You've probably already seen that the government has launched a new consultation on credit and store cards and has announced proprosals to ensure banks and building societies give consumers a fairer deal.

The main areas of focus are:

Allocation of payments - if you use your credit card to transfer a balance on to and for spending, you may well be charged a different rate of interest for each balance. And in most cases the card provider will use your monthly payment towards clearing the cheapest debt first. This leaves you accruing interest at the highest rate. This is known as the negative payment hierarchy and the government wants providers to change to a positive hierarchy so the most expensive debt is cleared first.

Minimum repayment levels - the minimum amount many card providers require you to pay off your balance each month can be as little as 2%. But if you do this it can literally take you decades to clear your debt and cost you thousands of pounds in interest. The government therefore wants minimum repayments increased.

Unsolicited credit increases - sometimes your credit limit can be increased without you asking for it. The government wants this stopped and is considering banning the practice.

Re-pricing existing debts - interest rates on credit cards are vairable but there are concerns that in some instances interest rates are being increased without proper explanation. The government wants this investigated and may restrict the way firms can increase the interest charged on existing debt.

So what's your view on all of this? Do you think credit card providers should be forced to clean up their act? Maybe you've been caught out by negative payment hierarchy or have seen the rate of interest charged by your credit card provider increase substantially. Let us know your thoughts. You can find out more about the consultation process a www.bis.gov.uk/creditconsultation. Also, representatives from the Department for Bunsiness, Innovation and Skills will be coming onto this forum throughout the day to answer your questions. So, let's get the discussion started....

Hello.

Ruth and I work on the Credit and Store Card Consultation in the Department for Business, Innovation and Skills. We'll be online today to answer your questions. This consultation is about giving you a better deal. We want to hear from you about your experiences of using credit and store cards and your views on our proposals. We look forward to hearing from you throughout the day.

Armelle and Ruth.

Clare Francis:

Re-pricing existing debts - interest rates on credit cards are vairable but there are concerns that in some instances interest rates are being increased without proper explanation. The government wants this investigated and may restrict the way firms can increase the interest charged on existing debt.

In principle, I believe there is nothing wrong with "price for risk" which this is a form of. However the underlying issue is the extortionate interest rates (for all) compared with bank rate. I see no sign that the proposals address that issue. Why am I not surprised?

Clare Francis:

This forum is full of reports of CCCs (allegedly) being unable to substantiate the legal enforceability of agreements. What about the law being changed so that in these circumstances the debt was automatically wiped clean with no default recorded?

Actually I don't necessarily want to see that. I would prefer punitive fines for financial organiasations which fail to comply with the law.

Hi BIS,

Do you not think there's a bit of a risk that setting government-approved min payments is nannyism?

Do I need government to tell me how fast i must repay my debt? Im not so sure.

Princess Daisy

Thank you for these comments; it's really helpful to hear what people are thinking.

As part of this consultation, we're considering a range of policy options to tackle different problems, and we'll take these comments into account when we're assessing which options could work best.

Please keep the comments coming in!

Ruth and Armelle (BIS)

Hello,

Here's moneysupermarket.com's comments on the proposals:

Peter Harrison, credit cards expert at moneysupermarket.com, said; “These are welcome and well intentioned proposals. However, any intended changes need to be in the interests of consumers, and some of these proposals may have unintended consequences. Whilst we strongly agree with the decision to address ‘negative payment hierarchies’; our own research shows that almost two-thirds of consumers don’t realise that cheapest debt is paid off first on the majority of credit cards. This proposed change may leads to the number of zero per cent balance transfer deals reduced or withdrawn completely.

“The proposal to increase minimum monthly repayments to ensure credit card debt is paid off more quickly makes good sense, however this may lead to many customers getting into financial difficulty as they won’t be able to meet higher repayments. Ultimately consumers need to understand the implications of paying just the minimum payment on their credit cards. Although the industry has come a long way in recent years with the introduction of ‘health warnings’ on statements, more could be done to tackle this issue.

