Credit card firms accept ‘fairness’ charterFebruary 2009
Credit card companies and the UK government have agreed ‘fair principles’ on interest rates and charges.
The cost of card borrowing in Britain has risen during the past three months despite three large cuts in the Bank of England base rate, and consumer affairs minister Gareth Thomas had warned that the Office of Fair Trading would investigate if ‘strong commitments’ to better conduct were not drawn up.
After the principles were agreed with APACS, the UK trade body for credit card operators, Thomas said: ‘I recognize that these changes will not be without financial pain for credit card companies, but it was vital that we nipped in the bud the bad practices that were causing real hardship for borrowers.’ Among Apac’s 29 members are Barclays, Capital One, Egg, and Lloyds TSB.
The voluntary principles, which came into effect on 1 January, tie companies to various commitments, both on the permissible conditions of interest rate increases and company conduct after such rises are made. However, they do not require companies to pass on interest rate cuts to consumers.
The principles say there should be no interest rate increases where a customer has failed to make the minimum contractual payment requested, or where the customer is in ‘serious discussion’ with a not-for-profit debt advice agency.
When interest rates are increased, customers should also be able to close the account and repay the balance at the existing rate within a ‘reasonable’ period.
Compliance with the principles will be monitored by the Banking Code Standards Board and the Office of Fair Trading.
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