Credit card changes 'to save £300m' (From Haringey Independent)

Credit card changes 'to save £300m'

9:39am Monday 15th March 2010 in

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Consumers could save around £300 million a year in a crackdown on the cost of credit card borrowing, Prime Minister Gordon Brown has said.

Repayments to credit and store card firms must be used to pay off the most expensive debt first before cheaper borrowing in a reversal of current industry practice.

There will also be a ban on credit limit and interest rate hikes for those facing financial difficulties and a 60-day right to reject rate increases.

Mr Brown said: "These new rights will put an end to the irresponsible lending practices that people have been most concerned about, and help cut the cost of borrowing."

Building society Nationwide said consumers could even potentially save as much as £500 million under the changes, which come into force in February next year.

The Government launched a review of credit and store cards in a consumer White Paper in July last year.

Following a three-month consultation, consumers will also be given more guidance on the consequences of paying back too little and an annual statement allowing them to compare costs with other providers.

Credit and store card firms will work with consumer groups and debt advice agencies to identify borrowers who are at risk and protect them from credit limit or interest rate hikes.

In his weekly podcast, Mr Brown said: "Lenders that don't comply will face tough sanctions, like having their licences revoked."

But shadow financial secretary Mark Hoban insisted Labour had failed to "stand up for British consumers" over the past 13 years. "Only the Conservative Party is committed to an interest rate cap for store credit cards, banning energy companies from charging unfair profits on pre-payment energy meters and enabling people without bank accounts to pay their bills via direct debit at the Post Office," he said.