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Statement of principles relating to credit card re-pricing (January 2011)

These principles cover risk-based and general re-pricing. They replace those agreed specifically for risk-based re-pricing following the Government’s Credit Card Summit in November 2008.

The principles reflect the changes agreed in the joint BIS/industry statement, as published in March 2010, which followed the Credit & Store Cards consultation.

The following definitions apply:

  • Risk-based re-pricing: this affects individual cardholders, or specific groups of cardholders with similar risk profiles.
  • General re-pricing: subject to the exemptions noted below, this is any type of re-pricing, other than that which is risk-based.

The Principles

1. Where we increase a customer’s interest rate, we will provide them with options:

  • These will always include the option to close the account and repay the remaining balance, at the existing rate of interest, within a reasonable period1
  • Where we offer alternative lending products, we may also provide the option to transfer the balance to such a product at the existing (or lower) rate of interest

2. We will not increase the interest rate when we are aware:

  • That an agreed repayment plan is in place in respect of the account
  • That the customer is in serious discussion with a debt advice agency (and we have been formally notified of this by the agency)
  • That the customer is currently 2 or more payments in arrears

3. The following frequency commitments will be observed (where a customer manages their account within the credit card issuer’s terms and conditions):

We will not increase interest rates:

Risk-based re-pricing

  • Within the first 12 months of a customer having the credit card

Risk-based re-pricing and General re-pricing

  • More often than 6 monthly, other than in exceptional circumstances2

4. The following notice requirements will be observed:

  • We will always give a customer at least 30 days notice of an increase in their interest rate, so that they can consider making other arrangements
  • Customers will have 60 days (which may run concurrently with the 30 days notice period) to confirm if they wish to reject the new interest rate. If they do this, we will close the account (as described in Principle 1). In all cases, they will be notified at least twice that they have this right, as follows:

For Risk-based re-pricing, the first notification will be separate to the monthly statement. The second can be on, or with, the statement.

For General re-pricing, the first notification can be with the monthly statement, but via a separate piece of paper. The second can be on, or with, the statement.

5. When we tell a customer about a rate increase, we will explain in clear language how it is changing, what it will cost and the options available to them

6. If the customer asks, we will make available an industry standard explanation of how credit card re-pricing works

Exemptions

These principles do NOT apply where:

  • The credit card’s interest rate has been set to directly track a movement to an external index (such as base rate) and this has been clearly stated in the product’s terms and conditions
  • A promotional interest rate has either come to the scheduled end of its duration, or has been revoked early by the credit card company (such as where a payment is missed)
  • The interest rate is being decreased

¹ Having due regard to the level of minimum payments and the customer’s financial situation
² The exception applies to general re-pricing only and, for example, may be a rapid escalation in underlying interest rates, or a change to legislation/regulation, that significantly increases costs, or decreases income

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