DEPARTMENT FOR
BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release
(creditcards) issued by COI News Distribution Service. 26 November 2008
Secretary of State
for Business Peter Mandelson and Consumer Affairs Minister Gareth
Thomas have secured agreement from the credit card industry to
help borrowers struggling with their credit card bills over the
coming months.
At a Credit Card Industry Summit at the Department for Business
this afternoon the Government and industry agreed proposals that
will give extra breathing space to struggling borrowers. It was
agreed that the credit card industry would report back in two
weeks time on a set of fair principles to help card borrowers to
manage their debts.
The Government and industry agreed the following joint text:
The industry agreed that where a not for profit debt advice
agency has formally notified that a consumer is in serious
discussion with that agency on a draft debt repayment plan then
the credit card company will suspend collections activity whilst
these discussions continue provided that they are concluded within
30 days, with the option of extending a further 30 days subject to
demonstrable progress being made but not yet concluded.
The group made good progress in discussing the issue of
risk-based repricing which is leading to high increases in some
individuals' bills. They will develop a statement of fair
principles in two weeks for risk based re-pricing decisions. Those
principles would address issues such as proportionality, frequency
and transparency. The purpose is to help borrowers manage their
debts during the downturn.
Notes to editor
1) Risk based re-pricing is is the industry term for when they
change customers' interest rates because of a change in the
risk that a particular group of customers will default on their
loan. It's these sorts of repricing decisions that have led
to the sorts of cases we're unhappy about, where people have
faced very significant increases in their interest rate, sometimes
of ten percentage points or more
2) The Government and industry discussed the issue of risk based
re-pricing, which is leading to some individuals seeing large
increases in their credit card bills. The Government called on the
industry to report back with a statement of principles on risk
re-pricing in the next two weeks.