MSE News: Government steps up credit card crackdown 27 October 2009 at 8:09AM in Credit cards 70 replies 7.4K views

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"The Government is attempting to cut up the credit card rule book, launching raft of proposals aimed at reducing the £53.9 billion of debt we owe on plastic as a nation ..."

Read the full story:
Government steps up credit card crackdown

Paulgonnabedebtfree

Well if they enforce higher minimum repayments each months, a situation that I can just about manage at the moment could become one of me being in very deep doodoo.
I do intend to start making higher repayments in a year or two but I'm not ready yet. I do have decent LOB deals on most of my debt so even with minimum repayments, I am making inroads into the capital part of my debt.. Enforcing higher monthly repayments could force me into default which, in turn, would result in me losing those LOB deals.
So, rather than reducing my debt more quickly, such a move would serve to increase it.
Worst case scenario is that it could be the bit that tips me into a bankruptcy that would not have been necessary if the government had left it alone.
The knock on effect could be even worse. Such tinkering, presumablt, would also affect many of my customers' disposable incomes enforcing work cancellations. I could probably manage to offset an increase in minimum payments by increasing my workload. However, with my customers similarly affected, that would almost certainly be impossible.

I suppose I could live on 20p a loaf bread from marked down shopping, water from the tap, and go scrumping apples for the first time since I was a kid.

As the Titanic's deckchairs were re-arranged, the passengers took swimming lessons in the childrens' paddling pool.

Intoodeep

Precisely my thoughts on the subject, if people only have so much they can repay every month, you cannot get blood out of a stone, a reduction in interest rates on credit cards would be far more beneficial and enable cistomers to repay quicker, okay the cc companies would make less but I think they have had a long enough period of screwing people over with ludicrously high interest rates.

Joe_Bloggs

@Paulgonnabedebtfree
What is to stop your credit card companies from acting before any proposed legislation and changing their terms so that they adversely affect you ? Can you reject an increase in the minimum repayment like you can reject an interest rate hike that effects your terms and conditions ? I ask because I don't know.
J_B.

Nick68

This really is insanity, what kind of financial genius has come up with this one, enough people are already struggling to make ends meet and now this!!. This kind of action isn't needed when we're in a recession.

At the minute the payments I make whilst not the bare minimum, cover pretty much the interest charged and what I put on the card each month. I think it should be for individuals to decide when there in a position to reduce their debt and mine won't be for at least another year.

Total Madness!!:mad:

binaryuniverse

No no no.
Thanks to this recession I've been forced to sign a new contract that takes my time and half from me should I work on sundays and bank holidays, also when I do over my contracted hours. Thanks to this I'm barely on minimum wage as it is and am doing my best to pay off my lovely £1 a day overdraft with the Halifax along with about £110 minimum payment a month over all credit cards. Should this go ahead there'd be no way I could pay it all and would be bankrupt within months. Let me decide if I will pay more or not.

Gordon_the_Moron

Hmmmm.... interesting one

Firstly I see no reason to ban credit card cheques unless they ban cash advances, if they do that people will just get round it by using their credit card where they can in order to save cash they wish to spend as cash, card companies will then hike their rates for purchases to compensate. People dumb enough to draw cash all the time deserve to be charged. Unsolicited credit card cheques should absolutely be banned though, for security reasons if nothing else.

Payment hierachy, it is already clear when you take a card out how repayments are handled. If you don't read the terms of a card you are a moron, if you do you will see. If they ban negative payment hierachy it will probably mean a lot less balance transfer/purchase introductory offers because they are subsidised by people dumb enough to trap expensive debt behind them.

Minimum repayments, as has been said it could force people bankrupt if they are forced to increase minimum repayments, however I do think 2-3% is irresponsibly low on a card with a high APR where it barely covers the interest. I think there should be a minimum repayment requirement of 4.5% on new card agreements, for existing ones the wording usually says words along the lines of "It will take considerably longer and cost you substantially more to repay if you only ever make the minimum repayment" it should be changed to say "If you make the minimum repayments for the life of your current debts on this card it will take X years and X months to repay and cost you £X in interest" this might scare people into doing something about it.

Noxs

Paulgonnabedebtfree wrote: »

As the Titanic's deckchairs were re-arranged, the passengers took swimming lessons in the childrens' paddling pool.

Made me laugh! :beer:
I actually think its a good idea as it means people will be forced to repay there debts quicker, thus not getting into as much debt as they would have previously.

Should make sure less people get into the credit interest trap.. ?

milliemonster

Well I personally think its about time something like this happened BUT, I do think that with increasing minimum repayments thjey should do this over a period of time so that as the debt reduces the minimum repayment stays the same, then people who are finding things really tough just maintaining min payments at the moment will still be able to manage but see their debt reducing more over time.

For all new debts, min payments should be set at whatever they decide they should be. It used to be 5% of the balance when I got my first CC and now I think a lot of the have gone doen to 2.5% haven't they?

What I do think is a good idea is not allowing them to hike up the interest rates like they do, fair enough when interest rates linked to libor and BOE are going up but not as they are doing currently. I also think changing the payment hierarchy so they have to put your payment towards the most expensive debt first is a good thing, yes just because it explains that they do this in the T&C's doesn't make it fair or in the consumers interest does it?

Credit Cards currently are a trap for a lot of people, I don't find the T&C's confusing at all but they are longwinded and basically allow creditors free rein to change what they like when they like, there needs to be some control over this and regulation. Some people may say, well if you don't like it, don't take out a credit card then, but again, it doesn't mean to say that its fair, laws are created to protect people and to make things fair, why should credit providers be exempt from this?

Stompa

Gordon_the_Moron wrote: »

Minimum repayments, as has been said it could force people bankrupt if they are forced to increase minimum repayments, however I do think 2-3% is irresponsibly low on a card with a high APR where it barely covers the interest.

Yikes, I'd always thought that the minimum repayment was 5%, which struck me as absurdly low. If it's actually 2-3% then it's unbelievable that such a low rate is actually permissible.

PepeLePew_2

Makes me wonder whether to get a claim in for the increases in APR I got hit with by a few credit card companies up to 29.9 & 34.9% without prior explanation. Okay it may have been in the small print, but a simple warning would not have gone a miss. I've never missed a payment but have been late on a couple of times. Which I don't believe should have demoted me to sub-prime category overnight without a chance to rectify any issue.
I'm very lucky in that I will have paid back my credit card debts in the next 4 weeks. And I'll feel empowered to shake my stick at the companies, especially if these practices are to be regulated against.
I believe that the credit cards may clean up their acts once the regulation comes in to place. But in the meantime many people in debt will be pushed to the brink and over for exploitation of minor misdameanours.