Citizens Advice Welcomes Clamp Down on Credit Card Providers
Monday 15th March 2010
Citizens Advice welcomes the package of measures unveiled today to include new rules to prevent irresponsible lending and crack down on the “sharp practices” of some credit card companies.
In the last 3 years the Dealing with Debt service operated by Citizens Advice and funded by the DETI has helped over 6,000 people and dealt with in excess of £53million of debt in Northern Ireland. A third of that debt comes from credit cards and it by far the most common type of credit that people get into difficulty with.
Citizens Advice supports any proposals aimed at improving the situation for those who find themselves in financial difficulty. Scott Kennerley, Money Advice Project Manager said: “We welcome the Government’s commitment to tackling irresponsible lending. Unfair practices by credit card companies can have serious consequences for those who are struggling financially and further exacerbate their debt situation. We hope that these measures will be carefully enforced to ensure that they help the most vulnerable and ensure that they are not pushed into the arms of the most expensive forms of credit and/or unscrupulous lenders thereby making their situation worse.”
Following a review of the Regulation of Credit and Store Cards the Department for Business Innovation & Skills (BIS) has announced five new rights to give consumers a fairer deal and more control over the way they can choose and use their credit and store cards:
- Right to repay: consumers’ repayments will always be put against the highest rate debt first. For consumers opening new accounts the minimum payment will always cover at least interest, fees and charges, plus 1% of the principal to encourage better repayment practice.
- Right to control: consumers will have the right to choose not to receive credit limit increases in future and the right to reduce their limit at any time; and consumers will have better automated payment options.
- Right to reject: consumers will be given more time to reject increases in their interest rate or their credit limit.
- Right to information: consumers at risk of financial difficulties will be given guidance on the consequences of paying back too little; and all consumers will be given clear information on increases in their interest rate or their credit limit including the right to reject.
- Right to compare: consumers will have an annual statement that allows for easy cost comparison with other providers.
In addition, consumers who are at risk of financial difficulties will be protected through a ban on increases in their credit limit as well as the ban on increases in their interest rate, and card companies will work with debt advice agencies to agree new ways they will provide targeted support to consumers at risk to help improve their situation before they are in too deep.
In announcing these new rights the Prime Minister, Gordon Brown also announced the launch of a new ‘money guidance service’ that will be funded by the banks saying it should help a million people choose financial products and deal with debt. He added that the Government will also give the Citizens Advice Service an extra £5million to pay for longer opening hours.
Derek Alcorn, Chief Executive of Citizens Advice said: “We are fully supportive of Government measures to tighten up on credit card companies. In particular, we feel that arbitrary unilateral increases in interest rates should be banned.. The extra funding to be provided in England and Wales will undoubtedly enable Citizens Advice to assist more clients in their efforts to manage their debts. We hope that a similar increase in funding will be made available to Citizens Advice in Northern Ireland to ensure that those suffering from debt here can have equal access to the free, impartial advice they need to get control of their finances.”
Notes to Editors:
1. Citizens Advice is the largest advice charity in Northern Ireland working against poverty, meeting the information and advice needs of some 92,000 people per year and dealing with over 324,000 issues. Sixty per cent of queries relate to social security. Citizens Advice Northern Ireland has formal links to National Citizens Advice in England and Wales and close working relationships with Citizens Advice Scotland (CAS). Together the three associations constitute the largest advice network in Europe, with over 60 year’s experience of providing advice and information to the public. For more information see www.citizensadvice.co.uk.
2. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
3. Citizens Advice is currently managing a £1.2m contract from DETI for the provision of debt advice in Northern Ireland, and a contract from the Social Security Agency for benefit take up which is targeted on 25,000 people.