Usury. How Barclays Kenya Is Stealing From Its Credit Card Customers.

I have been a Barclays credit card (Barclaycard) customer for the last 10 years, a banking relationship that has been smooth for the most part until now. Generally, this is how credit cards work: You make purchases, then at the end of the month (or when the billing cycle is over), the bank sends you a statement with a summary of your purchases till the statement date with payment due date (usually 20–25 days after statement date). The agreement is if you pay the amount by the due date, the bank will not charge you interest. This has been the case with Barclays for 10 years, until I noticed an anomaly on my latest statement. This post is a breakdown of my communication with the Barclays team, which shows a number of things:

1. Barclays Bank Kenya is participating in usurious lending, worse than a Shylock through their credit card product. They silently changed the terms of their cards, such that even if you pay part of your balance, they charge you interest for everything including the paid amounts. Surely, even a Moi Avenue Shylock will not do this, leave alone a regulated banking institution.

2. Barclays Bank Kenya is not adhering to the Interest Rate Cap law which was instituted last year, and governs lending by all banks that are regulated Central Bank of Kenya. Currently, the allowed lending rate is 14% annually, but as per my conversation with Barclays, their Barclaycard is charging either 3.5% and 3.99% per month (depending on who you ask). I suspect they are contravening this law with approval by the regulator, while their competitors have had to adhere to the law. As such, Barclays has been allowed to unfairly compete in the market.

3. Barclays is a terrible communicator. As you will see below, they not only take forever to respond to customer complaints, when they do, they ignore direct questions. It seems their customer service team has been fed one line which they keep repeating over and over.

My interaction with Barclays from the 14th March to date

On 14th of March 2018, I received my Barclaycard statement dated 7th of March 2018. The statement had an interest charge of KES 4,062, which stood out to me because while my January spending was high, I had settled the bulk of the previous balance, and only had a balance of KES 4,292. Was the bank charging me close to 100% interest on an outstanding balance?

I called customer service to inquire, and the lady who picked gave me stories that kept changing the more I questioned her. At some point, she gave up and told me that the interest is correct, and if I had further complaints I should email their customer care. So I wrote an email that summarized our conversation, and the answers that have me convinced that Barclays is robbing its customers.

I called your call center last night regarding account number xxxxx, and in a lengthy conversation with one Sarah Kabiru, I got a number of explanations none of which make sense. Please find the breakdown of her explanations, and my questions below:
1. At first she told me that when a card has a balanced carried forward (KES 4,292 ), interest is levied on this balance and any additional spending. This implied that the interest was charged on the entire balance of KES 63,517 (i.e balance brought forward of 4,292+ additional spend of 59,255).
My questions:
- This contravenes the terms of a credit card, because interest is due on amounts that are unpaid past the due date. You cannot charge me interest on purchases made and have not been billed to me. An example is a purchase made on the 3rd of March, 4 days before you bill. How would you charge full month interest on this?
- If I try compute the effective interest on my February expenditure (59,225), plus my outstanding balance (4,292), it would mean that Barclays charged me interest of 6.4% for this. A rate that contravenes the rate cap law.
2. When she realised that this didn’t make sense, she told me that whenever a card balance is not paid fully, interest is levied on the full amount that was due.
My questions
- Isn’t it breaking the law, to charge me interest on money I have paid you?
- Has my 81,595 which you have been holding for the last month earned me any interest, if it has not been used to reduce my liability to Barclays?
- If this was the case, what was the interest calculation that resulted in this amount? (she couldn’t respond).
3. After making me wait for another 2 minutes as she consulted, she came back with the third answer. She said that I paid past the due date because cheques take 3 days to clear, and that is why the entire 85,887 was charged interest at 3.5%.
My questions:
- As far as I know, cheques clear in T+1 under the new system, and the posting date on my statement shows this clearly. You received the payment on the 26th and effectively posted it on the 27th, the due date. So the 3 days thing is a lie.
- Even if it had cleared in 3 days, the money would have hit your account by the 28th, or 1st of March latest, which means the interest charged on 85,887 would have only been for 2 days, not a whole month, plus a late payment fee as per the credit card terms. This was not the case.
- When I try calculate the interest at 3.5%, the amount for a FULL MONTH isn’t 4,062, it is KES 3,006.
- If I was truly late in paying, the interest should have been charged on my late days, plus a late payment fee. This is not in the statement.
- Finally, the law prohibits banks from charging interest higher than 12% per annum, so isn’t Barclays breaking the law?

After 3 days, Barclays responded as follows:

This is to advise that as per statement dated 07/02/2018 the balance was Kshs 85,887.10 to be paid by due date of 27/02/2018. We however received Kshs 81,595.00 leaving a difference by the due date. Kindly note if payment is received in full by due date the interest charge is automatically waived off but in this case payment was not received in full. The outstanding interest that was accruing was applied hence the debit interest levied on account of Kshs 4,062.56 is correct and valid.

I wrote back to them asking them a number of questions:

- Isn’t it illegal to charge interest on funds you have received, and did the money I paid you earn interest for the period you held it?
- Even if I calculate the above balances at 3.5%, the interest is not 4,062. Can you share your calculation?
- All other banks, including my bank NIC Bank has adhered to the rate cap law for their credit card lending. They also communicated this (I have an email from NIC Bank dated 16th June 2016 informing us that ALL credit products were now under the rate cap law). Is this product not under the rate cap law? If not, where is the communication informing your customers this?

They did not respond, so I decided to ask their Twitter account about this. As you can see in the screenshots below, they first state categorically that their credit card lending isn’t under the rate cap law, then when I push them for clarification, they say that it is, without explaining why they then are charging usurious rates to clients.

At first, they state that their credit cards are regulated by their own interest rates”
This doesn’t make sense. A bank cannot charge you interest on what you have paid
Here, they state that credit cards are under the Rate Cap Law, but under “an agreement”, which of course wasn’t communicated to clients

In conclusion, I will be cancelling my Barclays Gold card effective immediately. As much as I have over time built credit with them, and this enables me make my online transactions easily and for large amounts, I cannot afford more interest rate than is due. My advice would be that if you have one with them, look at your statements again, and consider moving to a bank that follows the law.

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