The Liberal Democrat-Conservative government today outlined its plan to bolster consumer rights on bank charges and to outlaw excessive interest rates charged on credit and store cards.
Credit and store card rights
The coalition’s programme for government includes proposals to give regulators new powers to define and ban excessive interest rates on credit and store cards, as well as introducing a seven-day cooling-off period for store cards.
The latter measure will stop retailers offering customers instant credit in-store, often at an APR of up to 29.9%. When Which? investigated store cards, our researcher, posing as a student with an annual income of just £1,000, was offered instant credit of £2,750 across six cards, with BHS alone offering him a limit of a massive £1,500. The new measure, while not necessarily preventing inappropriate credit being taken out, will at least give the consumer the chance to reconsider their application for credit and will remove the temptation of taking out credit to pay for impulse purchases.
The government has also issued proposals to oblige credit card companies to provide better information to their customers in a uniform electronic format that will allow consumers to find out whether they are receiving the best deal.
Government pledges to end unfair bank charges
Today’s programme for government also includes promises to introduce stronger consumer protection in the banking sphere, including measures to end unfair bank and financial transaction charges. For more information about whether you can put in a claim now, read the free Which? guide What you can do to reclaim unfair bank charges.
Credit card pledges are a promising sign
Martyn Saville, Which? credit card expert, commented: ‘It’s promising to see a pledge on excessive credit card interest rates in the government’s policy list, although the devil will be in the detail, particularly in the definition of the word ‘excessive’. With Bank of England base rate still at just 0.5%, many consumers will feel that the current average credit card APR of around 17% is already excessive. And that’s not to mention the high interest rates charged on other unsecured credit, such as borrowing from doorstep lenders, which must also be included in the government’s review.’
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