On the 17th March, Gordon Brown announced a series of new debt protection laws. Speaking at a Which? hosted event, attended by consumer groups and money advice agencies, Gordon Brown set out the governments plans to introduce several measures aimed at stopping people from getting into unmanageable levels of debt.
Extra funding is being made available to advice agencies. This extra funding will be used to support the new Homeowners Mortgage Support scheme, which provides aid to home owners facing a temporary loss of income. The government will also ensure that those in debt will receive fair treatment by debt collection agencies and the courts. Speaking on the new measures, Citizens Advices’ Director of Policy Teresa Perchard, said “This package of measures shows the government has been listening to people’s concerns and is responding to the problems they are experiencing as a result of the downturn. It will also help encourage more responsible lending”.
New legislation will be introduced to stop credit card companies from sending out credit card cheques and from raising a customers credit limit, without prior agreement by the customer. Credit card cheque slips are sent out by credit card companies for use in situations when the credit card holder cannot use their credit card. They are used in the same way as a cheque from a current account, except that the credit card is used as proof and the transaction amount is charged to the credit card. The interested charged on a credit card cheque is typically much higher than the interest charged on credit card transactions and credit card cheques are not covered by section 75 of the Consumer Credit Act, so offers less protection for the consumer.
Which? chief executive, Peter Vicary-Smith, said: ‘Credit card companies have been allowed to get away with encouraging people to spend more than they can afford for far too long. Sending people unsolicited credit card cheques and extending their credit limits without being asked, in the hope of tempting them to overspend, is not just irresponsible - it’s immoral”.
Some credit card companies have already acted on credit card cheques, The Royal Bank of Scotland and The NatWest Bank stopped issuing credit card cheques to their customers in 1996. HSBC only offers credit card cheques to holders of its Premier Credit card.
The new legislation was not greeted so warmly by everyone. In response to Gordon Browns’ announcement, the UK Payments Association (APACS) has said “The credit card industry fully supports the Government’s aim to protect vulnerable consumers: already we ensure that our customers are not granted credit card cheques or credit limit increases without us making appropriate checks on their ability to repay. This is part of our ongoing commitment to champion responsible lending. We are not convinced that the proposed legislation is the best way forward and we are disappointed that the Government is talking about taking action before appropriate consultation and fully understanding the issues”.
Advice on debt and redundancy, can be accessed from your local Citizens Advice Bureau and from http://www.adviceguide.org.uk/