Re. Minimal payment changes – these should be higher, BUT making a sudden change could harm those people whose income is irregular, or maybe are paying off an expensive card first.

There is a suggesting that the banks should be required to include a suggested repayment amount that would clear your debt in 3 years. I think this would give valuable information, an a reminder that the borrowing is not free.

I am also in favour of the option to convert a credit card debt to a loan – but I am unsure how this would stop people just starting with a credit card again and getting in deeper trouble….

During the first period of unemployment, (nine months), I had to use up all savings and borrow on cards to survive. I admit that I also had existing credit card/loan debt, mainly a hangover from living in London in the 90s to build up professional experience. As a single mother, quite frankly I couldn’t have afforded to live there on junior management wages had it not been for easy credit.

I am now in a position where I am working (although earning 25% less than before) and can only just manage minimum payments. I haven’t increased my borrowing in several years and, where possible, I am trying to move card credit debt on to loans to reduce interest rates and fix terms for repayment. However, I can only do this gradually because of the footprint the credit check leaves in a six month period. Nevertheless, I am working towards being debt free at some point in the next 10-15 years.

I hope you will see from the above that I am now showing a level of maturity regarding my finances. I admit it was stupid to borrow on cards to live a reasonably comfortable (but not excessive) life when I was younger on the basis that I expected to earn more and pay it back in the future. However, I am punished by ridiculous interest rates and I don’t need further punishing by the government which is what would happen if they raised minimum payment levels for existing debt.

Until a year ago, my debt was on five relatively low interest cards charging between 9.9% and 15.9%. At the end of last year, I faced huge hikes in interest charges from three lenders, two of which imposed rises twice in a space of a couple of months. MBNA doubled interest on a card they had taken over from Beneficial to 30% despite me having a good credit rating (checked with equifax) and meeting the minimum payment every month. There was obviously no justification for this in relation to me being a credit risk as I’ve since been able to transfer the debt to a loan at 8.9% with a bank. However, as this interest hike took place before I had the option to cancel the card and remain on the lower rate of interest, I was paying £250 to MBNA in interest before securing the loan.

I also incurred 5% rises from two other lenders but was able to cancel these cards when they tried to increase them by another 5% three months later after government intervention. I chose to repay the debt on these at the existing rate of interest although I can only repay minimum amounts until I can convert them to loans in the future.

Therefore, I believe that it is not enough to simply insist card lenders tell you why they are increasing your interest rates, they must be able to prove a reason for doing so. If you have met monthly payments and have the same credit score, they should banned from being able to increase your interest rates unless the rise is linked to base rates. I strongly believe that I was being fleeced by MBNA and other lenders to cover their losses from bad debt that nothing to do with me.

In addition to the above, if the government is truly serious about helping consumers to pay back the debt accrued during times of easy credit, I believe that people with a good credit rating should have the option of converting their debt on cancelled cards to fix term loans offered by the same bank at the normal rates they would give you for such a loan, (usually closer to 10% than the average 20% card rate). This should just be for existing debt taken out prior to the credit cruch rather than new lending as I recognise that banks would not offer card credit to new borrowers otherwise.

In summary, my response to this consultation is:

1. Do not increase minimum payment levels for existing borrowers.
2. Make it easier for consumers to pay a fixed sum between the minimum and full amounts.
3. Ban credit cards from increasing interest charges unless they can prove a valid reason against lending criteria or base rate changes.
4. Existing card debtors with balances of £5K or above and a good credit rating should have the option to move debt to a fixed term loan on a lower rate of interest.

Whatever the government decided to do, it must be sure that it is truly in the interests of consumers and that it tackles the problem of card companies making us all pay for their bad debts.

Firstly giving them out to anyone. My 18 yr old daughter got a store card for £1,000 (at 29%) when she told them she had no income!

Secondly letting you go over your limit. One of my cards bribed me recently with an additional 0% deal if I spent before a certain period. Knowing what I was doing I went for it and maxed it out. Eventually it got stopped, however this was twelve transactions, two weeks later and £500 over the limit. Then they charged me lots and told me it was my fault for going over. I complained and got all charges dropped, but would everyone? They said all cards have a “shadow limit” and they do not like to embarass people when buying things.
Finally the big one. How come when bank rates have plummetted the card rates have stayed the same or even gone up? I got a 4.5% balance transfer for life deal when rates were up at about 4%, but now they are at 0.5% the best “for life” deal is about 7%. Reducing their rates to allow people to pay off less interest and more capital would be the easiset way for us all to get out of debt. I doubt that a single card has droppeed its rate since the credit crunch started, but they all dropped rates for savers pretty rapidly. The banks and big business in this country just want to rip off customers

Allowing the CC companies to just ride roughshod over their customers is no longer acceptable.

It’s not sufficient to place terms permitting non-opt in interest rate increases in credit card contracts where people are fairly unlikely to read them, because an unexpected hike in the interest rate on existing credit card debt can spell financial disaster in some cases.

There should also be a change in attitude throughout the consumer credit industry, so that those in most need of debt help are thought of as ‘vulnerable’ rather than ‘high-risk borrowers’, so that it ceases to seem quite so acceptable to change much higher interest rates to those who are struggling.

Offered a card with 0% interest on certain purchases and 15% on others, I think that I was ripped off. A large 0% debt and a very small 15% debt means that any payment I make short of full repayment leaves me still paying interest. I can never repay the 15% debt unless I pay the whole debt off in full.

Enforce lower interest rates and use option 3 to show people how long the debt will take to clear, please don’t enforce a higher minimum on existing debtors.

If option 4 is made law please only enforce for new customers, existing customers can then make their own decision on affordable repayments

I think that repayments should go towards paying off the total balance rather than paying off cheaper debts first.

Ban unsolicited credit limit increases.

Stop unfair rate rises.

If the rates where brought more into line with actual rate of costs of money market. The minimum repayments are acceptable but what really angers is the people with a poor credit rating having to pay an exhorbitant interest rate and being exposed to a double whammy of poor credit causing higher repayments by meeting the high rates of interest, it’s almost loan sharking.

