Credit card companies are regulated; however, in the past some of these regulations have been less than strict. The government is now beginning to restrict how the credit cards can work when it comes to debt. They are planning on preventing credit card companies from enticing consumers to rack up their debts. The minister stated that they are going to create new laws as soon as possible due to the concern they have regarding debts.
The idea of the new laws is to stop the raising of credit card limits without requests. In the past, credit card companies have raised the limits in order to help consumers spend more on the card. They are also going to stop the credit card cheques. Credit card companies have been sending out the cheques without a request. The government feels this needs to change so that easy money is no longer available.
Several experts fear consumers do not understand the repercussions of borrowing through their credit card. In fact they believe many consumers are unaware of the high fees and instead think it is affordable to borrow from the credit card companies. Gareth Thomas, the consumer affairs minister stated that it is imperative to protect the consumer. He and several others are afraid that consumers may feel the lure of increased limits and cheques.
Apacs on the other hand stated they never increase a credit limit on a borrower who has financial problems. They said they do increase a credit limit for those who are responsible and where it is warranted for those individuals. They also stated seven percent of the cheques they do send out are used.
Cheques from the credit card companies tend to be most expensive when compared to the regular use of the card. The cheques are designed to be used for purchases, balance transfers, or to pay off a debt. Experts say it is just a gimmick to get more consumers to spend money. Plus the cheques do not offer the same protection when purchasing items from a store.
Consumer Direct of Scotland is asking for more protection for consumers. They like consumer reporting companies on the internet are urging consumers to be more careful when they do sign up for a credit card. They encourage consumers to read the fine print, compare cards, and to understand they are entering into a contract with the credit card company.
At the moment credit card debt in Britain is £53 billion. Since 2001 there has been an increase of two- thirds in the debt of UK consumers. The UK Citizens Advice Bureau has also done a study on their own, discovering most UK consumers had an average of £17,000 on their credit cards, in personal loans, and other styles of credit.
The bureau also found one out of ten people had at least ten credit debts. This would include credit cards, loans, overdrafts, and any other form of credit. Out of these individuals, 58 percent could not pay the debts they had amassed.
The Citizens Advice of Scotland stated they are asking for the changes, especially after seeing the recent study on residents’ credit card debts. There is a problem, and now more than ever changes have to be made in order to reduce the debt. Research is showing the trend of large debts will continue, as the proportion of debt has increased in the last year.
It is true that credit card companies do need to be regulated a lot more. It is a good idea that they should not be allowed to simply send increase people limit or send out credit card cheques. People should also be made well aware of the costs involved in using credit card cheques. The debt clocked up on credit card cheques is usually charged at a higher APR than the purchases made straight on to the card as they are considered to be a cash withdrawal.
The thing is it’s all very well the government saying they are going to crack down on such things, but unless they actually do it, its no good. So often there is lots of talk about these things, but no action is taken.
Lets hope this time the government actually do what they say they are going to do.
The thing is government usually say these things to make people think they are going to help. But I don’t think most governments care. Many of these big time business men give money to the political parties in power to get what they want and I don’t think finance is any different. The big banks and the politicians are all friends and if something is not in our interest but it is in the banks interest then you can bet the banks are the ones who going to be favoured.
With all the trouble in the banking system over the past 6 months or so it has come to light that such organisations as the financial services authority have done very little to help consumers. In fact it has been said by many that the FSA is run by ex bankers and is merely there to help the banks. It would be great if there was real change, but some how I doubt it.