Gov takes on unfair credit card practice
Gov takes on unfair credit card practice
Tuesday 27th October 2009
The government has today taken on unfair credit card practices and charges, saying they could be outlawed under new proposals.The plans, launched by the Department for Business Innovation and Skills, would stop card firms from raising interest rates on existing debts, as well as stopping them from increasing a cardholder's spending limit without authority.
The UK has 62.8 million credit cards with 65.9 per cent deemed as being active and having a balance outstanding.
The move toward fairer practice has been welcomed by the industry.
Michelle Slade, spokesperson for Moneyfacts.co.uk, said: "Sadly, consumers are generally unaware that most credit card providers apply their payments to the cheapest debt first.
"There is an interesting contrast between this practice and the usual advice that a consumer would receive from debt agencies, which is to pay off the most expensive debt first. A change to this policy would be a real step forward for consumer fairness in the credit card market."
"We think it's simply wrong to entice people into spending more than they can afford and then to squeeze as much money out of them as possible. The sooner these practices are stamped out, the better," Which? personal finance campaigner Phil Jones added.
The government's proposed changes include:
Changing the rules that set out the order in which debts built up on a credit card are paid off
Raising the minimum monthly repayments levels to encourage people to pay off their debt faster.
Banning the practice of increasing credit limits without prior consent
Placing restrictions on increasing the interest rate on existing debt
Consumer minister Kevin Brennan said today: "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."
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