MSE News: Labour pledge to cap credit card interest a 'positive step', says Martin

bigadaj

So who's doing teh calculations on this, is it jewemy or will he delegate to DIANE ABBOTT!!!

zagfles

One-Eye wrote: »

It's actually a good idea that may help a few people.

Yes, loan sharks for instance.

mjm3346

As Martin is generally opposed to any changes being retrospective it should only apply to agreements made after (if) the law comes in.

If it seriously looks like it would come in then minimum payments would simply be considerably increased (possibly leading to a number of defaults and trashed credit records).

Timbosaurus

I think it's treating the symptom rather than the disease. Personal debt has rocketed in recent years because wages have stagnated while inflation erodes them in real terms. The economy has kept growing because the difference has been put on the never-never.

That said, it's a policy issue which is going to strike a chord with an awful lot of people. Smarter politics than it appears.

eddddy

Silvertabby wrote: »

If this proposal were to go ahead, then the credit card companies would have to keep their shareholders sweet by other means - such as charging an annual fee. Be careful what you wish for.

I think you may have missed the point - that's exactly what the policy is about.

In very simplistic terms...

• 'Wealthy people' who can afford to pay off their CCs each month get free CCs, Cashback, loyalty points etc and 0% deals.

• 'Poor people' who can't afford to pay off their CCs each month, pay high rates of interest in order to fund the freebies for the 'rich people'.

So Labour are saying it's unfair for 'poor people' to subsidise 'rich people'.

i.e. 'Poor people' should pay less and 'rich people' should forego the freebies.

(I'm not saying I agree or disagree with the policy - hopefully just clarifying.)

antrobus

The proposal is to limit the interest and charges to 100% of the 'amount borrowed'.

I can see how that works with payday loans. Someone borrows 200 quid; the loan company can't charge more than 200 quid in interest etc.

How does it work with a rolling credit account? Someone takes out a credit card, spends thousands over a number of years, and then gets into financial difficulties. Won't it take a long time for the interest charged to reach the amount borrowed?

antrobus

eddddy wrote: »

'Poor people' who can't afford to pay off their CCs each month, pay high rates of interest in order to fund the freebies for the 'rich people'.

Or credit card companies will decide not to offer cards to 'poor people'.

Phil&Michelle

Completely unrealistic a bit like there idea to cap rents, it will never work...idiots!

PixelPound

In theory it is great because it will help those struggling with debt at high APR's like 39.9% who only make minimum payments, but what will credit card companies do, offer less sub-prime cards, or make them default easier? If they cap at 100%, can they still put other charges on? Most people struggling with debt will often end up defaulting at some point.

It needs to be part of a package - often you will see people get new cards once they've maxed out one, and its freely given, or given increased credit limits when they exceed the previous one

chattychappy

I can see it becoming very complicated with all sorts of allocation issues and peverse incentives. Ie there could be situations when you have "almost" paid the same in interest/fees as the original purchase price when it becomes NOT worth paying down the debt knowing that it will now become interest free.

If something has to be done, I prefer the "minimum payment" change. Eg interest + 5%, so that existing debt would be paid down in less than 2 years.

Personally, such a change would have denied me credit on the terms I've obtained in the past which I was very happy to take.