Keynsham's MP welcomes new moves on credit cards

Keynsham’s MP Dan Norris has welcomed new moves to manage credit card debt.

Around half a million pounds is expected to be saved by North East Somerset consumers following a new agreement drawn up between the Government and the credit card industry. 

Mr Norris said: “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.

Mr Norris said: “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.”

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.