The Government has today announced new proposals to try
to ensure that credit and store card companies give people
a fairer deal, in the latest of a series of reforms designed
to make financial services work for consumers.
Consumer minister Kevin Brennan said: “Card companies
have to get their act together and do more for consumers.
“The Government is putting forward new measures today
which we believe will give consumers a better deal.
"I want to hear from the most important people, the
customers, about their experiences and to get their views
on our proposals. My opinion is clear, the current relationship
between card companies and consumers cannot go unchallenged.
We need to put the customer back in the driving seat.
“It is not acceptable for card companies to impose
complex and confusing terms and conditions that can leave
people baffled, or to increase interest rates without a
"Consumers have a real responsibility to manage their
finances properly, but they also have a right to clear information
to enable them to do that. Consumers should not feel each
month as if they’ve been exploited or disadvantaged.”
The Government has today published a consultation document
giving the detail of proposed changes in the law on repayment
policies imposed by credit and store card providers.
The consultation builds on action already taken by the
· Changing the rules that set out the order in which
debts built up on a credit card are paid off. Most credit
card companies make customers pay the cheapest debt off
This is a particular problem for consumers who withdraw
cash on their card, typically charged at 25 per cent APR
or more. They are often the most likely to be vulnerable
to financial difficulties. The Government is considering
rules that would mean the most expensive debt is paid off
· Raising the minimum monthly repayments levels
to encourage people to pay off their debt faster.
Around one third of people who don’t pay off their
credit card bill in full each month make only the minimum
repayment. This can mean consumers take decades to pay off
the debt. The Government is considering the introduction
of a mandatory higher minimum payment each month.
· Banning the practice of increasing credit limits
without prior consent
It is common practice for credit and store card lenders
to increase credit limits without consent. According to
recent research by Uswitch 5.7 million consumers saw their
credit limits changed in this way in the last year. The
Government is considering banning this practice or requiring
consumers to opt-in to credit limit increases.
· Placing restrictions on increasing the interest
rate on existing debt
The Government is concerned about interest rates being
increased without proper explanation. Consumers using their
cards responsibly and making payments on time should not
pay the price for excessive risk-taking by financial institutions.
The Government is considering banning or restricting the
re-pricing of existing debt.