“The proposed ban on credit limit increases without consumer consent is likely to be a fairly divisive issue amongst credit card holders. Our own research*, conducted for the Government has shown whilst 43 per cent of credit card users would be happy to have their limit increased out of the blue, 50 per cent would not be happy, this is largely because of anger at not being asked first and concern over getting into further debt. We welcome the move, as it is always good to involve the consumer in any decision made about their personal finances.

“Last year credit card companies agreed to notify customers when they plan risked-based interest rate rises and give them an option to reject the change – this has been a massive move forward for the industry. More needs to be done to educate customers on the principle of risk based repricing so consumers can understand what they need to do to avoid this happening in the first place."

---

Cast your vote in the Community Stars awards

Felicity King-Evans, Deputy Site Editor
felicity.king-evans @ moneysupermarket.com

Hi Princess Daisy,

Maybe it is a bit nannyism, but anyone who is paying only 2% per month off their credit card balance does need someone to tell them how fast to pay off their debt before they start to default and end up costing good money-managers more money.

Regards.

Felicity King-Evans:

This proposed change may leads to the number of zero per cent balance transfer deals reduced or withdrawn completely.

If I understand the context of that quote it is described as an "unintended consequence", and in the context of the quote "not in the consumer's interest".

I wonder if it would be better for consumers if 0% balance transfers were not available at all. (1) they lead (at best) to the standard rate at the expiry of the offer or earlier if even a minor T&C breach occurs and (2) on the evidence of this forum are declined for the applications where the deal would most benefit applicants struggling under outrageous "priced for risk" rates.

We're grateful for these additional comments and thoughts on the issues covered by our consultation. It's extremely useful to understand the things that are concerning you. We won't be able to log in again today, but we'll continue to monitor this forum over the coming weeks and months, so please keep posting.

Ruth and Armelle

The biggest problem I've had with both credit cards and debit cards are standing orders on the cards.

It is very difficult to get them stopped. Sometimes, you hae no option but to cancel the card itself. And that's not easy if you have arunning debt on the card.

The government should force the industry to make it easier to stop them.

I had a real fight with the AA. When I renewed my wife's cover last October, I used my credit card. This year we did not receive the renewal documents and so missed their 14 day cooling off period. The first we realised they had taken the £107.50 (!!) was when I checked my credit card bill.

Thankfully because I'm not a member and the credit card was in my name they had to refund the money due to a technicality.

Many firms use this 'auto-renewal' system but as far as I'm concerned it's theft.

Snedders:

It is very difficult to get them stopped. Sometimes, you hae no option but to cancel the card itself. And that's not easy if you have arunning debt on the card.

The government should force the industry to make it easier to stop them.

You make a very good point and I hope the BIS people are still watching. In fact its even worse than you state because cancelling the card is no guarantee of stopping the payments.

What could be done about these "recurring payments" or "continuous payment authorities"? I suggest that these arrangements should be listed on each and every credit card statement and that second and subsequent payments could not be collected until such a statement listing had commenced. Secondly, in respect of cancellation, there is a need for a mechanism that guarantees the account holder is able to cancel in the face of supplier "obstruction", whether that obstruction is not replying to letters, emails or answering the cancellation line phone quickly enough.

Over to you, BIS

Jalexa, agree wholeheartedly with you about continuous payment authorities; the only real problem I've had (fortunately) in 35 years of using a credit card was with a recurring payment for a monthly subscription - took nearly 9 months to sort out and the card supplier was extremely unhelpful- cancelling the card didn't stop the wrongful charges.

There definitely needs to be a mechanism to stop these with the card supplier WHATEVER the merchant says. If they have a rightful debt then there are ways of recovering the debt.

I also agree that there needs to be a control on credit card limits - I have had many unasked for increases on both my cards without EVER approaching anywhere near the previous card limit.

Something MUST be done about these continuous/recurring payments. It is so wrong that they can take money out of your account for ever and ever and you cannot stop it with your bank. We are in dispute with Lloyds TSB and their dispute dept can take up to 50 mins to get through and are rude and unhelpful. We are always in credit and have been with them twenty five years and yet are being treated like criminals.