Government Plans Consumer Credit Review

By Julia Kukiewicz Editor 16 July 2010

Latest Updates

Brits Keep Current Accounts Longer Than Partners

The average Brit's longest relationship will be with their current account, according to Santander.

EDF Electricity Prices to Increase

Millions of EDF customers will see their standard electricity price rise from October.

Related News & Guides

Queen's Speech Confirms Green Energy Help

The new government has confirmed that it will push through legislation to help households save energy.

Northern Rock Savers Lose 100% Protection

Northern Rock savings account holders won't have all of their money protected from today, though the bank remains nationalised.

CONSUMER minister Ed Davey has announced that he will be undertaking a review of the consumer credit market.

Mark Hoban, the Treasury's Financial Secretary, will also head up the review and a full consolation will take place either at the end of this year or in early 2011.

The last government's review of the consumer lending sector made a number of recommendations to the credit card industry. These included a rule that will allow consumers to reject high credit limits and a mandatory positive allocation of payments rule.

These amendments are due to be bought into force in January next year, though some lenders are already putting them in place.

Davey's review looks set to cover some of the same ground. "As Consumer Affairs Minister, I want to be sure that people can get fair deals on credit cards, loans and other products on the market," he said.

However, there were also hints that the outcome could be as beneficial to the lenders as to consumers.

"This is an opportunity not only to improve the safeguards on consumer credit products, where this is necessary. It's also a chance to cut unnecessary regulatory burdens, which increase costs and stifle competition." Davey commented.

Regulatory burdens

It'll be interesting to see which regulatory burdens Davey is referring to when the review calls for evidence in September.

During the last review the UK Cards Association attempted to negotiate with the Department for Business, Innovation & Skills(BIS)and proposed a reduced number of measures which would have cut the cost of increased regulation by half.

These were rejected and the association estimates that the full cost of the changes due in January to lenders will be in the region of £533 million over the first two years.

Election promises

It will also be interesting to see whether the review will bring up any of the new government's election promises.

Davey announced that the review will cover how consumers enter into credit commitments, including the way in which credit is sold, which might lead the way for Osborne's "data file" for banking consumers.

Both the Conservatives and the Liberal Democrats promised a cap on credit card and store card interest rates in their manifestos so this is also likely.