MSE News

Chancellor to ask regulator to investigate credit card and loan APRs after MSE and Martin Lewis campaign

Chancellor Rishi Sunak has backed calls from and founder Martin Lewis to make credit card and loan rates fairer and overhaul the rules so that more people get the rate that is advertised rather than being charged a much higher cost of borrowing.

The Chancellor's backing comes in response to a new MSE report that urges policymakers to take advantage of new Brexit ‘freedoms’ to give Britain back at least ‘typical’ rates of interest on credit cards and personal loans, and to ditch the EU-mandated ‘representative’ APRs, which are often worse for consumers.

Until 2011, the UK rules meant firms could offer ‘typical’ APRs, with 66% of accepted applicants needing to get the advertised interest rate on cards and loans. Then EU harmonisation meant the rules had to change to allow ‘representative’ APRs, where only 51% of those accepted get the headline rate.

The report argues that it is time to change it back or go further – especially in light of increasing debt due to the cost of living crisis. Here is the full MSE Report.

Martin Lewis, founder of, said:

"The fact so many people can be charged more than the rate advertised is demoralising and often financially dangerous. Many only find out once they’ve applied, leaving a negative mark against their file – forcing many into accepting the higher rate, or making it harder to find a cheaper deal elsewhere.

"For years we’ve railed against this, and now we’ve a golden opportunity for change. We are told there will be a Brexit dividend – well, this change was caused by EU harmonisation, so I’m asking the Government to deliver on this one. Lenders tend to make most of their profits ‘from the tail’ – those people who get charged higher rates – and often they’re the ones with weaker finances. They need protecting.

"This is heightening with the cost of living crisis biting, as unsecured borrowing is close to reaching record levels. That’s why we should urgently revert to the UK’s own system of typical APRs, or something which protects consumers even more strongly. So I’m grateful the Chancellor’s supporting that this is something that needs urgently looking at.

"We can’t give consumers a crystal ball, but we can at least make it so they needn’t take such a stab in the dark. Reverting to typical rates will improve fairness and transparency, as well as helping to protect people’s credit files. Taken together, this should reduce the financial and emotional harms the current system causes."

Sunak:  'I welcome the report by MoneySavingExpert'

The Chancellor said in response to reading an early draft of the report: "Leaving the EU means we are now able to set our own path on financial services regulation – to ensure our rules act in the interests of UK consumers and respond quickly to our flexible and dynamic markets.

"It is important that advertised APRs reflect the rate the consumer is likely to receive. I welcome the report by MoneySavingExpert looking at ways that this could be improved, and will ask the FCA to assess the merits of reform in this area."

'Representative' APRs have been harmful to consumers – and other key findings from the report

MSE's report finds that 'representative' APRs have frequently impacted consumers negatively and that:

  • Credit applications are inherently anti-competitive. Often the only way to find out the rate you’ll get is to make an application. Yet applying marks your credit file, so people must choose either to take what’s offered – even if the APR is higher – or to turn it down and accept their credit file is marked anyway, reducing their ability to get credit elsewhere. 
  • There is no cap on what can be charged. Those who don’t get the advertised rate can be offered any rate, without limit – and can see debts soar due to this.
  • Many are offered higher rates. MSE’s research shows in the last three years, 40% of personal loan applicants and 28% of credit card applicants who know the details of their experiences said they have been offered a higher rate than advertised at least once.
  • This impacts consumers’ financial and emotional wellbeing. Over 40% of those offered a higher loan rate since 2011 said it had a negative impact on both their financial and emotional wellbeing.

MSE recommends a return to 'typical' APRs as a bare minimum

MSE is submitting the report to HM Treasury, the Financial Conduct Authority and the Brexit Opportunities Minister. We call upon them to change the rules to:

  • Replace representative APRs with typical APRs. This means at least 66% (currently 51%) of successful applicants would be offered the advertised rate – though even more is better.
  • Cap the difference between the typical and maximum APR. 
  • Mandate firms to disclose the average proportion of successful applicants who don’t get the advertised APR, and by how much.
  • Consider 'soft' credit searches for credit card and personal loan applications. Or at the very least, before application, firms should communicate prominently the rate range for those not accepted at the advertised rate. 

Consumers have been hit hard by the current rules

During the preparation of the report MSE heard from many people who had applied for personal loans and credit cards that have faced big problems with the current system. Below are a couple of examples:

Dean, a loan applicant, said: “It’s a lucky dip. I recently applied for a loan of £15,000 with an advertised rate of 3.3% and did lots of enquiries and was very frustrated that I couldn’t find out before a hard search went on my file [whether I would get that rate].

"Eventually I took the plunge and, with my credit rating being 995 out of 999 and having zero debt, I was confident I would get the lower rate.

"Sadly, I got 7.8% but had no option but to go with the APR offered as the mark was already on my file."

Chris, another loan applicant, said: “The whole situation was a shambles and put me off getting a personal loan in the future.

“Back in 2017 we took out a loan [over five years]. We had been customers with the bank since 2014 and always found their service good. Using their online loan calculator, a rate of 3.6% was advertised but upon loan approval it went up to 6.5%, taking our monthly payments from around £200 up to £220.

"Unfortunately, we didn't want to keep looking around as we thought it may affect our credit score and we were saving for our first home."

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