I can’t work out whether to applaud or cry at Alliance & Leicester. It has done the single most despicable piece of financial manipulation ever on its MoneyBack Loan. Its loan is the market’s cheapest at 5.5% so of course it’s worth getting, but the payment protection insurance it tries to flog with it is expensive, so I say don’t touch it with a barge pole (see Cheapest Personal Loans for details).
Yet this is far more insidious. It has deliberately manipulated its loan rates for the newspaper best buy tables. These are done by Moneyfacts, and as well as listing the rate it makes a comparison based on borrowing £5,000 over three years. In Moneyfacts the Moneyback loan looks very cheap for this. And it’s no wonder let’s look at the facts, gleaned from A&L’s own website.
Borrow £4,999. Monthly repayment £169.97 Total Repayment £6,119
Borrow £5,000. Monthly repayment £164.48 Total Repayment £5,921
Borrow £5,001. Monthly repayment £170.04 Total Repayment £6,121
In other words, if you borrow EXACTLY £5,000 over EXACTLY 3 years you get a £200 cheaper loan with insurance.
Why? It can’t be a coincidence that this is the amount that Moneyfacts uses to compare on and supply the newspapers (amongst others) best buy tables. This is the most extraordinary attempt by the financial services community to pull the wool over peoples’ eye’s I’ve ever seen. It’s why we should never trust them. It’s a disgusting, despicable, anti-consumer piece of genius.
UPDATED INFORMATION: It gets even worse… 6 Feb 2006
After writing this blog, I called the Editor of the Guardian Money Section where I have my column and gave it the story (read it here). In it A&L’s comment is as follows:
“Moneyback Bank loans are tiered in common with most other lenders – these tiers reflect the most common loan amounts that our customers wish to borrow, and the risk associated with these amounts.
The tiers reflect the fact that those customers approved to borrow more are more likely to repay, making them lower risk. Those approved to borrow less tend to be in the higher-risk category.”
Today it called me and changed its mind
This morning I get a phone call telling me that the quote given to the Guardian wasn’t right and actually it was an anomaly,… in fact here’s its statement:
“The monthly repayment rate, at £5,000 over three years with Moneyback Bank, was an anomaly, one that as soon as it was drawn to our attention, and the attention of a senior decision maker in the bank, was recognised as such and changed as soon as we could.
It was brought to our attention on Thursday afternoon, and changed on our website on Friday afternoon”
I am totally unconvinced
So here we are with a major bank claiming that this was a pricing anomaly. It wasn’t deliberate manipulation, it was a pure accident that the insurance charge was different at the exact specification of loan that is used in the best buy tables, not a pound more or less, not a month more or less. Come on A&L hold your hands up and admit it! It was clever! It was devious and manipulative! But clever none the less….