Credit card rule changes approved
By UK CreditCards.com
Britons' reliance on credit cards has become increasingly evident since the onset of the economic downturn. However, a number of recent studies have indicated that households are being stretched to the brink by rising interest rates and the threat of missing repayments. As a result, the government has confirmed a host of new regulations, which are designed to protect consumers and will be given statutory force as soon as possible.
Five new measures
The changes were originally mooted last year, when the Department for Business, Innovation and Skills launched a consultation. The first will see consumers' repayments attached to the most expensive debt first, while new customers will see their minimum repayment covering at least interest, fees and charges. In addition, Britons are being given the right to resist credit limit increases, plus the ability to reduce their limits whenever they choose. Furthermore, they will be granted extra time in order to reject interest rate or credit limit hikes.
Fourthly, credit card customers who are under intense financial pressure will be afforded detailed information regarding the impact of underpaying their bills. This alteration includes a greater responsibility on the part of lenders to make any interest rate or credit limit increases, and the options subsequently available to the affected consumers, crystal clear. The final change will see annual statements offering individuals the chance to compare credit card deals.
Getting in control of finances
The news was welcomed by the UK Cards Association, which revealed that the changes will be incorporated into the Lending Code by the end of the year. Chair Melanie Johnson claimed that the body's evidence on unsolicited credit limit increases and the re-pricing of existing debt underlined the fact that small regulatory alterations were required, rather than a complete overhaul of the credit card industry.
"We believe that, overall, the outcome of the review is balanced and will give consumers the greater control and convenience that the industry and the government wish to provide," she said.
"Now that we have an agreement in place, we can focus on the important task of implementing these changes so that customers can benefit."
Tried and trusted
UK consumers' reliance on credit cards was underlined recently by the Bank of England, which revealed that a total of £61.5bn was owed to providers as of January 2010. While it is clear that the government is attempting to safeguard the most financially vulnerable families, the simple principles of budgeting remain. Britons should not over-estimate their income when applying for a credit card and should ensure that they will always be able to make at least the minimum repayment.
Published: 16 March 2010
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