July 2, 2009
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News: UK Reins In CC Companies
The residents of the UK have had enough. After massive complaints to the authorities, lawmakers have a proposed set of rules and regulations that aim at curbing the deceptive practices of credit card companies operating in the UK. Business secretary, Lord Mandelson and Consumer Minister, Kevin Brennan, have proposed the new white paper advocating credit card protection for the consumer. The paper also calls for the Office of Fair Trading (OFT) to look into other areas of the financial industry such as businesses that offer pay day loans or doorstep lending that takes advantage of individuals in need by charging interest rates up to an excess of 50%. The proposed new credit card rules would do the following:
• Prohibit credit card companies from increasing customer's credit limit. Higher credit limits tempt cardholders in increased spending.
• Ban banks from mailing out convenience checks without the permission of the cardholder. Cardholders typically are not aware that these types of checks often come with handling fees and higher interest rates.
• Place restrictions on raising interest rates on current credit card debt.
• Require lenders do a complete credit investigation on any individual requesting credit and provide a thorough explanation of the terms and conditions of the credit product.
• Require lenders to apply card repayments toward the highest interest bearing debt first.
• Consider raising the minimum monthly payment to help cardholders pay off credit card debt faster.
• Establish a new consumer advocate entity that would monitor and crack down on deceptive merchants and lenders to help consumers acquire refunds when they have received poor products and services.Consumer advocates say that UK residents have been severely affected by the ailing financial market and that action should be taken immediately to help them. Additionally, they urge decisive action be taken to protect credit card consumers from falling deeper in debt and prey to the deceptive and unfair practices of lenders. The financial industry says they intend to cooperate fully with the government to help consumers make responsible lending decisions.