Credit card companies have come up with a set of principles that should help customers who fall into arrears on repayments.
Pressure has been mounting on credit card lenders since last month, when research from Defaqto showed the average annual percentage rate rising from 17.2% in May to 17.6% in November, while over the same period the base rate fell by 2%.
Companies were also accused of increasing rates in time to catch out Christmas shoppers and ministers threatened an Office of Fair Trading investigation into their practices, which included raising interest rates for borrowers in financial difficulties.
Barclaycard, Lloyds TSB and Capital One responded initially with an offer of a 30 day period of grace to customers in financial difficulties and this has now been extended to 60 days, for all credit card lenders.
Other measures to be adopted across the industry mean that providers will allow borrowers to transfer deals and to freeze accounts at existing rates.
Providers have agreed not to raise rates if customers can show they are working to solve repayments problems with a debt advice group, or already have a payment plan in place.
In addition, they will disband the practice of hiking rates when a customer fails to make a minimum repayment for more than two months.
Also from 1st January, customers will receive 30 days’ notice of rate rises and there will be no rate rise during the first 12 months of a credit or store card contract. Thereafter increases will only be applied every six months.
Finally, the Government is advising borrowers who believe they have been the victims of unreasonable interest rate hikes to complain to their card provider or to the Financial Ombudsman Service.
Source : Here
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