By Channel 4 News
Credit card rules could be changed to ensure the most expensive debts are paid off before cheaper amounts to give consumers a better deal.
Card providers usually force customers to pay their most expensive debts first, so consumers who transfer outstanding balances as part of an interest-free promotion have to pay off the amounts they have transferred before they can pay off any amounts interest-attracting amounts for purchases they later make using the new card.
But the government has told the card providers to "get their act together" and new rules could also increase the minimum monthly repayments from their current low level to avoid customers taking decades to clear borrowings.
Consumer Minister Kevin Brennan said: "Card companies have to get their act together and do more for consumers.
"My opinion is clear, the current relationship between card companies and consumers cannot go unchallenged. We need to put the customer back in the driving seat."
Other moves being considered by ministers are a ban on increasing credit limits without prior consent, possibly by forcing consumers to opt-in, and restrictions on rate hikes on existing debts without proper explanation.
Mr Brennan added: "It is not acceptable for card companies to impose complex and confusing terms and conditions that can leave people baffled, or to increase interest rates without a proper explanation.
"Consumers have a real responsibility to manage their finances properly, but they also have a right to clear information to enable them to do that. Consumers should not feel each month as if they've been exploited or disadvantaged."
The Government said in July's Consumer White Paper that it would tackle the way credit card repayment policies could lead to bigger than expected interest charges. It is already legislating to ban unsolicited credit card cheques in November. The current consultation will run until January 19.
Fiona Hoyle, head of consumer finance at the Finance and Leasing Association, said: "Many of the measures proposed today by the government have been under discussion with the industry for some time and reflect rapidly-changing market conditions.
"The industry's commitment to helping consumers is shown by the many measures already taken in recent months.
"But as our statistics today show, credit spending is still declining. We must avoid the risk of reducing further the availability of credit or increasing the potential for over-indebtedness.
"More regulation of the wrong kind risks further shrinkage. For many people the primary concern will be getting access to affordable credit. We must do nothing to make that more difficult.
"We will be working closely with the Government on the practical implications of their proposals to ensure a fair deal for all."
Posts
