12 December 2008
Credit card companies have agreed to give more 'breathing space' to people struggling with their debts.
Card issuers backed a new set of fair principles with the Government, including an end to the practice of imposing overnight interest hikes on customers.
The move follows a credit card summit held by Consumer Affairs Minister Gareth Thomas two weeks ago.
Mr Thomas had warned credit card providers that he would ask the Office of Fair Trading to investigate the sector, if they did not commit to treating customers fairly.
But the Government stopped short of forcing credit card companies to pass on interest rate cuts to their customers.
Lenders have now agreed not to increase interest rates within 12 months of a credit card or store card being taken out and not to increase them more often than every six months after this period.
Customers will always be given at least 30 days notice of an interest rate rise.
They will also be given the option of closing their account and paying off the debt at the existing rate if they wish to do so.
Providers also agreed not to increase interest rates for borrowers who have fallen behind on payments or those who have sought help from a debt advice agency.
The deal is in addition to a pledge to give struggling customers 60 days' breathing space in which to agree a repayment plan with a debt advice charity before they begin to chase the outstanding sums.
Mr Thomas said: "I recognise that these changes will not be without financial pain for credit card companies."
The Government said borrowers who had already experienced a hike in their interest rate - which in some cases could be as high as 10% - should complain to their card provider.
They can also report the matter to the Financial Ombudsman Service, if they are not happy with their lenders' response.
The Government will ask the OFT to monitor the industry's progress on implementing the new principles, which will come into effect on January 1.
Source: uk.biz.yahoo.com
