Review of the Regulation of Credit and Store Cards: Government Response

15 Mar 2010

Our consultation closed on 19 January 2010 and we now publish our response.

We have given very careful consideration to all the consultation responses received and evidence from new research into this area.

We are setting out five new consumer rights which we believe give consumers a fairer deal and more control over the way in which they can choose and use their credit and store cards.

The five new rights are:

• Right to repay: consumers’ repayments will always be put against the highest rate debt first.  For consumers opening new accounts the minimum payment will always cover at least interest, fees and charges, plus 1% of the principal to encourage better repayment practice.
• Right to control: consumers will have the right to choose not to receive credit limit increases in future and the right to reduce their limit at any time; and consumers will have better automated payment options. Consumers will be able to do both of these online.
• Right to reject: consumers will be given more time to reject increases in their interest rate or their credit limit. 
• Right to information: consumers at risk of financial difficulties will be given guidance on the consequences of paying back too little; and all consumers will be given clear information on increases in their interest rate or their credit limit including the right to reject.
• Right to compare: consumers will have an annual statement that allows for easy cost comparison with other providers

In addition, consumers who are at risk of financial difficulties will be protected through a ban on increases in their credit limit as well as the ban on increases in their interest rate, and card companies will work with debt advice agencies to agree new ways they will provide targeted support to consumers at risk to help improve their situation before they are in too deep. 

These new rights, together with the existing right to redress, mean a better deal for consumers, giving them improved control of their credit and store card borrowing.

Timing

The Government and the card companies have agreed that the key consumer benefits will come into effect by the end of the year. This means that consumers do not have to wait for legislation to be passed to benefit from these measures. 

Documents

• A better deal for consumers. Review of the regulation of credit and store cards: Government response to consultation (PDF, 2.1 Mb)
• Plain English version (PDF, 268 Kb) 
• Joint commitment by the Government and card companies (PDF, 113 Kb)
• Economic Impact Assessment (PDF, 5.9 Mb)
• Equality Impact Assessment (PDF, 202 Kb)
• Summary of Responses to Consultation (PDF, 527 Kb)
• Consumer and Store Card Research (PDF, 1.5 Mb)
  The Government commissioned TNS-BMRB to conduct research focusing on: consumers’ current experience of using credit and store cards; how consumers think they would be affected by, and respond to, various options for reform; consumer preferences around trade-offs arising from proposed reforms. 
• International Regulatory Research (PDF, 2.4 Mb)
  The Government also commissioned Auriemma Consulting Group to research features of international credit card markets and how they are regulated.  A number of markets outside of the UK, particularly the US and Canada, have recently implemented new regulatory proposals related to credit cards. The study provided evidence on: market structure and credit card usage in other countries; regulation and its impact on both industry and consumers.

• Print this page