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"Credit and store card crackdown welcomed by Nationwide"

By admin | November 26th, 2009 | Credit Cards

A major High Street lender has said that it welcomes the recent crackdown on credit and store cards, following recent proposals that were put forward by the government.

The proposals by the government have been met with mixed reactions in some parts, and were put forward to the Department for Business Innovation and Skills. The moves have been welcomed by Nationwide, which said that the crackdown would prove beneficial for consumers.

One of the areas of the proposals that have been welcomed by Nationwide as well as many other industry officials is that if the proposals go through lenders will have to allocate monthly repayments from consumers to the most expensive debt on the cards first and then move on to the lower interest debt.

In most cases the allocation of repayments works the other way around at present, which means that consumers end up paying far more interest to the lender.

An official from the Nationwide said: “We are delighted that BIS have included order of payments in the review. We think all UK credit card providers should allocate payments in a positive way. The US has already recognised that the practice of paying the cheapest debt first is unfair to customers and is forcing lenders to be more consumer friendly.”

One of the areas that has received some degree of scepticism from some industry groups is the proposal that minimum repayments need to be increased by lenders.

Whilst this could mean that the debt is cleared far more quickly and a lot less interest is paid by the borrower some are concerned that in the current climate many credit card borrowers may not be able to afford to step up their minimum repayments due to financial constraints.

Tags: credit card interest, interest payments, store cards

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