MSE News: Government steps up credit card crackdown

milliemonster

You see, I have a crap credit score, and this is not due to anything adverse, no missed or late payments, always overpay, no CCJ's/defaults/arrears, on electoral role, but I am almost up to my limits on my cards (within a few hundred pounds) and this is why I have a crap rating so conseqently some providers have hiked up my interest rates (or attempted to) because I am using the credit they offered me.

Now to me this is just bizarre, they offered me a credit limit and I have used it, I have never been over my limit but yes I have used the facility they provided me with, so why then does that now make me so risky? if it makes me so risky then why did they offer it to me in the first place? and why as soon as I do use it do they then start putting up the interest rate?, this is how it traps you.

What is the point in offering credit and wanting you to use it, then when you do start getting all panicky that you will default (when nothing in your credit reports suggests you will)

This is why I agree with Martin that credit providers should give a better explanation than 'because of your credit score' as an excuse to put your rates up, because in my case, I have ALWAYS abided by the T&C's I signed up to when I opened the accounts, I have stuck to my side of the deal and now they are penalising me for it and my credit rating is in tatters!

thursday

PepeLePew wrote: »

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.
I am already doing this and think all of you in similar situation should.

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 recently became lucky anough to be able to re-pay all my debts. Just as I was about to do so, I decided to go over every single one of them and analyse them fully. So, I pulled out all statements, listed all data in excel sheet....
The result was shocking and I felt "empowered" (to use your word).
I immediatelly stopped all my minimum payments and decided not to pay a single penny untill I get in writing answers to my questions on their (Egg, Mbna, Rbs and Barclays) practice of increasing limit one month and then rate jacking the following one (sometimes by 6%). I stated each letter with "I want to repay what I owe you and need clarification ...."

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.

I believe the proposals are long overdue. I think they should be implemented from 1990 onwards and every single one of debts recalculated. That would help people who are struggling to make minimum payments.
I believe time will come when those cowboys will be repaying people monies they robbed them from.
Apsolutely.

Cell

People who have significant debt are not, on the whole, looking for cheap ways out nor to default on their agreements. Debt has been taken out with an understanding that it has to be paid back and most people must realise that the less they pay per month the more they'll pay in the long run.

However that debt was taken on with an understanding that you would pay back a minimum of 2 or 3% of the monthly balance. In the current economic circumstances this level of repayment is helping some people tick over as jobs are lost or pay reduced. An increase in the minimum payment would crush many of those people, force them into IVAs or even bankruptcy. Surely it is not the aim of policy to damage people in the name of helping them?

One thing that could be done is that existing contracts should continue with, say, a minimum of 2% being repaid on those cards, but as from a certain date any new cards must attract a minimum of 4-5%. That way those who could not afford a 250% increase in their monthly payments would be protected while those taking out new credit cards would be clear in what was expected of them.

I'm not point scoring in asking what would happen if the payment terms of UK Government debt was suddenly altered to the point that payments were more than doubled? I would imagine that might cause a bit of a problem, and so it is for individuals who are trying to manage their finances.

Excess debt is undesirable, but we are where we are. There is no point in having grand ideas of helping people pay off debt more quickly if, by doing so, a significant portion of those people are unable to meet the payments thus forcing them and their families to the wall. As unemployment increases and pay is frozen it could be a recipe for absolute disaster.

squack

Our nanny state interfering again. credit cards are run as a business, by using them correctly they can make your life a lot easier.

By clamping down on practices like negative payment hierarchy the canny card user will eventually lose many benefits like cashback and cheap balance transfer deals.

This is because the card providers will no longer be allowed to make enough money from the disorganised fools that get trapped in a debt spiral and pay huge amounts of interest.

thursday

squack wrote: »

Our nanny state interfering again. credit cards are run as a business, by using them correctly they can make your life a lot easier.

By clamping down on practices like negative payment hierarchy the canny card user will eventually lose many benefits like cashback and cheap balance transfer deals.

This is because the card providers will no longer be allowed to make enough money from the disorganised fools that get trapped in a debt spiral and pay huge amounts of interest.

you are obviously organised fool working for Egg or such

Noble_Savage

Some good points in the posts above.

The Govt is asking for consumers to get involved. If you want to give your feedback on the proposals or have your own ideas, visit the Department for Business Innovation & Skills link below.

http://www.bis.gov.uk/creditconsultation

*MF*

Draw a line in the sand?

From a set date

- impose the new standards on all new cards.

- impose restraints on the CC Companies for fair treatment on all pre-existing cards.

That way those with existing cards can manage their affairs as best they can with the Card Companies limited as to what actions they can enforce, and those wanting credit anew do so knowing what the terms and conditions are.

PepeLePew_2

*MF* wrote: »

Draw a line in the sand?

From a set date

- impose the new standards on all new cards.

- impose restraints on the CC Companies for fair treatment on all pre-existing cards.

Yes, and a middle time period from say a month before the official start of the credit crunch to the set date for the new standards.
Whereby all rate-jacking increases are repaid to the consumer.

I'm sure I'm not the only one to have been pushed to the edge with "We can't rob Peter anymore so we'll rob Paul" astronomic rate increases at the time that Bank of England Interest rate plummeted.

Degenerate

Taking the proposals one by one:

1. Increased minimum payments

• Lenient approach: Improved information on the dangers of low minimum payments.
• Launch a new 'recommended minimum' option, which people can select to clear debt in a certain time.

No problem with either of these. Educating the clueless is always an acceptable compromise.

• Tough approach: Legislation to provide a limit on how low the minimum repayment can be.

This would hurt those who are struggling, limit the ability of those with multiple credit lines to pay off the most expensive ones first, not to mention enrage the stoozers!

2. Automatic credit limit increases

• Lenient approach:Better information on the dangers of automatic rises.
• Only allow limit rises if consumers opt-in.

Again, no objection to education - although the information is already there for those that care to look.

• Limiting the size of increases.
• Tough approach: Banning automatic rises.

These would be nanny-state measures interfering in the private agreements between individuals their credit card companies, as such I would vociferously oppose them.

3. Anti ratejacking measure

• Lenient approach:Clearer information on rate rises.
• Regulation that defines what lenders must take into account before repricing.
• Regulation to limit the size and frequency of any rises.
• Tough approach: Banning the practice.

IMO these are all quite irrelevant since the opt-out came in at the beginning of the year. As long as the account holder can avoid the usurious interest rates on their existing debt, the card issuer should be free to offer whatever terms they want on further debt - the account holder does not have to take them up on it.

The only improvement I could see is making it opt-in, ie if the provider wants to rate-jack, then they should automatically apply the run-down measures on the account with it's existing debt, and require the customer to opt-in to the higher rate to continue using the card.

4. How your payments are applied

• Lenient approach:More information on how firms apply payments

Again, I have no objection to educating the sheeple.

• Lenders must apply all payments to the debt proportionately.
• Repayments clear cash withdrawal amount first.
• Tough approach: To apply payments to the most expensive debt first (as Nationwide does).

Again, this would be nanny-state interference into the terms that individuals may agree with their providers. (That's not to say I'm happy with most card's payment hierarchies, but I am able to work around them, and I don't think it's any of the government's business.)

djm1972

I think they're good proposals on the whole. Sure; people should be more careful and understand exactly how their card works, but the fact is that people aren't that careful - mistakes are easy to make and with the current almost universal standard of payments being applied to the lowest APR balances first a simple mistake can end up being extremely costly.

That aspect of credit card operation is pure greed on behalf of the banks and has no place co-existing with a responsible lending policy.