Wednesday, 28 October 2009

Cedit Cards Crackdown

These proposals were surprisingly released quietly, perhaps due to how late the government is in addressing this in the first place. The centrepiece of these credit card reforms is to outlaw customer repayments being used to pay off the lowest debt first, this obliviously leaves larger debts generating interest nicely for the bank, yet though common practise, they don't tell you that in the really small print.

Other proposed measures include:
  • Raising minimum monthly repayment levels to encourage people to pay off debt more quickly and so incur lower interest charges.
  • Banning banks from increasing credit limits without the prior consent of customers.
  • Restricting banks from raising interest rates on existing debt.
These are points that are hard to argue against, even though banks are trying. Yet if they're banned from belatedly punishing borrowers who turn out to be higher risk than they thought, it may encourage them to lend more wisely in the first place. Banks screaming about making sure credit is available, is all well and good now, after handing it out like candy on Halloween. Pushing them to be more upfront with people is an idea I support.

I would have liked to have seen the practice of selling on peoples debt to companies that specialise in getting to back, without warning or contacting the borrower addressed. For those that won't pay back debt this is a good tactic, yet it's not those people that this measure so often applies to.

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