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Interest Rates: Credit Cards

Treasury written question – answered on 9th September 2009.

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Photo of Elliot Morley Elliot Morley Labour, Scunthorpe

To ask the Chancellor of the Exchequer what steps he is taking to ensure that financial services providers reflect the Bank of England base interest rate in the interest rates offered on credit cards.

Photo of Kevin Brennan Kevin Brennan Minister of State (Department for Children, Schools and Families) (also Department for Business, Innovation and Skills), Minister of State (Department for Business, Innovation and Skills) (Further Education, Skills, Apprenticeships and Consumer Affairs) (also Department for Children, Schools and Families)

I have been asked to reply.

The Government fully understand concerns over interest rates charged by some credit card lenders. In December last year the Government took decisive action to secure agreement from the credit card industry to Fair Principles for any interest rate increase they introduce on reviewing an individual's account. These came into force in January 2009, and provide extra protections when a customer or group of customers' interest rate is changed as a result of a perceived change in their ability to repay their debts.

On the 2 July Government published the Consumer White Paper detailing plans to bring forth a review of credit and store card regulation. The review will examine whether restrictions should be placed on the raising of interest rates on existing debts.

The review will also explore if minimum monthly repayments should be raised to combat debt levels, it will also look at the benefits and risks of banning the practice of increasing borrowers credit limits without their consent, and what order debts built up on a credit card should be paid off. We intend to publish a consultation in the autumn and report our findings in the new year.

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