New credit card legislation does not go far enough

Wednesday 17th March 2010

The government's proposed new measures to assist consumers struggling with debt management related to credit cards are a step in the right direction when a leap was needed, according to an industry expert.

More expensive debt will now be paid off first under the terms of credit agreements between card companies and consumers.

Up to now, standard industry practice has largely been to service cheaper debts first so that the credit card companies can hang on to more lucrative debt for longer, thus earning more money.

Prime minister Gordon Brown claimed that the new rights being introduced would "put an end to irresponsible lending practices that people have been most concerned about".

The director of Credit Action, Chris Tapp, was less effusive in welcoming the proposals, though welcome them he did.

"The government, in our view, is taking a step in the right direction but only really a baby step," he said.

It is his belief that dubious practices which harm consumers persist in the credit card industry.

Chief among these is the policy of unsolicited credit extension which, he says, can encourage some people to get into more debt than they can afford.

"We would have liked to see a stronger line taken against unsolicited rises in credit limits," he said. He believes that the onus should be on the individual concerned to ask for a credit extension rather than to simply have the opportunity to opt out once that credit has been extended.

Moreover, Mr. Tapp would have liked to see a rise to the minimum payment threshold on credit card repayments, as just a small difference can drastically decrease both the time spent repaying loans and the amount in interest that is repaid.

Credit Action is a charity dedicated to educating people about financial issues.

News article brought to you by Debt1 – Confidential Advice for Managing Debts

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