MSE News: Government steps up credit card crackdown

Mozette

I do think these need phasing in gradually, or for new agreements or it could cause as many problems as it solves.

Degenerate

djm1972 wrote: »

Sure; people should be more careful and understand exactly how their card works, but the fact is that people aren't that careful

This is true, but it raises quite a fundamental philosophical point: should we all suffer restrictions because of the ineptitude of a few? I say no.

Paulgonnabedebtfree

Joe_Bloggs wrote: »

@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.

I suppose that is always a possibility. I do wonder if there is a getout clause there though because it could be argued that the CC company did it in order to try to force the end of favourable (to me) LOB deals. This could be one of those instances where T & Cs are overriden by rules on "unfair conditions". At least I hope so anyway. Taking this to a more ridiculous extremity, what would there be to stop a CC company offering say a 7.9% LOB deal and after say three months, increasing the payback rate to 50% of the total debt? Then, when the borrower can't repay, they terminate the LOB deal and throw a ridiculously high interest rate at them.
All theoretical of course.

Paulgonnabedebtfree

Noxs wrote: »

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.. ?

Glad you liked it .

I can see the sense of making big changes to new credit deals. It's clear that things have to change. We are in this mess partly due to cheap credit being thrown around fairly indiscriminately. Not all of us are frivolous. I couldn't have predicted the ending of a longterm relationship nor could I predict being off work for so long to treat a major illness (succesfully I'm glad to say).
Some sort of sliding scale with minimum repayments might make more sense. Something like pegging the minima at the current £p level and enforcing a higher % per month on new borrowing. Mind you, I currently regard the slightly lower repayments each month as a small cushion for when my mortgage eventually rises. My compulsory card repayments are rather less now than they were last January purely because the repayment on each card goes down a pound or two each month. However, it is fair to say that my Hali card minimum only reduces about 40p each month as they only take 1%.
If the dark stuff really hits the fan I suppose I might have to get a lodger. I really don't want that though. I've lived on my own in a 2 bed flat for a long time and such a move would feel like a massive intrusion. It's lovely to be able to shut the front door and block the world out if I choose to.

Paulgonnabedebtfree

Stompa wrote: »

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.

Depends on the interest rate really. With the LOB deals that I have, a decent chunk is actually knocked off the capital each month. An approximate example:- minimum payment of £160 a month can equate to about £55 interest and £105 off the capital if the rate is around 6 - 8% . Still not ideal but at least it's coming down at some sort of rate. It also has a knock-on effect onto subsequent minimum payments because the total debt (and therefore the next minimum payment) are coming down faster.

Paulgonnabedebtfree

PepeLePew wrote: »

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.

No no. They really should stick with robbing Peter to pay Paul

Stinkybell

It's a shame that credit card providers are attempting to get away with the absolute opposite whilst they can. Barclaycard wrote to me last week offering to lower my minimum payment to interest + 0.25%, trying to sell it to me as helping me out in this difficult time. I know better than to take them up on the offer (and don't pay minimum anyway) but I wonder how many people will be sucked in by this clever ploy?

Degenerate

Stinkybell wrote: »

It's a shame that credit card providers are attempting to get away with the absolute opposite whilst they can. Barclaycard wrote to me last week offering to lower my minimum payment to interest + 0.25%, trying to sell it to me as helping me out in this difficult time. I know better than to take them up on the offer (and don't pay minimum anyway) but I wonder how many people will be sucked in by this clever ploy?

If your Barclaycard balance was under their 6.9% life of balance offer, and you had a balance on another card with a standard 18%ish rate, it would make perfect sense to make minimum payments to Barclaycard and apply the rest of your available cash to the other card.

Navvie

The only proposal that instantly gets my attention is to increase minimum payments.
The heavy-handed stick and no-carrot approach will surely lead to more defaults, and more IVAs/bankruptcies.

The suggestion to introduce a 'recommended minimum' is fantastic, I don't know if this is actually in the white paper or if its Martin's own suggestion, but education about debt and adding the 'recommended minimum payment' to credit card statements - with some wording on each statements highlighting how much money/time it would take to clear the current debt at minimum payment, and recommended minimum payment - would really open up a lot of people's eyes as to how much money they are paying in interest.

RuthMarianna

I agree that there should be a suggested payment which clears the debt in 3 yeras. I am concerened that if people have already got debt that they may not always be able to afford more than the current minimum payment and will default and incur fines. If people have taken on debt but checked they can at least afford minimum payments each month whilst it is better for them to pay it off sooner to change the rules once they have incurred the debt is unfair.