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"Borrowers will receive help from credit card firms"

By admin | December 16th, 2008 | Credit Cards

Credit card firms have spent more than their fair share of time in the financial news headlines for various reasons, and not always for the right reasons. Recently, credit card firms have come under fire as a result of the high rates of interest, charges, and fees that they are applying to customers’ accounts and the fact that many have been increasing their borrowing rates and fees even though the base interest rate has been slashed by 2 percent in the past couple of months.

However, following intervention by the Prime Minister, Gordon Brown, credit card firms have now agreed that they will be doing more to help struggling borrowers. The credit card industry is now in the process of putting together a report with a set of fair principles that will be designed to try and help borrowers who are struggling to repay their debt. This report will be presented to the government in a couple of weeks.

Firms have also stated that they will be looking at cutting interest rates, and representatives have met up with the Business Secretary, Lord Mandelson, in order to look at the possibilities and discuss the options. Risk based interest rates have been discussed, where the rate of interest charged by the lender is based on the risk of the borrower defaulting on the credit card repayments.

Credit card providers have also agreed that if a borrower is struggling to make repayments on a credit card, and if they are working with a debt agency or advisor to try and sort out the issue, the credit card firms will suspend any debt collection action for thirty days. Government officials have been stating for some time that they are concerned over credit card interest rates failing to come down, and this is why the Prime Minister decided to take action and organise the meeting.

Consumer Affairs Minister Gareth Thomas attended the meeting, and he said: “The government is deeply concerned that borrowers aren’t getting a fair deal. That’s why we’ve taken swift action to bring the industry in to look at how costs are being applied to people’s existing debts.”

An official from the Finance and Leasing Association, which represented the credit card sector, stated: “The group made good progress in discussing the issue of risk-based re-pricing which is leading to high increases in some individuals’ bills. They will develop a statement of fair principles in two weeks for risk based re-pricing decisions. Those principles would address issues such as proportionality, frequency and transparency. The purpose is to help borrowers manage their debts during the downturn.”

Concern over higher interest rates on credit cards have been further fuelled by the fact that in the current financial climate a rising number of cardholders have been forced to turn to their credit cards in order to pay for day to day things and in some cases even to make bill and mortgage repayments.

Tags: Credit Cards, credit card firms

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