Rules to protect card borrowers

The end of 2010 will see the introduction of a range of new measures to protect consumers who borrow money through store and credit cards.

The changes - agreed between the industry and the Government - are supposed to offer people increased control over their borrowing.

Meanwhile increased protection will be offered to those who are at risk of getting into financial difficulties.

One of the most important changes is that repayments made by cardholders will be used to reduce their most expensive debt first.

This will bring an end to the current practice under which borrowing that is accruing low interest or no interest at all is normally repaid prior to debt on which interest is being charged at higher rates.

At the same time, minimum repayments for people who open new accounts will be set at a level that covers all interest, fees and charges during the month, as well as 1% of the outstanding balance, to help consumers pay down their debt more quickly.

People will also be given greater control over their credit limit, enabling them to opt out of receiving credit limit increases, while they will also have the right to reduce their limit at any time.

When credit card providers decide to increase interest rates, consumers will also be given more time in which to opt to remain on their current interest rate, but stop using their card to make new purchases.

The changes will also see consumers given more information on their right to reject increases to their interest rate and credit limit.

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