People (credit card users) have been seen as funders for shareholders profits of banks financial houses. The financial/money markets are run as a profit, rather than service industry and are now becoming even bigger than Governments, by merging and becoming international if this keeps going banking groups will be seeking tax havens to dodge company taxes in the countries they operate.

I am not happy about raising the minimum payment on existing debt because that would cause immediate serious problems for card holders such as myself on a low income. My income has declined over a number of years and I have not been able to remedy the situation.

1) CC companies should always pay the amounts we pay off against the highest interest amounts first.

2) Give a minimum and a recommended monthly repayment amount.Some months i clear my balance, others i don’t. This is at my discretion and is the whole point of having a credit card in the first place. They are useful tools, which leads me on to my next point:

3) Ensure that any changes don’t ruin it for people who manage their credit cards responsibly.

4) If the government are listening to this it might be an idea to start teaching financial management as part of the national curriculum. Many of us have been born into a culture of debt and have had to educate ourselves out of it. Not everybody is capable of doing this, so it should be taught in schools… Home economics for the 21st century!

I just had a letter from CITI one of those mega US companies( being well supported by the taxpayer!!!)reducing any rebate on fuel from 3p to 1p per litre and upping the interest rate to 17.9% on any balances. Without so much as a by your leave.
Of course they have now lost a customer.

Thanks for alerting me to this – Martin Lewis of moneysavingexpert.com

Is it not time to stop this, by introducing a interest rate on all credit cards in line with the Bank of England.

Also it should be made quite clear on the credit card statement the actual percentage applicable to each amount outstanding and when the end date of the promotional rate expires. for example

£1500 at zero percent until 31st July 2010
£2000 at zero percent until February 2010
£1000 at 13% apr

I’m uncertain about raising the minimum payment. I am happy with the current situation, that if I pay the minimum the debt is pretty much static. I am self employed and my income is irregular. I would prefer it that if there is a month that I am short I can choose to pay as little as possible and then pay extra in other months when I’m doing better than expected.
I would rather that the government did not dictate to me how I should manage my own debt.

However I would support any legislation that forces credit card companies to communicate more clearly with their customers

http://webarchive.nationalarchives.gov.uk/20091116141131/http://particitech.ning.com/profiles/blogs/2192313:BlogPost:173

I have been told I am eligible for hundreds of thousands of pounds of credit by a building society yet I knew I could not pay it back given the size of my family and bills etc.

Also please think about the position of those people with high levels of Credit card debt. If you force companies to charge them a higher minimum payment will they be able to afford it? Perhaps you should only apply stricter repayment guidelines to new debt or put in a threshold

In the medium term the problem would be solved without need for time consuming and potentially flawed legislation. There would be minimal outcry from the public about government interfering in markets, because the current revulsion for financial companies and banks in general, and credit card companies in particular, is so great.

Once the UK CC market had settled into a more equitable pattern, the credit card brand could be sold off – making yet more money for the public purse.

Alan T

It is no coincidence that these sky-rocketed in the aftermath of the credit crunch as the banks/credit card companies scrambled to re-establish profits and bonuses. How have they been allowed to single out card debt for such excessive charging in a way that would have caused an outcry if applied to existing mortgages for example? Just imagine the reaction to mortgage rates being increased BY 10%pa as most of my card rates have!

Increasing minimum monthly repayments is at best irrelevant, since cardholders can simply spend more on cards each month to shore up their consequently depleted current account balances, and at worst dangerous in that it will tip many into default or even bankruptcy. Could we expect Government funding to buy time in such cases as with those in mortgage difficulties?

As far as credit card cheques are concerned, I see no problem if they are available only on request and if there are no extortionate transaction or interest rate charges. A fixed fee of, say, £5 per cheque would seem acceptable.

Zero rate balance transfer offers should also be banned unless they are genuinely 0% and the subsequent reversion to ’standard rate’ is just that. Right now the companies are free to offer zero for say 6 months (when a 3% fee is charged – the equivalent of 6%pa) and then increase it to 15% or more AND TO KEEP DOING SO.

And the old argument that these high rates are to reflect enhanced risk is a lie. I had a card with zero balance outstanding on which the rate was increased to 29.9%. I was then offered a balance transfer at 0% – reflecting what risk exactly?

The whole credit card sector is a disgrace, reflecting the regulatory complacency, until now, of Government.

And finally, if, as would be right, ethical and equitable, rates are capped at, say, an average LIBOR rate + 5% say, the card companies should be forced to refund all interest charged above that rate
over the last two years to those of us still continuing to pay the required amount on time each month who have no wish to default.

Let’s have some integrity injected into these businesses at last!

I think the minimum payment should be increased, as it would discourage people from borrowing amounts that are beyond their salary earnings, and force them to pay back the loan, instead of making mimimum payments and increasing their borrowing.

I have a 9,800 loan with MBNA which is at its maximum. They charge me 258.00 every month on interest, which I pay. I can’t afford to pay anymore and I struggle to find the money every month. If I were allowed to transfer it to a loan I would at least be able to see light at the end of the tunnel.

Do not allow the proposals to be watered down

Its long overdue

The Government sorted them out. They should be able to deal with the banks unless they just want to suck up to them and not rock the boat.

The Government should get the Post Office to lend money to all of those in financial hardship, not give anymore money to the financial institutions who’s lax lending criteria go us into this mess in the first place.

What are the banks doing with the money? Using it to pay shareholders dividends and their employees bonuses.

As for George Osbourne comment that bankers should have their bonuses paid in shares – why should the Government’s share of the banks be further reduced by giving bonuses in shares? Doesn’t he also realise that the tax take on shares is likely to be less than it would if it was paid in cash?

God help us if the Conservatives get in with their grasp of economics being borderline O level grade D.

Intrest rates need to be capped at a fixed rate above the bank of england base rate.

Allocation on payments need to be the most expensive paid first.

