New proposals have been brought in to try and provide greater protection and flexibility to credit card users in the UK, according to recent reports.
The new measures form a combination of the proposals that were put forward by the government and proposals that were put forward by lenders. The government had put forward a range of proposals originally, but the credit card industry defended some of its methods with a lengthy report to respond to those proposals.
Whilst the package of measures does not go quite as far as some industry officials may have hoped they do provide some additional protection and flexibility for credit card users.
There had been talk of the minimum repayments being increased for credit cardholders but there was concern that consumers would struggle to manage, especially if they had more than one credit card.
However, lenders will have to charge new account holders a minimum of 1 percent of the amount spent, plus enough to cover any fees, interest, and charges.
The Consumer Minister, Kevin Brennan, stated: “In our consultation it was made quite clear by consumers that they might not be able to manage their current debts if they had to pay off more each month. People with several cards would have had less flexibility to deal with their debts.”
For this reason existing cardholders with balances on their cards will continue to make the minimum repayment requested by their individual lenders.
A number of measures have been put into place as part of the proposals, which are expected to come into play at the start of next year.
This includes a ban on increasing credit limits for those with financial problems, a sixty day period for cardholders to reject any increase on their existing debts, and the opportunity for cardholders to opt out of interest rate increases.
Those that want to reject increases will have to close their accounts, but will be given reasonable time to clear the balance by their lender.
Tags: credit cards, lenders, package, minimum repayments, debt, greater protection
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