New rules designed to help credit card customers stay in control of their debts will come into force by the end of January 2011.
The new agreement has been put in place following the governments call for the credit card industry to ‘clean up its act’ last year.
The agreement will include:
Ensuring that the highest cost debt on a credit card is paid off first
A new 30-day window to allow people to opt out of any unsolicited increase in their credit limit
A ban on those in financial difficulties being offered an unsolicited rise in their credit limit
A 60-day period for people to reject a change to the interest rate on their existing debt. If they reject it, they must then close their account, with "reasonable" time being given for them to pay off their debt or move it to another lender.
Regular payments of only the minimum being met with more information from the lender.
Consumer Minister Kevin Brennan said: "This is a fair framework of rights and rules that makes sure easy and convenient lending for the majority does not lead to unmanageable debt for the minority who may be in financial difficulty."
Chair of the UK Cards Association said: "We are pleased that our evidence on unsolicited credit limit increases and the re-pricing of existing debt has conclusively shown that existing practices do not need to be overhauled. We believe that, overall, the outcome of the review is balanced."
Citizens Advice Director of Policy Teresa Perchard warned: "Too often we have seen situations where individuals’ credit limits have drifted up to totally unaffordable levels, making it impossible for them to address their debts if they lose their job or hit a financial crisis."
"In addition the level of minimum payments has not always enabled consumers to keep up with the interest."
Craig Gedey, marketing manager at Debt Advisory Line said: "ensuring customers pay off the most expensive debts first is a great step forward for the credit card industry."
"Perhaps a cap on interest rates for credit cards and store cards should be introduced to further protect vulnerable customers."
Anyone with credit card, store card debts that are out of control should speak to a qualified and DEMSA Approved debt Management Company like Debt Advisory Line. Call us today on 0800 542 6782 or visit our web site www.debtadvisoryline.co.uk for more details.