White paper on consumer debt slated
THE government’s bid to crack down on the credit card industry to reduce the number of people struggling with unsustainable debts has been criticised by a number of bodies who warn it may restrict lending at a time when people need it the most.
The Consumer White Paper aims to clamp down on unsolicited credit card cheques, while lenders will no longer be able to raise borrowers’ credit limits without their consent or increase interest rates on existing debts.
CBI Deputy Director-General John Cridland said: “Measures to stop reputable lenders being able to change interest rates to reflect customers’ changing credit ratings could see some people being denied lending.
“This could come at a difficult time for them, or force them to turn to unregulated lenders.”
Shadow financial secretary Mark Hoban yesterday said: “This is a confused package of measures which doesn’t really hit the mark.
“Issues such as a cooling-off period for store cards and the length of time it takes for consumers to pay off debt in minimum payments have not been tackled at all.”
The consumer white paper also aims to assist tenants whose landlords are subject to repossession orders.
But The Association of Residential Letting Agents (ARLA) yesterday criticised the white paper as being “too vague”.
ARLA president Lucy Morton said: “The Government’s pledge to legislate at ‘the next opportunity’ is far too vague, as both landlords and tenants need the government to take action now rather than making promises.”
Debt charities have warned that a £2,000 credit card debt would typically take 20 years to pay off if the minimum payment was made each month.
The average person has seen their credit limit rise by just over £1,500, according to comparison website uSwitch.com.