Chancellor to ask regulator to investigate credit card and loan APRs after MoneySavingExpert campaign

- New MoneySavingExpert report

- Now UK is out of the EU – it’s time to make credit card and loan rates fairer

- Chancellor welcomes report and will ‘ask FCA to assess the merits of reform’

Until 2011, the UK rules said 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.

Today the UK’s biggest consumer website, (MSE), is launching its new campaigning report, which says it is time to change it back – especially in light of increasing debt due to the cost of living crisis.

The lead recommendation of MSE’s report – It’s time for a ‘Typical’ solution to interest rate shock (1) – asks 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 worse for consumers. A draft of the report has already been submitted to the Chancellor, who says he is now calling for the financial regulator to investigate.

Key information and findings

  • Typical APRs were used until 2011. This meant at least 66% of successful credit applicants were guaranteed the advertised APR on cards and loans.
  • Representative APRs are now used. This only requires firms to give 51% of successful applicants the advertised rate.
  • The change in 2011 was due to EU harmonisation rules (2). Now the UK is no longer part of the EU, these rules no longer need apply.
  • 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 new 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 (3).
  • 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 (43%) and emotional (41%) wellbeing (35% for each with credit cards).

More details in the full MSE report.

Chancellor of the Exchequer, Rishi Sunak, said: "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."

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."

Key recommendations from the report

MSE is submitting its report to HM Treasury (HMT) and the Financial Conduct Authority (FCA). It calls 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.
  • Apply the improved APR rule to advertised 0% deal lengths for credit cards too. This would mean at least 66% of those accepted get the advertised 0% length. Currently there isn’t a rule on this. (It should also apply to other risk-based pricing models.)
  • Consider mandatory quotation searches (or ‘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.

‘A way to reel you in’ – getting a different rate to the one advertised is bad for consumers
Please credit case studies’ accounts as told to MSE.

Paul Kendall, 57, from Hertfordshire, applied for a personal loan in 2017 that was advertised at 2.9% rep APR. He was offered the loan, but for a much higher rate of 5.2% rep APR.

He said: "I questioned it with the bank and it told me that the rate I applied for was not for everyone, which I hadn’t known before making my application. It felt like the lower rate was a way to reel you in – and because a credit check had been done, I felt I had to take the higher rate, as I didn’t want it to affect my credit rating."

Matthew Davey, 30, from Southampton, applied for a loan in 2021 that was advertised at 2.9% rep APR. He was offered the loan, but for a much higher rate of 8.5% rep APR.

He said: "I applied thinking I was getting the advertised rate. But when the offer came back a lot higher, it made me feel a bit rubbish – especially as my credit score was 999! I declined the offer and looked around, but was worried I wouldn’t be able to get credit elsewhere. Luckily, my bank gave me a guaranteed APR of 6.9% on another loan before I even applied, which made me feel much more confident to try again."


Notes to Editors

(1)   It’s time for a ‘Typical’ solution to interest rate shock was published in April 2022 by the MoneySavingExpert campaigns team. This included commissioning YouGov Plc to conduct two nationally representative surveys, each of 2,000+ GB adults, from 28-29 September and 2-3 November 2021. The total sample size for these separate surveys was 2,113 and 2,065 GB adults respectively. All figures, unless otherwise stated, are from YouGov Plc. The surveys were carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). Read the full report on typical APRs for more information.

(2)   This 51% minimum was brought in as a result of the EU Consumer Credit Directive, which was legislated in 2008. The Directive was then transposed into UK law through several pieces of legislation, including the Consumer Credit (Advertisements) Regulations 2010, SI 2010/1012, which came into force in February 2011.

(3)   ‘Don’t know’ and ‘Prefer not to say’ answers have been removed, where personal loan/credit card applicants could not recall whether or not they had been offered a higher interest rate than first advertised.

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