BIS Credit & Store Card Consultation - CLOSED - responses added

[Amethyst]

lovely reading - enjoy. (35 pages consultation response bba members to the BSi ref implementation of the ccd)


alsooooo impact assessment for ccd - http://www.berr.gov.uk/files/file50893.pdf - referred to at end of above

[Amethyst]

BIS credit/store card consultation

Credit and store card consultation Department for Business, Innovation and Skills

Credit and store card consultation

We want to secure a better deal for consumers, giving them improved control of their credit and store card borrowing, whilst also ensuring that any intervention is proportionate, transparent and targeted.

• Read the full consultation and leave your comments
• Take our poll on the key issues
• Read our plain English version of the consultation (PDF) http://understood.dreamhosters.com/w...nsultation.pdf
• Listen to a 3-minute audio summary (MP3)

Consultation Documents

Review of the Regulation of Credit and Store Cards: A Consultation (PDF, 24KB)
Equality Impact Assessment for the Review of the Regulation of Credit and Store Cards: A Consutation (PDF, 24KB)

Economic Impact Assessment for the Review of the Regulations of Credit and Store Cards: A Consultation (PDF, 24KB)

Areas for consultation

This consultation is looking at five areas:

• allocation of payments – lower interest debts being paid off first
• minimum payments – minimum payments only covering interest, not capital
• unsolicited credit limit increases – card limits going up without your consent
• re-pricing of existing debt – increased interest rates without proper explanation
• simplicity and transparency – making the costs of using a card simpler to understand and easier to compare alternatives

Legal Beagles will be submitting a full response. HOWEVER the BIS are asking for individuals views as well as the industry and consumer groups and you can leave comments on the Department for Business website.


USEFUL DOCS
OFT confirms Credit Card Default Fees were HIGHLY UNFAIR under the UTCCR Test Case - Legal Beagles
http://www.oft.gov.uk/shared_oft/rep...cts/oft842.pdf
The Office of Fair Trading: Credit card interest calculation methods
August 09 Credit Card Stats (MS Excel)
BBA Association - Credit Card Market
http://www.berr.gov.uk/files/file33902.pdf

[natweststaffmember]

Re: BIS credit/store card consultation

allocation of payments should be reversed ie the most expensive to least expensive.
minimum payments should not be less than the expected interest if it is paid.
The old trick used to be that if you paid the minimum that the bank increased your credit limit until you told them to stop.
Increase in interest rates are evil, lol.
Not sure that they aren't transparent already but will read the consultation

[Tools]

Re: BIS credit/store card consultation

Legal Beagles will be submitting a full response. HOWEVER the BIS are asking for individuals views as well as the industry and consumer groups and you can leave comments on the Department for Business website.

Any input/opinions from members would be welcomed.

[natweststaffmember]

Re: BIS credit/store card consultation

Having listened to the MP3 bit I would agree with them with regards to the Cash Advance interest ie that the manner in which payments are treated currently, ie smallest amount to largest(or purchase interest to cash advance interest) should be reversed to help clear debt faster. Furthermore, I think that the issue of taking a CASH advance should be made more clearer ie that you pay interest immediately rather than if you do not repay the full amount which happens on purchases from shops.

part 2 deals with the full payments against minimum payments. I like their idea of a higher amount but a minimum amount if they are in financial problems. I think the current system of a mild warning is not necessarily right.

part 3 credit card hikes without asking. Personally I think the Credit card provider should indicate the limit they are prepared to increase a card to on the statements and put that it is subject to credit checks

part 4: increase in interest rates. This one is quite worrying because those with credit problems are forced to use cards that have a huge interest rate. I think a cap is needed.

part 5: will need to look further into as it is about confusing advice

part 6: Too varied the amounts of cards. I do like their idea of labelling similar to food labelling.

Will have some further comments at the weekend when I read the 86 page stuff from the BIS so these are initial thoughts

[Amethyst]

Re: BIS credit/store card consultation

thank you Nats, there is a mass of information to wade through, but I think it is worth it.

