Department for Business, Innovation and Skills
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Government and lenders joint statement on credit summit
Secretary of State for Business Peter Mandelson and Consumer Affairs Minister Gareth Thomas have secured agreement from the credit card industry to help borrowers struggling with their credit card bills over the coming months.
At a Credit Card Industry Summit at the Department for Business this afternoon the Government and industry agreed proposals that will give extra breathing space to struggling borrowers. It was agreed that the credit card industry would report back in two weeks time on a set of fair principles to help card borrowers to manage their debts.
The Government and industry agreed the following joint text:
The industry agreed that where a not for profit debt advice agency has formally notified that a consumer is in serious discussion with that agency on a draft debt repayment plan then the credit card company will suspend collections activity whilst these discussions continue provided that they are concluded within 30 days, with the option of extending a further 30 days subject to demonstrable progress being made but not yet concluded.
The group made good progress in discussing the issue of risk-based repricing 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.
Notes to editor
1) Risk based re-pricing is is the industry term for when they change customers' interest rates because of a change in the risk that a particular group of customers will default on their loan. It's these sorts of repricing decisions that have led to the sorts of cases we're unhappy about, where people have faced very significant increases in their interest rate, sometimes of ten percentage points or more
2) The Government and industry discussed the issue of risk based re-pricing, which is leading to some individuals seeing large increases in their credit card bills. The Government called on the industry to report back with a statement of principles on risk re-pricing in the next two weeks.
