Bank under fire for 'best buy' loan dodge

Critics this week accused Alliance & Leicester of manipulating its personal loan rates to push its internet bank to the top of the newspaper "best buy" tables.

Moneyback Bank, a subsidiary of A&L, sits at the top of the unsecured personal loan table with a 5.5% deal for someone borrowing £5,000 over three years.

It costs £150.76 per month, or £164.48 per month if payment protection insurance is included.

But Martin Lewis, founder of Moneysavingexpert.com, points out that only those borrowing exactly £5,000 get the table-topping rate. Repayment costs jump alarmingly if you raise or lower the amount borrowed by just £1.

The calculator on Moneyback Bank's own website shows that those trying to borrow £4,999 or £5,001 (with PPI included) pay almost £200 more in total than those borrowing the magic £5,000 figure.

"It can't be a coincidence that this is the amount that [independent data provider] Moneyfacts uses to compare on and supply the newspapers (among others) with best buy tables. I've never before come across such a blatant attempt to manipulate the best buy tables," he says.

A&L denied there was any attempt to influence the Moneyfacts tables.

It said: "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."

This is not the first time that Moneyback has made the news. In July last year it was accused by Moneyfacts of "misleading customers" by only actually offering the money back deals to those taking out its expensive protection insurance.