I am in debt mainly because of bouts of unemployment and student loans. Very quickly the situation becomes out of control when a car fails it’s MOT, pay freezes happen etc etc.

All very well to judge others, but not all of us get ahead so easily or get good pay raises.

Once in even a small amout of debt it easily spirals due to steep interest rates and hefty penalties.

The credit companies need regulation.

Also the proposal for stopping the automatic increase of a credit limit is fully supported by myself. In the past I have queried this and left mine where it is. The Credit Card Company say it is because ‘you’ have paid off and are therefore considered a ‘good risk’. It is not. It is about them trying ‘you’ to spend and then they make money out of ‘you’.

If you think you would struggle to pay off a monthly amount do not apply for a credit card – you will have less nightmares!

I’d prefer that the most expensive purchases are paid off first but this would presumably be against their interests; why can’t the payments be allocated to the oldest debt first? I manage an accounts department and when clients pay their bills unless they specify we always allocate to the oldest invoice first.

I’d also like to see options for minimum payment – showing how long it would take to pay off my debt, and an increased payment again showing how long it would take to pay off my debt. One of my credit card lenders has increased their minimum payment to 5% and while this was a struggle in the first month I am much better off now I have budgeted for this and find my debt is decreasing at a much better rate. Companies could offer this option to old customers and state this as a condition for new customers.

Getting the limit reduced was really difficult as the card company only wanted to discuss further increases. They made it really difficult to reduce the rate.

I would like to see limit increases subject to customer written consent.

There should be a maximum credit limit per individual. The average limit could be £5,000 in total, not per card. A couple both working would have £10K which is plenty for 95% of the UK.

I am a financial adviser dealing mainly with retired clients. I spend most days paying off credit card debt where clients have failed to grasp the realities of retirement.

When they worked, they generally had 8 hrs to spend shopping or playing golf. Now they have double the time to spend it with half the income! Some rack up over £60,000 of debt before they cry for help. Some have sold houses to clear their liabilities. Some were relying on their house values and look whats happened now!

With the massive pensions shortfall on the horizon for those now in their 50’s, the problem will only get worse if credit cards are allowed to carry on as now.

Strict legislation is required to control interest rates to say 10% over base. Card companies moan that they need 25% or more to offset the risks they take. This is just an excuse to get the rest of us to pay for bad lending practice. If they did proper credit checks and were restricted to a maximum per client, a lot of card companies would shut up shop.

Some would argue that this drives the uncreditworthy to the arms of loan sharks. This is true, and nothing has changed here for hundreds of years. Again the government needs to tackle this with tough legislation backed up by real penalties.

I hope there won’t be any knighthoods or peerages for Financial Services people. I’m still waiting to see if Fred Goodwin be stripped of his knighthood?

Give the DD option of X% of the LIMIT rather than X% of the BALANCE

DIFFERENT INTEREST RATES
————————
The current situation is totally unfair for consumers.
Conversly, forcing an revesal would probably be unfair to the Cardit Card Companies.

How about this – you Pay off the debts IN THE ORDER THAT YOU TOOK THEM OUT

MINIMUM PAYMENTS
—————-
I think that mandating an increase of minimum payments would be disasterous for many many people.
What would be very useful would be to FORCE the credit card companies to offer Direct Debit options other than A) Minimum Payment or B) Full Balance
Which are the only options many of them give.

It would be better to have the option of
Minimum Payment or £X (Whichever is higher)
where X is a figure that the customer sets.

This allows you the protection of always making the minimum payment, while ensuring you don’t get stuck in the decades-long minimum paymnent trap.

CONFUSING ADVISE
—————-
I also agree that Credit Card terms should be MUCH easier to read. I don’t have time to read 2 A4 sides of smallprint, and I doubt many other people do either.
Credit Card terms should be STANDARDISED, with variables that the credit card company may set, then they could be told that they must display a table showing what their variables are, e.g.:

Cash Rate: A%
Purchase Rate: B%
Balance Transfer Rate: C%
Repayment Order: D
Currency Exchange Rate: E%
etc.etc.

Just my two penneth..

Nick

I’d also like to see older children being taught about managing personal finance and debt in schools as part of the curriculum because it’s the first thing they’ll have to deal with when they leave and get a job.

Allocation of payments is the thing I find most disgraceful, at the very least, payments made should be assigned to debt in strict date order.

Please stand firm! We need to reverse the order that debts get paid off so your payment lowers the highest interest element and make the minimum payment amounts at least double. Whilst we don’t want to make payments unaffordable, credit companies should be forced to explain on statements how long the existing debt will take to pay off if you just pay the minimum. We should consider a three-year cut off for all credit card debts, so you have to make enough payments to clear it in that time and the companies have to tell you how to do this.

Companies should be banned from increasing credit and overdraft limits without asking and getting our informed consent, ie if we don’t reply they can’t raise it by default. The practice of “to acccept this increase facility just start using it” should be stopped, along with being able to request an increase by phone, but not a decrease: one credit company increased my limit without asking then told me I had to write to say ‘no thank you’- not good enough!

The companies can bleat all they like; people will always need to borrow money, so they’ll always be able to make a profit – what must happen is clear information before anyone commits and consistently clear information and projects throughout the life of the debt.

Stand firm, Government!

Having read the consultation I do not believe making the businesses give customers more information about the pricing structure will be helpful. Most consumers do not read the small print initially, and therefore giving them more information to read would seem contradictory to the aims you are trying to achieve.

I believe rolling credit debts should be paid off in chronological order and all debts for the same account should be subject to the same rate of interest.

Consumers would then not need to worry that they will be charged between 4% and 40% depending on the transaction. If this means that the base borrowing rate for consumers will increase, but the inconsistency erradicated then I do not believe that consumers will be put off from borrowing as they will knows that 7% is all they will be charged for each transaction.

The payment of interest free debt part of the loan should NOT take priority over interest bearing debt, which should become the priority or the customer should be given the option to stipulate which part of the debt they are paying.

