|TRANSPARENCY: Victory for consumer awareness in the UK as information on credit card cheques is improved.
|CREDIT CARD CHEQUE INFORMATION BOOSTS CONSUMER AWARENESS
(London, 7 September, DEPARTMENT OF TRADE AND INDUSTRY News Release (P/2006/197))
The Government is working closely with banks to ensure their customers get clearer information on credit card cheques.
Following a consultation, the DTI found consumers wanted more information on how credit card cheques work. Lenders have now agreed to include a summary of the costs and fees for using the cheques when they are distributed.
The consultation revealed that although there was a demand for more transparency about fees and charges, there was no evidence to suggest credit card cheques were causing debt.
Consumer minister Ian McCartney has now called on lenders to introduce these measures as soon as possible. He said:
"These steps are an important move towards increasing the transparency about the marketing and use of credit card cheques.
"The extra information will go a long way in helping consumers and will make it easier for them to find the type of finance they want. I will be looking to the industry to deliver speedily on the changes it has promised.
"If it fails to do so, or if there is evidence that the operation of these cheques is causing harm to consumers, we will look again at the need to regulate."
Members of the payments trade association, APACS, have agreed to print summary boxes on leaflets and letters sent out with credit card cheques by the end of the year. A requirement to use them will be written into the banking code in 2007.
THE SUMMARY BOXES WILL INCLUDE INFORMATION ON:
* details of interest rates for credit card cheques - including both promotional and standard rates;
* clearer information on charges for using the cheque, for example fees for use and charges if the cheque is not honoured;
* legal information explaining that credit card cheques do not benefit from the same level of consumer protection as credit card payments; and
* a statement explaining how to dispose of unwanted cheques.
Twenty responses were received from credit card companies, trade associations and debt-advice organisations during the consultation.
The Government will be keeping in close touch with industry bodies to ensure they deliver their commitment to make information clearer for consumers.
NOTES TO EDITORS
1. The Government recently published its annual Over-Indebtedness Report. The report outlined actions the Government is taking to tackle over-indebtedness, including:
* the introduction of the Consumer Credit Act 2006 with new laws to improve responsible lending and borrowing;
* £120m funding for financial inclusion initiatives including £45 million to fund the launch of more free face-to-face debt advice around the UK and
£6 million to fund outreach initiatives; and
* the launch of Debt Test, an online self-assessment tool to improve financial capability, particularly among young people.
* The full text of the Government response to the consultation is available at: http://www.dti.gov.uk/consultations/index.html
2. The Consumer Credit Act updates and augments the 1974 Consumer Credit
Act. It aims to create a fairer, clearer and more competitive consumer credit market by:
* Improving consumer rights and redress:
by removing the extortionate credit test and replacing it with a test concerned with unfairness, and by introducing an alternative dispute resolution (ADR) scheme for consumer credit matters to be run by the Financial Ombudsman Service (FOS);
* Improving the regulation of consumer credit businesses: by altering the powers of the Office of Fair Trading (OFT) to enable it to take targeted action to drive out rogues, and by requiring minimum standards of information provision to consumers throughout the life of the loan; and
* More appropriate regulation of consumer credit agreements: by abolishing the £25,000 limit for regulation and making the rules concerning enforceability consistent and proportionate.
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Created: 11/09/06. Last changed: 11/09/06.
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