer Relations
PO Box 29112
Dunfermline
KY11 2ZX
