5 New Rights for Credit Card Holders

By: Jaime Concha
01-Apr-2010

Consumers who have credit cards or store cards will be benefiting from Government plans to increase their rights. While the agreement will not be enforced as legislation, it paves the way to recognise that UK card holders are under threat from malpractices in the card lending industry, such as the widespread use of negative payment hierarchy.

The new rights for cardholders are predicted to save consumers 296 million GBP a year according to the Government. Nationwide, a building society, expects their customers to save 500 GBP million a year.  The Department of Business, Innovation&Skills (BIS), partnering with the UK Card Association, has drafted five new rights in order to protect credit and store card users and decrease their mounting debt. These five rights are:

Right to Repay

The card holding company will commit to put the consumer's highest debt rate first, allowing for the most expensive things in their balances to be paid as soon as they have the money to do so. This also entails that when opening a new account, the minimum payment that has to be settled will always cover at least interest, fees and charges, and one percent of the interest incurred. The new practice will avoid people in debt extend the repayment of their debt over a long period of time, accumulating an unfair amount of interest to their name.

Right to Control

Around a fifth of credit card holders interviewed in a survey by TNS claimed to have been the victim of unsolicited credit limit increases in the year leading to October 2009. Over half of these people said that they weren't informed by their bank that this would happen. There is a new rule stating that consumers will have the power to choose not to receive credit limit increases in their cards.  This new rule would also permit them to reduce their limit at any time.

Right to Reject

Consumers will be given at least 60 days to reject increases in their interest rate or credit limit. Normally it is the general industry practice to give 30 days for a rejection. They would be also given the option of closing the account or paying the balance at the existing rate if they wished it. This will allow consumers to weigh their options and help them analyse whether the credit limit or interest rate increase will affect them in the repaying of their debt.

Right to Information

Those who are at the brink of defaulting on their debt or who are having financial difficulties will be offered guidance on the consequences of making minimum repayments to their debt. This commitment will also allow banks to clearly explain all changes to a cardholder's account, helping them make a decision whether they wish to enforce the right to reject.

Right to Compare

Card lending companies will offer an annual statement that would enable the customer to compare the spending and interest charges from their account with different providers. Consumers will also be able to have a more open access to their credit history that will either cost them 2 GBP by using the credit rating companies such as Experian or Equifax, or free of charge with a service that the BIS wants to make available soon.

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