Credit card companies are charging various rates on cards without explaining why. My latest letter is from Virgin increasing the APR to 24.9% !!

They hide important terms and conditions in th small print so many consumers are unaware of the impact some actions may have (taking out cash on your credit card, paying off low interest rates first and the high ones last etc).

Following the financial crash, consumers need to be put in the driving seat. There MUST be complete transparency on the part of the banks with hefty and enforceable penalties if they deviate from the straight and narrow.

I arrived home yesterday to be greeted by a letter from them increasing my interest rate to 36.95%.

What other type of business can award themselves such an increase in their profits with no extra work or outlay?

I also meant to say in my last post that I believe that the Government hasn’t a clue about how to stop Bankers huge bonuses, as they have let it happen again. They apparently are collectively going to take £6,000 Million pounds this year yet last year they lost so much money that the Government had to ‘bale them out’.

So if they’ve made profits this year from those in ‘debt’ have they paid back all the Gov’nt ‘loans’? If not, why don’t we simply charge them 30%+ in interest until that debt is paid off?

I also made a mistake of using the word ‘Information’ in the ‘I’ bit of BIS, when it should of course be ‘Innovation’. It’s a pity that we haven’t a Department of Information on Human Rights since 1948 as even now if you ask anyone to tell you what they are in Government they tell you to ‘consult a solicitor’ who also have no real interest in them or they would have campaigned for them since 1948. They only follow the ‘law’ which has ignored the Universal Declaration since 1948, as that’s how they earn their money for nothing too, in violation of Article 30 of it and Article 10 of Resolution 53/144 mentioned in my comment at 200.

On other points frequently commented on above, I also wrote to the PM and Brown in 2001 suggesting that the ‘bonus culture’ of the city needed to be stopped but that was ignored, as were my suggestions that Interest Rates on all debts should be capped. This State does little to protect anyone from ‘extortion as theft’ which is effectively what 30% interest, when the base rate is 0.5%, amounts to. So why not prosecute all who charge it?

Licences could be withdrawn or revised by the authorities. Is there a code of practice or a policy and who is the regulator?

Is this not a simple direct means by which CC companies can be ‘persuaded’ to act reasonably?

Finance companies have privileged access to all kinds of personal information and can share this information etc – not even Govt Depts. can do this (DPA).

It is not good enough for banks to argue the case for high interest rates because of the number of bad debts they have to accommodate. This situation penalises responsible users and removes the necessity of banks to rigourously check the financial credentials of those applying for cards.

7-8 years ago I too was in hock to the CC companies, something like £16k in total. But, I was very “lucky” I found an almost forgotten life insurance policy that I could cash in for about half that amount – I hated doing it, but we were completely debt-locked and needed some financial wiggle room.

Then, I clued myself up on personal finance by reading some basic material, Alvin Halls’ TV and radio shows, books like “Rich Dad Poor Dad” and so on – of course I didn’t understand or agree with all of it, but pretty soon I gained a far better idea of where, why and how I had got to that debt-ridden state. You need to learn about how to use money in just the same way as you may learn to cook, do woodwork, use a new mobile phone, use a PC or a thousand other things that are, arguably, far less important to your basic happiness.

Using this new knowledge, I prioritized paying off the worst debts and made some considerable headway, halving the total remaining within about 14 months. Then, more luck, I got a very handsome redundancy package which enabled me to pay off the remainder of the debts and have a little money left over.

Now, I am getting my own back on the CC companies. By using their 0% offers, I am operating “Stoozing” (Google it!). This is a perfectly legal method. Basically, you spend for your essentials normally, but you use a “0% for purchases” credit card. For each pound you spend on the 0% card, you put the SAME amount of cash into something like an ISA, Premium Bonds or the highest interest accounts you can find. You pay off the minimum on the CC each month to avoid charges, and when the 0% period expires you pay off the card using the money you banked. In the meantime, you earn interest on the banked cash, and often you get special freebies from the CC company such as store vouchers. You need to be REALLY on the ball to make this system work – payments need to be made on time and card changes need to be timed precisely. Again, this comes down to actively managing your finances – perhaps 20 minutes per day on your PC is all you need once you have it under control. A successful “Stooze” can put the CC boot firmly on the other foot.

Okay, I completely agree that my turnaround story was in some part due to very good luck. However, at one time, financial despair made me lose sight of the rather obvious truth that you need to be active in looking after your own interests, nobody else will do it for you. The banks spend a fortune employing the brightest in the land to figure out how to get the most “take” within the law out of you and me. It’s therefore necessary that we, as consumers, should at least equip ourselves to recognize and avoid the worst traps they set.

Once you understand where your money is going, who is ripping you off and who gives good deals, then you can start to do something about it, maybe at first you’re finding ways to save just a few pounds a year here or there by shuffling your finances around, but if you make that into a habit then good stuff will happen in the medium and long term. In the same way that debt snowballs, so can saving and good buying habits. Examples: Buy premium bonds (assets) – not lottery tickets (liability). Make sure you switch energy suppliers annually to get the best offers. You’ll find you’ll spend much more time on managing your finances, but isn’t it better to do that, than to sit watching TV re-runs to take your mind off your financial problems? Yep, I used to do that.

Sorry, I didn’t mean this to be a homily, but rather as a message of hope in response to some of the despairing stuff I have just read on this site.

Go get ‘em tigers.
Alan T

How can a increase go from 15.9% to 29.9% overnight?
Ask them to justify that?

It is a disgrace!

Well done for taking this on, really feel that this practice needs to stop NOW!!

I agree the interest rates are extortinate and need to be reduced but not at the expense of what most people cxan afford.
It would be better to give exisitng customers a choice of how much to pay based on the current rate of 2.5% as mimimum. New customers could all be signed up at the proposed new rates which would mean a slow but acheivable debt reduction without causing existing users major financial problems that are avoidable.

This is a creditable attempt at a complex situation but totally ignores the reality of the situation were people rely on surviving by paying the mimimum.