[Amethyst]

Re: BIS credit/store card consultation

BBA Initial comment

Retail Report
Heavily trailed consultation on credit cards publishes
First announced in the White Paper in July, the Department for Business Innovation and Skills has launched its consultation paper, which seeks to change the balance between card providers and consumers and protect consumers from financial pressures and heavy debt. This is the key content of the paper: 1. Allocation of payments
The consultation argues that consumers are paying a lot of interest over a long period of time because payments are allocated to the cheapest debt first. In particular, they raise concerns about withdrawing cash on credit cards. BIS has suggested a range of options, from ‘do nothing’ to regulation of allocation, and press commentary suggests that preserving the status quo might be an unlikely outcome. 2. Minimum Payments Quoting data from UK Cards Association, BIS state that one third of those who regularly use their card only make the minimum payment. The options again range from ‘do nothing’ to statutory intervention, but any change would need to be carefully considered as any leap in repayments required could have a significant – and negative – impact on household budgets, potentially leading to higher defaults. 3. Unsolicited limit increase BIS believe that unsolicited credit limit increases undermine consumer control over their borrowing and here, again, media commentary suggests some form of change is likely. The options outlined include improving transparency, limiting the size and/or frequency of individual limit increases, prohibition or ‘opt-in’. 4. Re-pricing of existing debt BIS state there is often no obvious change in a consumer’s circumstance to justify increasing interest rates. They also believe the changes are not properly explained, despite an industry agreement to subscribe to a statement of principles earlier in the year. The suggestions for change put forward for re-pricing introduce unequivocal price regulation, including a definition of the factors that lenders should take into account when changing an individual’s price on grounds of risk; limits on the size and/or frequency of existing debt re-pricing; and a ban on the re-pricing of existing debt. 5. Simplicity and transparency On the basis that credit and store cards are too complex which means consumers make poor choices, BIS’ preference is for an annual electronic statement setting out the total cost of running the card for the previous year along with information on specific fees and charges incurred. From a first read, the extent of the possible intrusions on the credit card business model is enormous and clearly set precedents that could be applied elsewhere in the sector. We will be working very closely with the UK Cards Association to support their response to the consultation
“We will be working closely with the UK Cards Association to support their response to the BIS consultation, which could have huge impact on the credit industry.”

[natweststaffmember]

Re: BIS credit/store card consultation

Adding some brief comments as I wade through the information that might be pertinent to say. The use of the words "current account package" which could be used by banks to market the credit card as part of the whole current account package especially to young and vulnerable students at university.
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63 million credit cards in circulation, that is mooosive.
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minimum payments made by 14% of that 63 million or 8, 820 000
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period of july 2008 to July 2009 5.7 million customers had their credit limit increased without asking for it to go up.
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issue not yet covered(as I am still reading) is the way a balance transfer fee is dealt with. For example, last year NatWest had a balance transfer of 0% with a fee and added a certain period for purchases yet the balance transfer fee itself was classed as a purchase so interest was charged after an initial purchase free period.

[natweststaffmember]

Re: BIS credit/store card consultation

To add to last night's ramblings. Part 5 I think is where the balance transfer issue needs to be made.
The reversal of how payments are made is probably the easiest thing to do

[natweststaffmember]

Re: BIS credit/store card consultation

Part One will need users help to provide evidence of this specifically because I think a case study might be helpful:

"1. The Government calls on consultees to submit evidence about
the current nature of the UK credit and store cards markets,
including in particular:
●● The incidence of multiple credit card use, particularly among
the most indebted consumers;
●● The use of personal credit cards for business purposes by the
owners of small firms;
●● The consumer experience of using credit cards and dealing
with their lenders; and
●● The profitability of credit card lending and the impact of the
economic downturn on both consumers and lenders"
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I don't agree with 2.4 of the consultation on page 19. I'm not sure the risk of fraud does carry a higher than expected risk that a purchase would not.

[natweststaffmember]

Re: BIS credit/store card consultation

I think the 78 questions at the end should work as a guide to the response that is sent in to the OFT with case studies if at all possible.

[natweststaffmember]

Re: BIS credit/store card consultation

Current statistics: September 2009
Proportion of credit cards bearing interest is 63.5%.
52 million accounts and 66.3% active ie had a balance outstanding.
Data from BBA: ttp://www.bba.org.uk/bba/jsp/polopoly.jsp?d=470&a=16813

I would expect October's figures soon.

[natweststaffmember]

Re: BIS credit/store card consultation

Research finds customers fixation on minimum payments drives up credit card bills

Part 3 research press release re minimum payments.
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Neil Stewart

Love this decision device.

[natweststaffmember]

Re: BIS credit/store card consultation

H.R. 627 - Summary: Credit Card Accountability Responsibility and Disclosure Act of 2009 (GovTrack.us)

CARD act 2009.

[natweststaffmember]

Re: BIS credit/store card consultation

http://eur-lex.europa.eu/LexUriServ/...66:0092:EN:PDF

Consumer Directive
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http://www.berr.gov.uk/files/file38667.pdf

Over-indebtedness in Britain
A report to the Department of Trade and Industry(2002).
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In the red: debt and mental health | Mind

In the red...Mind Report.
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UK Cards Association - Best practice guidelines

Best practices--credit card limit increases.