Over the weekend, credit card firms were subject to the wrath of Gordon Brown over their ability to raise interest rates without providing any warning, or an explanation. Speaking in a podcast, Mr. Brown said “Sharp practices by lenders – such as hiking interest rates on existing debts without explanation, sending out unsolicited credit card cheques and raising credit card limits without being asked – should end.”

Under the new proposals credit card companies will be unable to increase the limit of a customers credit card without first subjecting them to a credit check. Consumers will also be given a 14-day cooling off period in which to step away from a credit card or store card without giving a reason. Customers will also be able to compare offers much more clearly with a clearer disclosure of applicable fees.

The move by the Government follows hot on the heels of the USA where President Barack Obama signed a ‘credit card bill of rights’ back in May which would stop increases in unfair interest rates, unfair debt traps on late payments and plainer language on bills.

It was a little under 12 months ago when, at a credit card summit, the Government and credit card companies brought forward a number of short-term measures, including a suspension of debt collection for 30 days where a customer is seeking debt advice from a charity and also interest rate increases where stopped if a customer had missed two minimum payments. Increases in interest rates more than once every six months were stopped and in the first 12 months of having a card.

With credit card debt at an all time high, and many ompanies looking to debt recovery agencies for a lending hand in recovering these payments, the move should help all around in keeping payments manageable without escalating rapidly.

Government Versus Credit & Store Cards is a post from: Federal Management