The Week Unzipped: Crackdown on credit and store card firms as consumers canvassed

Published on Saturday 31 October 2009 13:56

THE government has announced a clampdown on credit and store card companies, which will stop them raising credit limits without being asked and increasing interest on existing debts.

Many card issuers charge different interest for different slices of borrowing, with different rates on purchases and transferred balances or cash withdrawals. Banks will have to pay off the most expensive debt first, whereas currently the cheapest is settled, leaving outstanding balances attracting high interest.

Ministers are also proposing increasing minimum repayments so the debts can be settled faster, and they want consumers to get in touch about their experiences.

Consumer minister Kevin Brennan said: "Card companies have to get their act together and do more for consumers. I want to hear from the most important people, the customers, about their experiences and to get their views on our proposals.

"The current relationship between card companies and consumers cannot go unchallenged. We need to put the customer back in the driving seat.

"It is not acceptable for card companies to impose complex and confusing terms and conditions that can leave people baffled, or to increase interest rates without a proper explanation."

FSA fines lenders

THE Financial Services Authority fined two large companies for regulatory failures. The GMAC-RFC mortgage lender is to repay a total of 7.7 million to 46,000 borrowers after the FSA ruled that the company had levied unfair charges on customers who fell into arrears and looked to repossess before exhausting other alternatives.

The FSA also fined the lender 2.8 million. This is the largest fine yet the FSA has imposed on a mortgage lender. The FSA is currently investigating three more lenders over similar failings. Insurance broker Swinton Group Ltd is also to refund more than 480,000 payment protection policies and pay a 770,000 fine for serious failings in their PPI sales process. The FSA found that the firm adopted an "assumptive" selling technique which automatically included PPI in insurance quotes even if the customer had no need for the cover.

The FSA revealed last week that overall the number of complaints made to financial services firms increased by 2 per cent in the first half of 2009. Firms received 1.51 million complaints. The number of complaints about misleading advice and regarding the mis-selling of payment protection insurance increased by 19 per cent. However, despite increase in volume of grievances, the proportion of complaints upheld by the firms dropped 2 per cent to 38 per cent.

House price rise

NATIONWIDE'S House Price Index has recorded the first annual rise for 19 months, up two percentage points on 12 months ago, although overall the pace of monthly price increases in UK housing market slowed in October

Month-on-month prices were up for the sixth consecutive month. However, the increase was just 0.4 per cent, significantly lower than the 0.9 per cent recorded in September and 1.4 per cent in both July and August.

The building society predicts that values could level out in autumn months as more sellers return to the market. The average property is still worth 13 per cent less than at the peak of the market in autumn 2007.

The number of mortgages approvals has picked up with building societies lending 1.6 billion in September compared to 1.3bon in August, according to data from the Building Societies Association.

However, lending is still at levels much below that of previous years.

Fireworks warning

Insurance companies are urging people to ensure they are fully covered as the UK gears up to celebrate Guy Fawkes Night.

With 6,600 people hurt and requiring hospital treatment following accidents caused by fireworks, according to the latest BIS figure, Moneysupermarket.com recommends consumers hosting their own parties check the small print of their home insurance for personal liability cover. The comparison website also suggests pet owners check their four-legged friends are insured as well.

ISA extension

M&S Money has extended the introductory 1 per cent interest rate bonus period on the M&S Advantage Cash ISA option by three months to 21 July 2010. The interest rate, including the 1 per cent introductory bonus, is 2.25 per cent.