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Half a million
pounds' savings expected for North East Somerset consumers with new measures
to manage credit card debt
Around half a million pounds is expected to saved by North East Somerset
consumers following a new agreement drawn up between the Government and
the credit card industry.
The area's local MP Dan Norris today welcomed the plans, which will be
introduced this year and will eventually become law.
"These key changes will give consumers a much better deal when it
comes to managing spending on credit cards," he said. "It will
also mean that those already in financial difficulty will be offered real
help and will not be able to just increase their credit card limit."
The new agreement with the card companies will mean:
" A new right
for card holders to have 60 days to reject interest rate and credit limit
increases
" Card holders will pay off the most expensive debt accrued on their
card first: cash withdrawals, for example
" Better repayment plans for new customers
" A ban on credit limit and rate increases for people at risk of
financial difficulty
Across the UK consumers
will save around £300 million a year, though one industry forecast
predicts the saving will be closer to £500 million. It means around
half a million pounds in savings for people in each of the country's 640-plus
Parliamentary constituencies.
"Until now, the credit card industry has often been seen as taking
the most money from those in the worst financial situation. These measures
should redress that balance and show an industry that's working in a more
responsible manner," added Dan.
Credit card companies have often used payments from customers to pay off
debt at lower interest rates - including zero per cent balance transfers
- until tackling outstanding debt at a much higher rate. That will no
longer be the case.
There will also be easier access to credit records online for £2
(free of charge from June 2010) under a new agreement with the three main
credit reference agencies. Access will be free for victims of ID fraud
and people receiving debt advice.
Other measures included in the agreement will be a new regulation and
guidance requiring lenders to check customers can afford a loan. This
means that lenders which fail to give clear information about loans and
don't offer a 14-day cooling off period run the risk of losing their licence.
There will also be more protection for consumers who suffer a sudden drop
in income. Banks and lenders have to look more favourably on accepting
token payments or will more readily consider reducing or freezing interest
and charges.
Lenders have between April this year and the end of January 2011 to introduce
these changes, with the Government hopeful that many will introduce the
measures as soon as possible.
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