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New rules to save credit card customers millions

New rules to save credit card customers millions

Category: Credit cards

Updated: 15/03/2010
First Published: 15/03/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Credit card customers are to benefit to the tune of millions of pounds as a result of new rights that were announced today.

There are more than 30 million credit card holders in the UK, holding around 58 million cards. They will now be afforded a number of new rights which have been agreed by the Government and the credit and store card companies.

The changes are a result of feedback from thousands of customers to an earlier consultation, and will be introduced by the industry this year.

Fiona Hoyle, head of consumer finance at the Finance and Leasing Association, said that the new rules will give customers a much greater say in how their credit and store card accounts are managed.

The five new rights for credit card holders are:

  • Right to repay: consumers' repayments will always be put against the highest rate debt first. For consumers opening new accounts the minimum payment will always cover at least interest, fees and charges, plus one per cent of the principal to encourage better repayment practice.
  • Right to control: consumers will have the right to choose not to receive credit limit increases in future and the right to reduce their limit at any time; and consumers will have better automated payment options. Consumers will be able to do both of these online.
  • Right to reject: consumers will be given more time to reject increases in their interest rate or their credit limit.
  • Right to information: consumers at risk of financial difficulties will be given guidance on the consequences of paying back too little; and all consumers will be given clear information on increases in their interest rate or their credit limit including the right to reject.
  • Right to compare: consumers will have an annual statement that allows for easy cost comparison with other providers.

Other measures designed to ensure responsible borrowing and lending include a 14 day cooling off period in which loans can be cancelled, and free access to personal credit reports for those consumers that have fallen victim to ID fraud and those receiving debt advice.

The cost of checking credit records online will fall to £2 for everybody else.

"This is a big win for consumers and helps to put them back in the driving seat with their finances," commented Consumer Minister, Kevin Brennan.

"When we asked the public what changes they wanted to see we discovered most people did not know the charges worked this way. They thought it was unfair and confusing, and they naturally wanted to pay off their most expensive debts first."

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