Pressure Eased On Credit Card Borrowers

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A new voluntary code of practice is being introduced to help protect credit card users from sudden interest hikes and unfair payment processing.  The changes, which have been brought about due to pressure from the new coalition government, will come as a welcome relief for those in the red and struggling to meet their monthly contracted payments.

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A new voluntary code of practice is being introduced to help protect credit card users from sudden interest hikes and unfair payment processing.  The changes, which have been brought about due to pressure from the new coalition government, will come as a welcome relief for those in the red and struggling to meet their monthly contracted payments.

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Amongst the raft of changes are that repayments will now be prioritised to pay off the most expense debt first.  Credit card companies often have different rates for balance transfers and new purchases and previously many providers allocated repayments against the cheapest debt, leaving the customer to accrue interest on the more expensive debt.

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Credit card companies will also have to give borrowers 60 days notice of any planned interest rate rises along with the ability to reject the increase, hand back their cards and pay off the outstanding balance at the old rate.

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Perhaps most significantly, credit card companies will also need to employ robust credit checks to determine whether someone can afford additional credit before unilaterally increasing their limit.

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A spokesperson from lender MBNA commented “If we write to customers to increase their interest rates in 2011, we will give them 60 days' advance notice, plus a reminder letter 30 days before any increase takes effect…this will mean customers have 60 days to opt out of the increase, in which case we can close the account and the customer can pay back the money at their existing interest rates.”

To read the full article click here.

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