Credit card companies agree to play fair
Jon Trickett has welcomed the news that Credit Companies have agreed with the Government a new set of “fair principles” that will put an end to overnight hikes in credt card charges and give much needed breathing space to borrowers struggling to repay their debts. Jon Trickett said: “As a result of a constituent contacting me directly I raised in Government the issue of credit card companies hiking up their interest rates. The threat of reporting the credit card companies to the Office of Fair Trading obviously worked and I am pleased that the credit card companies have responded to the Government’s two week deadline to clean up their act”.
Credit card companies have agreed to give people at least 30 days notice of an increase in their individual rate and to limit how often they will increase it. This will give people chance to shop around for a better deal and plan ahead for changes to their family budgets. The credit card companies have also agreed to give breathing space up to 60 days to borrowers in difficulty and won’t chase a debt where somebody is trying to get back on their feet and agree a repayment plan with the help of a not-for-profit debt advice agency. The changes will come into effect on the 1st January.
· The Government has been particularly concerned about growing evidence of bad and unfair lending practices being undertaken by credit card lenders – in particular, recent evidence of new practices of card lenders hiking up people’s rates significantly with almost no notice and without any justified explanation, claiming that they now pose a higher risk.
· Two weeks ago Business Secretary
· The credit card industry yesterday came back with a new set of ‘fair principles’ that commit them to putting an end to overnight hikes in credit card charges and give much needed breathing space to borrowers struggling to pay back their debts.
· The statement of principles will bring about three main changes for borrowers.
· First, they set out how lenders will deal with cases we have been seeing of people having their interest rate significantly increased – sometimes by 10% or more, and at short notice. On this, lenders have agreed that borrowers will always be offered an alternative if a lender seeks to increase their rate. All customers will be given the option of closing their account and paying off their debts at the existing rate of interest.
· Second, they’ve agreed to give people at least 30 days notice of an increase in their individual rate and to limit how often they will they increase it. This will make sure people have time to shop around for a better deal and plan ahead for changes to their family budgets.
· And thirdly, for struggling borrowers, industry has agreed that they will not increase rates for customers who’ve failed to make their minimum payments for two months or more, or if the borrower has sought help from a debt advice agency.
· Card lenders will all have fully implemented these principles from 1 January 2009.
· These commitments come on top of the agreement reached at our Credit Card summit that the industry will give a breathing space of up to 60 days to borrowers in difficulty. That means they won’t chase a debt where somebody is trying to get back on their feet and to agree a repayment plan with the help of a not-for-profit debt advice agency.
· Those borrowers who have already experienced hikes should complain to their card provider if they felt their rate increase was unfair. If they are unhappy with the handling of their complaint, borrowers can take their case to the Financial Ombudsman Service. If the interest rate has been increased without justification, the Ombudsman can require the lender to compensate the borrower.