Credit card industry responds to Government proposals

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The UK credit card industry has agreed to Government proposals to help credit card holders manage their debt.

As part of a crackdown on credit card companies, the Government recently warned credit and store card firms to “clean up their act.”

One of the main issues was for credit card companies to stop increasing interest rates when a customer fell behind with their repayments.

In addition, the proposals included changing the order of priority for credit card repayments, so that the most expensive debts are paid off first.

Furthermore, the practice of raising borrowers’ credit limits without their prior consent will be banned.

However, a 230-page report has stated that consumers would not benefit from some of the proposed changes.

Melanie Johnson, chair of the UK Cards Association and a former Labour MP, said the industry was “keen to give consumers as much control of their finances as possible”.

However, she adds that the Government’s options would “limit the options on offer by the industry” which has been steadily declining since 2005.

She continues: “Our approach will deliver big improvements to customers without smothering competition and choice, which customers value and gain significant benefit from. It will also maintain features which are vital to lenders being able to lend responsibly.”

The Association did say that it agrees that people paying off their credit cards should see the most expensive debt paid off first.

The Nationwide building society has been one of the few financial institutions that has been vocal on this subject and has regularly called on the UK credit card industry to abandon the practice of adverse order of payments.

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