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Credit card industry faces transformation

Credit card providers may soon be forced to change their ways, as the government attempts to make credit and store cards fairer for consumers.

There could be big changes ahead for credit card providers, as the government assesses responses to its Review of the regulation of credit and store cards.

In the consultation, the government asked the following five questions:

• Should credit card providers be banned from increasing the interest rate on a customer’s existing debt?
• To avoid the dangers of minimum repayments, should the government introduce a mandatory minimum monthly payment?
• Should credit card providers be forced to reverse their practice of negative payment hierarchy and allocate payments to a customer’s most expensive debt first?
• Should unsolicited credit increases be banned?
• How can credit cards be made simpler and more transparent for consumers?

The deadline for responses was Tuesday and many organisations have taken the opportunity to voice their concerns about the credit and store card industry in the UK.

Nationwide (www.nationwide.co.uk) is one of the only credit card providers that doesn’t practice negative payment hierarchy and has urged the government to legislate against it.

Chris Rhodes, Nationwide’s product and marketing director, said: “Nationwide has always operated an order of payments that works in the customers’ favour, by paying off the most expensive debt first. There is no reason why our competitors cannot do the same.”

Chris Eagle, commercial manager at Creditchoices.co.uk: “There is the potential for some dramatic changes to come from this consultation, which could lead to a much fairer deal for consumers.

“However, this depends on how far the government is prepared to legislate, and to what extent these proposals get watered down before they become law.”