In collaboration with the United Kingdom Department for Business, Innovation and Skills, the UK Card Association recently announced new “rights” for UK credit cardholders. The changes will take effect by yearend and become part of The Lending Code, a specific rule of the UK government’s Lending Standards Board related to credit card and other loans.
Among the provisions, UK issuers must allow cardholders to pay off their highest cost of debt first and not increase credit to cardholders with financial difficulty. Issuers also must allow new cardholders to opt out of credit-limit increases with a 30-day notice period and provide customers with a clear understanding of why minimum payments are the most expensive way to pay off debt. Moreover, issuers must give cardholders a 60-day notice before re-pricing existing debt, the association notes in a news release.
The provisions also call for credit card companies to work with debt-advice agencies to determine the best methods for identifying consumers in financial distress, according to the card group. The association plans to work with consumer groups and the government to assess whether issuers also should be required to provide cardholders with yearend credit card statements.
The association, which represents all major credit, debit and charge card issuers as well as merchant acquiring banks, began working with the department in October in analyzing 44 million card accounts and cardholder behavior over the previous two years. The association also worked with an independent company to conduct its research.
Though the association believes the new policies represent good news for consumers, the changes will cost the industry an estimated 533 million British pounds (US$809 million or 588 euros) during the first two years, an association spokesperson says. Overall, “the outcome of the review is balanced and will give consumers the greater control and convenience that the industry and government wish to provide, “ UK Card Association Chair Melanie Johnson says in the association’s release.
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