Government Action to Secure a Better Deal for Consumers
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Issued 2 July 2009
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.
· 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
· 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
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
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
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.”
1. The White Paper A Better Deal for Consumers – Delivering Real Help Now
and Change for the Future is available at :
2. The full plan and policy detail of Building Britain’s Future can be found
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
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
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.
About the Author
© Crown Copyright. Material taken from the BERR- Department
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Article Published/Sorted/Amended on Scopulus 2009-07-02 11:04:32 in Economic Articles