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A titanic battle ensues this week with the Government pitting themselves against Credit and Store Cards, with the promise of a fairer deal for consumers should the Government come out on top.
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.
