Credit Card Summit commitments
Following the Credit Card Summit of 26 November 2008 the credit card industry made further commitments in the following two areas:
· Provision of a breathing space for customers in financial difficulties
· Statement of principles on risk-based re-pricing
Breathing Space Commitment
The industry agreed that where a not for profit debt advice agency has formally notified that a consumer is in serious discussion with that agency on a draft debt repayment plan, then the credit card company will suspend collections activity whilst these discussions continue, provided that they are concluded within 30 days, with the option of extending a further 30 days subject to demonstrable progress being made but not yet concluded.
Statement of Principles Relating to Credit / Store Card Risk-Based Re-Pricing
The industry has developed these principles to cover the circumstances, alternative options, frequency and transparency of an interest rate increase.
1. Where we increase a customer’s interest rate, we will provide him/her 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 period, having regard to the existing level of minimum payments and the customer’s financial situation. 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) interest rate.
2. We will not increase interest rates in the following circumstances:
·Where a customer has failed to make the minimum contractual payment requested on the last two or more consecutive monthly statements; or
·Where an agreed repayment plan is in place in respect of the account; or
·Where we have been formally notified by a not-for-profit debt advice agency that the customer is in serious discussion with it.
3. Provided a customer manages his/her account in accordance with the product’s terms and conditions we will not:
·Increase interest rates within the first twelve months of a customer having a credit/store card;
·Increase interest rates more often than six monthly beyond this period.
4. We will always give a customer at least 30 days notice of an increase in interest rates, so that the customer can make other arrangements, should they so wish.
5. If the customer asks, we will ensure that our staff are able to provide the customer with an explanation as to why an interest rate may have been increased.
