PM vows to Crack Down on Credit Card Companies

The Prime Minister has announced today (Monday 15th March 2010) that stricter measures are to be imposed on Credit Card companies to ensure they do not take advantage of struggling customers.

The Department of Business, Innovation and Skills put these proposals out to consultation last year. After careful consideration of the responses received the Government has decided to implement the measures put forward.  

In his weekly podcast, Mr Brown said the bad habits of some banks and credit card firms were putting "extra pressure on you and your household budgets just at a time when finances are tight for many".

He added "We want not only to empower and protect you, as consumers, but also to make banks and credit card companies behave responsibly and act fairly. And so we will re-write the rules on lending to end the sharp practices which sting so many credit card holders."

The five new rights are:

• 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; 
• 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.

Mr Brown also took the opportunity to announce 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 £5 million to pay for longer opening hours, according to the PM.

Citizens Advice Northern Ireland is pleased to see that the Government is committed to tackling irresponsible lending. Unfair practices by credit card companies can have a detrimental effect on the already difficult circumstances of those customers who are strugging financially. These measures, if fully imposed and carefully enforced should improve the situation for many people.

We are also fully supportive of any Goverment measure which promotes financial advice and guidance services. The extra funding to be provided  in England and Wales will undoubtedly enable Citizens Advice there to assist more clients in their efforts to move out of debt. We hope that a similar increase in funding will be available to Citizens Advice in Northern Ireland to ensure that Northern Ireland client's have equal access to free, impartial advice.