I do note that Banks and Building Societies that borrowed billions are also requesting longer to re-pay yet you propose to impose a draconian method on the general puiblic who mcan ill afford it.

Try to stop the extortinate rates charged.

My biggest problem is that one credit card providor is charging me an interest rate of 35.9%apr. I took out a credit card on a zero% transfer but one payment was two days late. (My daughter forgot to post the letter and I found it in the car). As a result the 0% deal was scrapped and I’ve been on this punitive interest rate ever since. There is no natural justice in this. If card companies can push up rates in this punitive way they should also be forced to return rates to a standard rate once a good payment record has been re-established (say after 3 months).

The Government really needs to stand up to these white collar loan sharks. Every time the Government tries to introduce rules to improve the deal for borrowers they get worse. For example, the card industry was stopped from charging a late fee of £25 but instead was allowed to introduce punitive interest rates- allowing them to charge far more in real terms. Another retrograde step was to allow unsecured lenders to put a charge on people’s homes if they default. I have never done this but it makes me even more afraid of the proposal for increased repayments which would make me insolvent.

Whatever the outcome of the consultation, please consider the problems for current borrowers as well as how the industry should operate in the longer term. Thank you.

Many consumers, as has already been shown in earlier posts, are caught out by almost loan shark style tactics of raising rates when the facility to repay the entire amount, as an alternative, is simply out of the financial reach of many. Let’s be honest, if we had the money available no-one would take the credit.

I am, however, concerned that measures such as these simply seek to alleviate a burden which is created as a result of poor personal money management by consumers.

If these measures are to take effect then I would like to see balancing measures that force card issuers to complete more than simple credit checks.

As a nation, we are horribly inept at controlling our spending and more needs to be done to stop the culture of debt from continuing to dominate consumer spending habits.

We may complain about how our cards are managed by the issuers but we are the one’s using them.

Michael

Ultimately, I used these cards and have to take responsibility for my own levels of borrowing in that respect, but I did so on the basis that I could afford the minimum payments. At 5% there is a real risk of serious hardship or bankruptcy for many people.

I agree there is a ‘trap’ there – I pay the minimum payments which really doesn’t get me very far in terms of paying off the debts, so I’m essentially stuck with it until my income increases enough to repay.

I would also point out that the majority of my credit card debts were accrued at university – I didn’t get much of a student loan and I was using cards just to live on. Seems rather unfair that I’ve graduated, got a job, am repaying my student loan, am paying tax and NI like millions of others and yet the government could well tip me over the edge into student-like poverty again! – or worse.

It would be unfair.

Thanks!

Recognising that changing the rules may make things difficult for those already deeply in debt, I think rules should apply to all future transactions. These rules should take on board the proposal to increase and regulate minimum payments. These should be to recommend a payment at a level to clear the debt in three years, but should also increase the current minimum to at least 3% to discourage future reckless borrowing.

The rules should also address the problem of the way that credit card companies maximise profits by paying off cheapest debts first. This should be totally reversed to pay off the most expensive first, which is what most people in debt would want to do.

Thirdly action should be taken on the practice of increasing credit limits in an unsolicited way, encouraging those less able to control their debt to let it rise accordingly. There should be no increases in limit without the customer making an application to have a higher limit and the company taking due account of their ability to fund the repayment of such an increase based on their repayment record to date. No increases should be given if the current debt cannot be paid off within the three year limit.

Credit card companies should not be able to increase interest rates without giving proper notice and permitting borrowers to reduce their exposure, or alternatively by not increasing their borrowing, continue to pay off the debt at their current rate. Where a company chooses to increase their rates selectively to a particulat customer they should have to give a full explanation of their reasons for doing so, including the reasons for any credit scoring issues.

There should be a limit on the frequency with which companies can increase their rates and provided that customers have complied with the payments schedule, this should be no more than once every six months.

Finally, Companies should be forbidden to reduce credit limits below the level of debt currently outstanding by a particular customer.

if the goverment of the day wish consumers to believe they are taking on the credit card industry to sort out it prolems

They should cap there interest rates at 5 10 or 15% immediately until the introduction of regulation

As a long delay will only add to peoples hardship

However, I have come across outrageous actions by creditcard companies- echoed repeatedly above.

1. I was charged for going over my credit limit. When i argued that I- genuinely- thought my card would be declined if i tried to go over it, I was informed (by MBNA) that they always let people go over to ’save you embarrassment when paying’. Erm, well, actually, i’d rather have been ‘embarrassed’ and not now be £100 over my limit (it was several different purchases over the month) AND faced with a charge AND a massive amount of interest.

There is not way that a card should be allowed to go over it’s limit. It should be declined immediately and the customer advised to contact the company.

2. With Mint, I was very near my limit and then the monthly charge of interest put me over my limit. This meant a charge for exceeding my limit.

If the interest amount due the next month is more than the remaining limit on the card, the amount payable should automatically be adjusted so the payment keeps the card within its limit. A call/ text/ email wouldn’t go amiss- god knows they’re making enough out of us to provide a wee bit of customer service.

3. Interest rates are not clearly shown and not universally stated. One card i have says it annually (helpful), another states it monthly (less helpful).

4. Having another option for the direct debit is crucial but rather than a fixed amount each month, like a standing order, it should be ‘min. monthly payment plus XXX amount’ This means that the minimum payment is always met with a regular additional amount.

5. IT would be helpful if balance transfer offers were done on more specific information- namely how much you want to transfer. My debt spiralled when i tried to consolidate creditcard debt but was always only offered a fraction of what i needed. Some balance at 0% was better than a full balance at 29% so resulted in my switching some over. And then having two monthly payments… and then three, as i got another small 0% offer confirmed and then, eventually 4. I think at one point, by 21, i had 5 cards on the go.

6. The suggestion of minimum payment increases are sensible but, as stated many times already, terrifying for those already caught in a spiral of debt. I can afford my min. payments. If they double, i could not afford them.

