Unsolicited credit card cheques are to be banned and credit- and store card regulation reformed under new proposals published today in the government’s Consumer White Paper.
‘A Better Deal for Consumers – Delivering Real Help Now and Change for the Future’ sets out proposals to promote responsible borrowing and lending.
Which? welcomes the white paper
Which? chief executive, Peter Vicary-Smith, said: ‘We’re glad that the Government is finally addressing issues on credit and indebtedness that we’ve campaigned on for years.
‘Many of the measures outlined in the white paper are overdue but welcome. The important thing is that no time is wasted in turning these proposals into tangible benefits for consumers.
‘The jury is out on the creation of the role of Consumer Advocate, for the devil is in the detail. It will be interesting to see how the role will fit in with the organisations and roles that already exist.’
New measures to tackle problem debt
The new measures in the white paper include:
- Consultation on significant reforms to the regulation of credit and store cards, putting consumers more in control of their borrowing and helping to guard against people running up credit and store card debts they can’t pay off.
A ban on unsolicited credit card cheques which can tempt consumers to borrow money they cannot afford, at a higher rate of interest than regular credit card borrowing.
- A review by the Office of Fair Trading (OFT) of the market for high cost credit, such as pay day loans and door step lending.
- Appointment of a new Consumer Advocate responsible for co-ordinating work to educate consumers and to help them get their money back when things go wrong.
- A new self-help tool-kit developed by the Money Advice Trust and a new Debtor’s Guide from the Insolvency Service to help people in debt take control of their finances.
The white paper also includes plans for new powers for the courts to ban persistent rogue traders.
Regulation of credit and store cards
The review of the regulation of credit cards and store cards will examine a number of areas:
- if restrictions should be placed on the raising of interest rates on existing debts
- if minimum monthly repayments should be raised to combat debt levels
- if the practice of increasing borrowers’ credit limits without their prior consent should be banned
- what order debts built up on a credit card should be paid off
New requirements will also be introduced on all lenders to check consumers’ credit-worthiness before they borrow, and to fully explain financial products including the consequences of failure to repay. Lenders will also have to comply with new OFT guidance to tackle irresponsible lending.
Mandelson – ‘We need to do more’
Business Secretary Lord Mandelson said, ‘The Government is determined to help consumers during the current economic difficulties. Many family budgets are under unprecedented strain.
‘We’re already providing targeted help to protect people from falling into debt and to support those who get into difficulty. But we need to do more. Our aim is to help consumers make better informed borrowing decisions.’
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