Monthly Archives: December 2010

New Credit Card Rules Come Into Force

A number of new measures have been introduced to protect consumers when borrowing money through credit cards are set to come into force.

These credit changes have been agreed between the finance industry and the UK Government. They have been set to give credit card borrowers more control over their borrowing, and those at more risk of getting into financial difficulties will be given far more protection.

The key changes implemented are:

1 . Repayments made by credit card holders will be used to reduce their most expensive debt first. This will essentially end the current practice that ensures debt that is only earning low or zero interest is repaid before debt on which interest is charged at higher rates.

2. Borrowers will be given greater control over their credit limit, enabling them to opt-out of receiving credit limit increases. In addition to this they will also be able to reduce their limit at anytime.

3. When credit Card lenders who decide to increase interest rates borrowers will be given more time in which to opt to remain on their existing interest rate, but stop using their cards to make new purchases.

4. Minimum repayments for people who open new accounts will be set at a level that covers all interest, fees and charges over the course of the month, as well as 1% of the outstanding balance, to help borrowers reduce their debt at a faster rate.

5. People at risk of getting into financial problems will be given more advice and guidance on the consequences of re-paying too little each month. They will also receive an annual statement that shows the cost of their borrowing.

Further measures are being looked into to help protect borrowers, including a cap on the interest rates that can be charged on credit cards.

OFT to clamp down on dodgy Doorstep Loan companies

The Office of Fair Trading (OFT) have recently launched an offensive against “doorstep lender” in an effort to improve standards in the loan industry.

The OFT are concerned as Doorstep lenders tend to target the more vulnerable people who may not be able to access credit elsewhere, due to a poor credit score or a marked financial history, such as defaults on loans and credit cards or County Court Judgements (CCJs).

A worrying report by the OFT reveals that more than 50% of people after a home collected credit licence failed to convince the industry watchdog that they would provide their customers with the right financial information and credit documentation.

The report also suggests that, although many of the larger financial providers are OFT compliant, smaller companies have frequently been found to not have the appropriate compliance measures and procedures in place to protect themselves and their customers.

One of the biggest criticisms of smaller Doorstep lenders is that they do not seek permission from the would-be customer before calling at their home to offer loans. In addition to this there is frequently no pre-contract information in place as well as no cancellation rights.

Consequently the OFT have demanded that uncompliant credit licence holders and those applying for one, supply them with documentation that proves they are complying with the Consumer Credit Act (CCA). They have set a deadline of 3 months.

Ray Watson, Director of the OFT’s Consumer Credit Group, commented:

“We are working to improve practices in the industry to protect vulnerable consumers. Over the festive period, people are often looking to borrow money to cover their additional costs.”

Mr Watson added:

“Home credit can be a good solution for some people, but we strongly encourage borrowers to shop around for the cheapest and most suitable credit product available to them.”

Government Calls for Simplified Financial Products

Banks, Payday loan companies and credit card providers are being faced with standardisation after a Government publication on simplifying financial services.

The Government has recently stated that high-street banks and consumer groups should look at developing a range of simple finance products to help consumers make the most out of their finances.

A recent publication by the Finance Secretary to the Treasury, Mark Hoban MP, sets out a number of proposals for financial products that will help promote personal responsiblity amongst consumers. It will also enable people to compare products and understand their features more clearly. It’s thought that this will encourage competition amongst banks, payday loan companies, and credit card providers.

Mr Hoban commented:

“The Government is committed to helping consumers take responsibility for their finances. In order to do this they need to be able to make sense of the huge range of financial products in the market. Simple financial products will help them to do that, by providing a safe choice and a common benchmark against which other products can be compared.

“This is one of a series of reforms to ensure that consumers get a better deal from financial services.”

Banks still charging extortionate rates on overdrafts

Recent figures by the Bank of England suggests that customers are being crippled by the highest rate in overdraft charges since records began.

Financial experts throughout the UK have condemned these extortionate charges being imposed on customers who dip into the red on their bank accounts.

The figures released by the Bank of England yesterday shows that overdraft rates reached a whopping 19.09% back in October.

As a result the typical customer is actually being faced with repayments that are 38 times more than the 0.5% base rate set by the Bank of England.

Most shockingly, Lloyds, the bank that British taxpayers had to bail out back in 2008, are charging their customers 19.3% and, on top of this, requiring their customers to pay £5 per month on top of this just for the privilege of having an overdraft facility in place.

Financial expert, Andrew Hagger, commented:

“When an overdraft is unauthorised, you can understand the idea that you are charged when you go further into the red. But to ask to borrow money and then be charged these exorbitant rates is just very difficult to swallow.”

In spite of this there are a number of high street banks such as the Halifax who have realised that the charges they were previously imposing on their customers were ridiculous.

As a result a number of banks have changed the fee to a fixed charge should their customers go over-drawn. For instance, the Halifax are now charging a daily rate of £1 for being overdrawn with permission, or £5 per day on an unauthorised overdraft.

CreditWindow suggests that if you are facing these ridiculous charges on your overdraft now may be the time to switch to a different bank account. Alternatively you could consider dipping into savings or even using a credit card rather than going overdrawn and facing exorbitant charges.

Credit card spenders growing more savvy

A recent study by the British Bankers’ Association (BBA) has suggested that consumers are becoming increasingly more savvy when it comes to credit card spending.

Statistics by the BBA indicates that the total number of people using credit cards fell by around 18% in the 12 months leading up to October.

Further to this, the average number of people drawing out money using their credit cards fell by more than 20% to £136. Drawing out money is not advisable as borrowers could be hit with very high fees and interest.

The figures also suggest that consumers paid a whopping £281 million off their credit cards in October, meaning that the UK as a nation owes just over £60 billion – the lowest level since August 2004!

David Dooks, Statistics Director for the BBA, commented:

“The use of cards for purchases is seeing a slow trend increase over time. But consumers regularly pay more than they spend, and cards are used much less to withdraw cash than they were a year ago.”

CreditWindow Digs Deeply For Charity

Over the course of November, financial aggregator, CreditWindow has been taking part in the “Movember” challenge and Children in Need and raised almost £150 to help research into prostate and testicular cancer as well as improve help and awareness for vulnerable children all over the UK.

In spite of the difficult economic climate, CreditWindow has continued to support charities on both a national and global scale. CreditWindow’s owner, James Barnett has continued to pledge money to, and raise awareness of, a number of very worthy causes over the course of the year, including Sports Relief, Children in Need and the NSPCC.

Owner of CreditWindow, James Barnett, commented:

“We all recognise that we are still going through a tough economic climate and many businesses around the UK are still reeling from the effects of the recent recession. However, it is increasingly more important to remember that there are people out there less fortunate than ourselves and deserve our help and support.”

Mr Barnett added:

“I am incredibly proud of what we accomplished over ‘Movember’ and expect our charitable contributions to increase and continue into 2011.”

CreditWindow.co.uk offers a great range of financial services and advice to anyone who needs them, whether you have poor credit or a terrific credit score, we have something to suit you. Visit CreditWindow.co.uk for a great selection of credit cards, guarantor loans, payday loans and more.

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