7. If i went to my banks business department and said, “i have a business offer for you: invest 10k in my business idea and i guarantee that you’ll have your money back plus 10% on top in 3 year”, they would jump at the chance. If i then said, “ok, well give me a loan!” they’d turn me down. I have stopped using my cards and am desperate to get out of debt. I can afford 3 creditcard payments each month at interest ranging from 19- 27%. If all of this could be consolidated in one loan with a fixed repayment amount each month, i would be out of debt in 3 years. Instead, I am trapped in my debt.

8. My final point is about age. I think 18 is too young to handle a credicard. However, i’m aware that some 18 year olds are not living at home or attending university and might find a creditcard useful. For this reason, i would not go so far as to say the limit should be raised to 21. I would say that getting credit at 18 should only be made available after a serious review and dicussion with the applicant. It should NEVER be offered to an 18 year old, only considered as a specific request. Companies that solicit 18 year olds should face grave sanctions.

I have dealt with: MBNA, Barclays, Mint, Marbles, and House of Fraser (a store card turned creditcard- ironically my lowest rate) and all of them have been underhand and sneaky and actively counter-productive to helping me control my finances.

I have resigned myself to the fact that i will be in debt forever; that, living in london, i will never be able to save enough to buy a house before I retire and that banks will happily take my money as a tax payer whilst doing everything they can to make as much money out of me as a consumer as possible.

I think the payment used to pay off the cheaper interest rate first is very unfair. It needs to be changed so that people can pay off their debt quicker.

Also, some CC companies only allow balance transfer of 50% of credit limit is also very unfair : People should have the discretion to use all their credit limit to do the balance transfer in order to pay off their debt easier.

I, until very recently had a Halifax One card. I have a decent credit rating, have never missed or been late on a payment on anything, yet I was ‘ratejacked’. Disturbingly, I never received any notification of it before it happened, though H claim the letter with the details was included with my June statement(which I have intact in its envelope and no sign of aforementioned letter). They say that since I have continued to spend after being informed, I have accepted the new rate. Its currently with the Ombudsman, but all really hinges on the missing letter. Their system claims to have sent it, I haven’t seen it, and I know its not where they claim it was.
Oh, and the balance is now on a new 0% rate card…bye bye Halifax – will never use them again.

All the practices you highlight are overdue for reform. In addition I’d like to see some kind of control over the rip off interest rates some of these companies charge. I wonder if NS&I could offer a credit card with a rate fixed at inflation +5% – this would bring the others into line, and probably also earn some profit for the Govt, since people would flock to it.

The government also needs to legislate on clearing times. If I use my debit card in the shops, the transaction is almost always debited from my online bank statement by the time I get home. If I make a payment to my credit card it can take up to 5 working days to show up on my online CC card statement. That’s a scandal, in general – not just CCs. The government should use its leverage on the banks and CC card companies to make them uniformalise the timings of credits and debits.

I think the issue with credit cards is that they tend to prey on the inexperienced and weak. Reforms should be aimed, at least partially, at making it a little harder for the unwary to fall into debt with the CC companies.

Why not make it obligatory that any credit agreement that involves interest charges more than say, 5% above the prevailing bank rate, must be referred to an independent adviser appointed by govt (perhaps the CAB or similar body with additional funding for this purpose?). This would mean that the financially illiterate are at least alerted to any potential rip-offs, even if they choose to ignore the impartial advice?

It’s obvious from even a brief look at sales and “welcome” literature of CC companies that they try very hard to make the good news about the product look very attractive, and to bury the bad news (if you’ll excuse the expression) Ts&Cs in unapproachable sub documents or webpages, with pages of closely spaced lists of clauses and conditions set in small font and – even now – couched in language calculated to put off most ordinary people.

Lots of people are saying that you shouldn’t sign up for cards if you haven’t read the small print. However, I would point out that credit card companies (and indeed Banks with their products) have teams of professional people writing all this stuff, calculated to obscure and soften bad news and to accentuate the positives. No doubt they spend months on preparing this literature. The ordinary person probably has a maximum half hour to read through the great welter of stuff they send out, and as I said, the documents are constructed such that the more positive the message the more attractive the layout, and vice versa. No wonder the bad bits often go unread by the unwary and inexperienced.

Alan T

I make the minimum payment plus how ever much on top I can afford that month. The minimum payment with my provider is approx 60/40 interest/capital. Would this double? If so, I would have to default, which would mean I lose my job, as I work in finance.

I did the poll – only 14% for increasing minimum payments (which we all have the choice to do anyway) with the majority going for paying off the most expensive tranche first. I note there was no choice for a full review of cc interest rates. Base rates have never been lower, but the government is allowing the high rates not just to continue, but to increase. This is the REAL problem. If the government really wants to do something about consumer debt, it would instruct the banks (already supported by our taxes) to lower rates immediately.

Lots of other people will also use their cards in the same way. If you increase the minimum repayment, you will be penalising people who use their cards sensibly.

If the bank would have just given me the fifteen grand I needed to complete my recording studio in the first place, all this wasted time and stress and expense need not have happened

This could potentially lead to defaults on payments and penalties being added potentially higher than the interest charged on the account at present.

I think a great deal of thought needs to be put around this. I, like a lot of people, signed up for credit cards with contractual minimum payments, I suspect also, that some people, like myself looked at the minimum payment percentage as a factor in choosing a card; the reason being, not to extend the amount of interest I’m paying(!), but to simply be able to manage my debt better when necessary. If minimum payments were to be mandatorily increased by several percent then I, like a lot of people would be unable to manage the debt successfully and would end up in an even more difficult situation!

Currently I pay near the minimum amount on a few of my cards, while paying higher amounts on others, so that I can manage my debt and reduce it in my own time – If I want to pay more in a given month, then I have that option – I don’t want to be forced to pay back more than I signed up for!

I strongly think that making a change like this would put a great deal of people into defaults and bankruptcies. I also think that many people would have to go down the debt management route; effectively this would mean that their debts would take even longer to pay off than before any minimum payment increases!!

