These new rights will help foster a culture of responsible borrowing and lending while protecting consumers from a spiral of debt. Consumers will be able to pay off high interest rate debt quicker and have twice the amount of time to reject increases to their interest rate, and the right to reject any increase in their credit limit at any time.
In striking this agreement, we have sought to ensure that the majority of consumers who manage their finances well are protected from the risk of higher rates or more red tape. This deal sets a new standard for the relationship between credit card companies and their customers and helps put consumers in the driving seat.
We are also banning card companies from increasing credit limits or interest rates for consumer at risk of financial difficulties. Card companies will work with consumer groups and debt advice charities to identify consumers at risk, for example those who repeatedly make low repayments, and insure their communications are clear and easy to understand.
These new rights are have been secured following an agreement with industry and will be implemented by industry, by next year.
So what are the five new rights for consumers?
Firstly, the right to repay: Consumers will have the right to pay off their most expensive debts quicker, saving them money. Minimum repayments on new credit and store cards will be set at a level to help prevent consumers building up too much debt.
Secondly, the right to control: Under the right to control, consumers will be able to refuse a raise in their credit limit and reduce their limit whenever they choose.
Thirdly, the right to reject: Consumers will have double the time to reject any interest rate increase and the right to reject any increase in their credit limit at any time.
Fourthly, the right to information: There will be a new responsibility on lenders to develop a system to warn all customers at risk of financial difficulty about the consequences of paying back too little, and all credit and store card holders will be given clear guidance about their rights on interest rate hikes and credit limit increases.
And finally the fifth right, the right to compare: This is a new responsibility on lenders to send consumers a yearly statement detailing how much it cost to use their card in that year, including all interest and charges. This will be available electronically to consumers.
Now taken together, these new rights represent a significant step forward for consumers.