WIREDGOV

GOVERNMENT ACTION TO SECURE A BETTER DEAL FOR CONSUMERS

News Release issued by the Government News Network on 02 July 2009

Cracking down on persistent rogue traders and a ban on unsolicited credit card cheques are at the forefront of measures announced in the Government’s Consumer White Paper today.

 “A Better Deal for Consumers - Delivering Real Help Now and Change for the Future” sets out action to promote responsible borrowing and lending and provides a longer term framework to enhance and enforce consumer rights in the wider economy and a changing world.

Today’s announcement builds on the real help already provided for homeowners, pensioners, savers and those struggling on low incomes and follows Building Britain’s Future, which set out Government’s plans for creating growth and jobs as the economy moves out of recession.

Measures include:

· A wide ranging consultation on significant reforms to the regulation of credit and store cards to put consumers more in control of their borrowing and to help guard against people running up credit and store card debts they can’t pay off. This will balance the importance of choice and a flexible market with personal responsibility and protection from over-indebtedness;

· A ban on unsolicited credit card cheques which can tempt consumers unaware of the high interest rate charges to borrow money they cannot afford.

· A review by the Office of Fair Trading of the market for high cost credit, typically above 50% APR, such as pay day loans and door step lending;

· Appointment of a new Consumer Advocate responsible for co-ordinating work to educate consumers and to help them get their money back when things go wrong;

· New powers for the courts to ban persistent rogue traders; a new national specialist team for internet enforcement to tackle scams which con consumers on the internet; new money for a central ‘Fighting Fund’ to tackle rogue traders operating on a large scale; and a pilot scheme giving Trading Standards officers powers to help consumers get money back; and

· A new self-help tool-kit developed by the Money Advice Trust and a new Debtor’s Guide from the Insolvency Service to help people in debt take control of their finances.

Business Secretary Lord Mandelson said:

“The Government is determined to help consumers during the current economic difficulties. Many family budgets are under unprecedented strain.

“We’re already providing targeted help to protect people from falling into debt and to support those who get into difficulty.

“But we need to do more. Our aim is to help consumers make better informed borrowing decisions.”

The review of the regulation of credit cards and store cards will examine if restrictions should be placed on the raising of interest rates on existing debts; if minimum monthly repayments should be raised to combat debt levels; if the practice of increasing borrowers’ credit limits without their prior consent should be banned; and what order debts built up on a credit card should be paid off.

New requirements will be introduced on all lenders to check consumers’ creditworthiness before they borrow; to explain financial products fully including the consequences of failure to repay; and to comply with new OFT guidance to tackle irresponsible lending.

In addition, consumers will be able to compare the cost of different credit cards based on the way they intend to use them. Following consultation, the Financial Services Authority’s Moneymadeclear website will host a new, impartial comparison table, helping consumers make the right and informed choice for them.

Consumer Minister Kevin Brennan said:

“Consumers have been seriously affected by the past two years of turmoil in the financial markets, as well as by the longer term changes in the way that goods and services are bought and sold. We are taking decisive action now to prepare for the future.

“We are delivering a new approach to consumer credit with a review of the regulation of credit card and store cards. We are imposing requirements on lenders to explain their products and to check creditworthiness before they lend, and revised OFT guidance to tackle irresponsible lending.

“There will also be tougher action against rogue traders and fraudsters who look for ways to fleece consumers out of their hard-earned cash, and a new emphasis on consumer rights spearheaded by the Consumer Advocate.”

Notes to Editors:

1. The White Paper A Better Deal for Consumers – Delivering Real Help Now and Change for the Future is available at :

http://www.berr.gov.uk/whatwedo/consumers/consumer-white-paper/index.html

2. The full plan and policy detail of Building Britain’s Future can be found at: www.hmg.gov.uk/buildingbrita insfuture .

3. The forthcoming Treasury paper on Regulation of Financial Services will set out further proposals for consumers and reforms to the sector to ensure the sector is well placed to emerge from the downturn.

4. The Department for Business budget for the new measures in the Consumer White Paper will rise to £3m per annum by 2010/11. Other Government Departments will be providing funding from their budgets for measures covered by respective departments.

5. In the Budget the Government announced an additional £270 million over two years to meet demand for interest-free loans for people in financial difficulty, available through the Social Fund. It also announced a further £18.75 million to help people on low incomes obtain affordable credit and banking services through credit unions and other community-based institutions. This will help to prevent people from sinking into a spiral of debt and being driven into the hands of loan sharks.

6. The Government has been working with organisations including energy and water suppliers, high street banks, credit card companies and debt collectors to ensure that arrangements are in place to give customers a 30 day “breathing space” period when debts will not be pursued, whilst the customer seeks help from a debt adviser to reorganise their finances.

6. The Government has also invested significantly to strengthen the provision of debt advice, including over £130 million in England and Wales for free face-to-face advice between 2006 and 2011. In November, last year, the Chancellor announced £10 million to support longer opening hours at over 330 Citizens Advice Bureaux – to deliver generalist advice to help those hit by the recession - and £5.85 million to increase staffing levels of the National Debtline by 50 per cent.

7. The Government has also announced a package of financial support and legal protection to help people stay in their homes including the £285 million Mortgage Rescue Scheme for some of the most vulnerable households facing repossession; Homeowner Mortgage Support which enables households experiencing a significant loss of income to defer a proportion of mortgage interest due for up to two years; Support for Mortgage Interest to help out-of-work people with interest payments and a £20m Repossession Prevention Fund which can provide small loans to help homeowners avoid repossession.