One last point I’d like to raise is regarding the point that 14% of card customers regularly pay the minimum amount… Have the government considered people who pay a little bit more than the minimum amount but no-where near the potential 5% increase suggested? I believe if these customers were factored in then we would be looking at a much higher number of customers who would be adversely affected by an increase of even a few percentage points.

I like some other people have suggested, believe that the only way forward on this matter would be to either impose a ‘recommended’ minimum payment, but allow people to be able to pay their original contractual amount or to only roll out the change on NEW lending (and to make this clear to the consumer).

Minimum payments – Amending the level of minimum payment should certainly be introduced for new credit card contracts but existing debt should be treated differently. Those who would struggle to meet higher repayments people should be able to arrange a repayment plan be refused further credit, effectively converting the debt to a loan.

Another difficulty is that if paying by direct debit, the customer has to choose between the minimum amount and clearing the entire balance each month. You cannot make a direct debit of, say, £100 per month in order to know that you will pay off the debt in a certain number of months. Whilst it is true that you can make payment additional to the minimum, we humans are often weak and undisciplined and need help with our good intentions to repay debt. I am sure that lender’s systems could cope with a fixed amount direct debit; why isn’t it offered?

More transparent information – this is helpful but to be effective it has to be seen, understood and acted upon. This, however, is rarely the behaviour of those in debt. Detailed information about true costs of operating the card in prior 12 months should therefore be introduced, but in conjunction and the other measures proposed.

Unsolicited credit limit increases – These should be banned immediately. Increases must only be at the request of the customer only. An increase is usually incredibly easy to obtain on request.

Re-pricing – Lenders should not be able to re-price an individual’s existing debt. It is ridiculous to lend more money, more expensively to someone who is struggling. Can the government help promote credit unions?

All of these proposals will affect lenders’ ability to make money for their shareholders, and of course the industry will resist any intervention in their operations that adversely impacts on profits.
The right to make a profit should not be at any cost to society and must be set against the duty of government to protect its citizens, particularly vulnerable ones. We no longer have a ‘do without if you can’t afford it’ culture’ so it is ingenuous of lenders to make suggestions that put the onus of responsible behaviour on the borrower. (E.g. Borrowers can always contact the lender to refuse a credit limit increase. Most of us won’t, and the lenders know this.) The government must take account of human psychology here. Freedom should no longer include the right to get oneself deeply into unsecured state. Critics will say this is the nanny state, but the politically unacceptable truth is that many of us need nannying. Most people don’t know what caveat emptor means.

Finally, there are many dangers in an economy dependent on debt, and it is not the industry that picks up the pieces of shattered lives and a devastated economy. And that can be clearly evidenced.

If the industry objects to your proposals you are getting right. Have courage and good luck!

I can see that there are many people managing large debts as we do. Currently we have around 11 credit cards. There are balances across 4 of them totaling around 13K. This has been as high as32K. We have never missed a payment, and we have rarely paid rates of 17%never mind 27%. Currently about half in on circa 6% for life of balance, with the remainder on 0%.

The strangest one yet is the current virgin one, where I had £7500, and while the rate was at the 0%, the minimum payment was £25!!!

Way way forward on % of debt to be payed is to strictly control lending/repayments on future debt and leave the exsisting debt as it is.

A Maxium APR should be set by the FSA.

A Maxium % of earning/avilable credit should be set.

Multy card owership should be banned.

I have read other comments about how why people get themslves into these situations with debt with little thought that these companies have very clever tactics to lend money and have done so without an thought of repayment as that is not there aim. There aim is make money end of story.

If it were up to me I would remove these products form the market. Why does anyone want one. I am a 41 year old male married 2 kids and no cards I can manage ok.

They should (as mentioned previouslly) have a warning in large capitals at the bottom of the bill stating how long it is going to take to pay off your bill if you pay the minimum, plus the same sum if you pay double so that consumers can understand the different made.
also
they should never ever be allowed to increase your interest rate without your permission. i have never understood it. You sign a contract and it has so much small print and there is so much of it you never understand just what a scam it all is.

2) I think that there should be rules that when you pay an amount off your credit card that it comes of the total and not off the section of money that has the lowest rate

WHAT IS MISSING:
There should be a rule that stops credit card companies sending out cheques in the post; it is dangerous for potential fraud, a HUGE waste of paper and tempting for those in debt.

I do not agree with financial institutions giving people credit without many checks. Many people including myself have been given unreasonable amounts of credit and we are all now feeling the pain (yes I do take ownership of my debt and blame myself for it building up!) If the minimum payment is bought in to the people already in debt the consequences will be astronomical.

Why not reduce the interest rates by a small amount, this will reduce all of our debts, this is the only thing that will help me!

As a consumer expecting fair treatment from my finance providers, why isn’t there a certain amount of time (2 or 3 weeks) before the CC providers can assess interest charges to my account.

In addition to not being given ample time to pay off my CC before being charged the interest charge, it is not clearly indicated on my HSBC CC statement what the monthly CC interest charge is & when it is assessed to my account. In my online CC statement & .pdf versions of my CC statement do not clearly list the Interest Charge as a line item. It is not ‘charged’ to my account on a specific date, rather wrapped up or “implied” in the total balance due. (which was only communicated to me on the last day of the billing cycle.

How about some transparent accounting here.

As for increasing the minimum payments for credit cards, I think that this would actually hurt a lot of people and I think that Martin Lewis (from money saving expert) has a better suggestion of making card companies include ‘recommended payment’ options on statements, calculated to clear the card in 3 years, and show how many years it would take them to clear the debt if they did only make the minimum payments (so people can see the impact that minimum payments have). This might encourage people who can afford to pay more than the minimum to do so, without hurting those who can’t afford to.

Introduce a higher minimum payment for new debt from this point on.

Force credit card companies to make important and highly relevant changes to conditions summarised in simple, clear terms with bold print on the front page of any communication.

And why does it take Halifax credit card company five days to receive my internet banking payment but Halifax bank receives it within three days? Is this another scam to attract late payment fees?

