Consumers to save millions under new credit card protection

a�?Consumers

The Government-led crackdown on credit card companies is expected to save consumers around A?300 million a year.

The crackdown comes after the Government warned credit and store card firms to a�?clean up their acta�? after it launched a review of the industry in a consumer White Paper in July 2009.

According to Prime Minister, Gordon Brown, the cost of borrowing will be slashed after new rights, coming into effect by January 2011, will put a stop to a�?irresponsible lending practicesa�?.

New measures include consumers being able to opt out of any increases in their credit limit and they will be given 60 days to reject changes in the interest rates charged on their existing debts.

In addition, new rules will see a change in the order of priority for credit card repayments, so that the most expensive debts are paid off first.

This could reduce the amount that borrowers will have to pay off and cut the amount of time needed for some to clear their card debts.

Currently, only a small amount of lenders ensure that the most expensive debt on a card is paid off first.

However, while Peter Vicary-Smith, chief executive of the consumer group Which?, welcomed the changes, he said: a�?there is still more to be done to ensure vulnerable consumers are protected.a�?

Recent research revealed that despite the Bank of Englanda��s base rate being held at the historically low rate of 0.5% for one year, average credit card interest rates have risen to over 18% – the highest level since 1998.

According to many experts, providers are passing on the cost of a rise in defaults – reflected by the squeeze on British households due to rising unemployment.

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