A clear payment summary should be added to each statement to show the different periods of time various payments will take to clear the balance.

Change the terminology from “balance” to “debt” and from “you have available to spend” to “you can increase your debt by a further…”

We should be able to determine our repayment schedule without the bank changing this without consultation.

I think credit cards should offer 3 choices, 1) Minimum, 2) Repayment of a certain amount, eg calculated to repay over 5 years, and 3) repay total each month.

I do think that paying of the most expensive debt first is a good move.

I would suggest that one solution to the debt might be for banks to consider a ‘freeze’ by agreement, on the interest on credit cards which have had an outstanding balance for over 12 months (i.e. agree a fixed ammount of interest to pay off the outstanding debt in a given time – similar to a loan agreement) that way, those in debt would at least be able to see the light at the end of the tunnel and know that if they keep up with the payments, the debt will clear. This could be linked with a close on the account. prohibiting further spending on the card.

An alternative would be for a ’subsidised’ pay-off scheme supported by the government – agreeing a low interest rate on long-term debt with the banks in order that this can be paid off – similar to the arrangements which have been put in place for the banks themselves.

Love Money suggests the following

1. The interest rates charged on many credit cards are way too high. Credit card APRs should be capped at Base Rate plus 10%.

I suggest that this may be too high (4%-6% should be quite enough)

2. Negative payment hierarchy should be banned. Credit card providers should allocate all monthly repayments to the most expensive debt first.

Agree

3. Penalty charges for late payment of a credit card bill should be no more than £5 per late payment. [This could also include the overlimit charge that some companies have introduced.]

There used to be no such penalties. Credit card providers have simply programmed their computers to add these charges automatically. In some cases you may receive a standard letter advising you of the position, otherwise you find out because the penalty is listed on your monthly statement. A far better way to ensure timely payment is to prevent the use of the card until payments are up to date.

I believe that this form of penalty amounts to no less than contactual theft and should be banned.

4. Special promotional deals – such as a 0% balance transfer – can’t be withdrawn after one late payment. Promotional deals may only be withdrawn when the user breaks the rules a second time.

Agree

5. Charges for cash withdrawals at ATMs should be limited to £1 per transaction. Interest on cash withdrawals should be charged at the same rate as purchases for that card.

Actually I have no problem with reasonable bank charges – many banks offer free ATM withdrawals from standard bank accounts. A £1 charge does not offend in the same way as other charges identified here.

6. A credit card customer must be obliged to pay at least 5% of his/her outstanding credit card debt each month. Low minimum payment levels can consign some users to more than a decade of debt. [Presumably the idea is that consumers will more rapidly pay off their debt or reach the position when they can't much earlier.]

Agree mostly

7. Credit card companies can no longer increase credit limits without permission from the customer.*

Agree

8. Unsolicited credit card cheques should be banned.*

Not necessarily. It is the abuse associated with high charges and higher interest rates that should be banned. If the charges including interest were in line with the rest of the above there would be no problem.

* The government said in March that it would introduce legislation to deal with points 7) and 8).

If the “money” that has been created by credit never really existed but has been lent to people who cannot pay it back, there has been some form of collapse in the availability of “funds”. Our western monetary system in operation since 1694 has turned money into a commodity that is itself bought and sold. Thus poor nations have become poorer as people have gambled on the value of a nation’s currency. Only about 3% of our nations currency is in solid tangible form. The remainder has been generated as credit. If the lending institutions charge just 3% interest on that you can see that in a very short time there will be no money left! Indeed that situation has passed and there is no money left!

Time for a major alteration in how we issue money – it is the responsibility of government to rectify.

Clive Sawers

Check the store credit cards – why do they need 30% APRs? Why do people need to borrow so desperately that they ignore such rates? TVs, stereos, mobile phones etc aren’t essential to life.

There should be strict limit for people below the age of say, 25. Draconian, yes, being a parent having to pay off £5000 debts is likewise!

Clear, plain language advise on how to mange effective repayments.

Good idea that credit limit is not raised with out serious consideration.

Make this happen and to hell with the lobbyists!

Any changes should be aimed at preventing excessive debt accruing in future and deterring new borrowers from going beyond their means, but it is totally wrong to apply this to current borrowers.

Additionally why not cap all loan and credit card interest rates at maximum 5% over bank rate? Interest rates on all loans and cards is way above what is reasonable.

I think ALL upfront offers should be banned and it should be illegal to give new customers a better deal then current customers – this should go across all the brands that an operator owns.

At present all the credit company just complete to see who can trick the most customers into operating their card(s) in the most expensive why.

The card i have left is for £4000 0% intest for another ten months. i pay direct debit for min amount then via internet bank pay off whatever is in my bank account the day before payday. If i have nothing extra i pay nothing.

The credit card companies have it there own way for far too long.
the way payments are used to pay cheaper loan off first is unfair and needs to be addressed.

1/ making companies apply payments so that you pay off the most expensive debt first

2/ Ban unsolicited increases to your credit limit, clearly a trap for the unwary

3/ Increase minimum monthly payments to a level that pays off the debt in, say, 2 or 3 years. There are better (cheaper) ways of borrowing for longer periods, and a this could be accompanied by a recommended repayment rate that would pay off the balance in 12 months (or less).

Another change I would like to see is a limit on how much companies can spend on unsolicited mail. I probably get 4 or 5 invitations a week to apply for a new credit card and it must cost a fortune to send these out, paid for by the excessive fees and interest that credit card companies charge. I have to shred them all as they come pre-printed with my personal details. Please could this be limited in some way, eg a legal limit of the amount a company can spend on promotion as a proostion of fee and interest income, or a voluntary industry agreement enabling a customer to opt out of receiving unsolicited credit card application forms (with a web site and/or phone line to register your requests).

Personally speaking – I think they should be forced to offer some of the balance transfer deals to existing customers – say every six months – as this does ease the pressure on monthly payments somewhat and gives something for people to aim for as far as paying debt off.