Consumer Credit

Lib-Cons to axe high interest rates

Regulators will clamp down on excessive interest rates charged on credit and store cards, according to new plans laid out by the government. The measures will give regulators new powers to define and ban what are deemed to be unfair rates of interest charged by credit and store card lenders, as part of a series of initiatives geared towards greater consumer protection. The plans include the introduction of a seven-day cooling-off period for store cards, while credit card companies will also be obliged to provide customers with better information that will allow them to establish whether they are receiving the best deal. The government also pledged to provide consumers with more protection against 'aggressive bailiffs and unreasonable charging orders', and will ban orders for sale on unsecured debts under £25,000. In addition, courts will be given the power to insist that property repossession is always the last resort. Russell Hamblin-Boone, a spokesperson for the Finance and Leasing Association, said: "The proposal to give regulators power to define and ban excessive interest rates on credit and store cards could restrict competition between card providers and reduce choice for consumers." Unfair banking and financial transaction charges will also be addressed by the new measures and policies will be unleashed against utility creditors, which will include energy providers supplying information on bills that directs customers towards the best tariff. Post Office card account holders will also be given the chance to benefit from direct debit discounts to ensure that the best prices are offered to those on social tariffs. Source: Credit Today, 20 May 2010.

OFT examines legal implications of pricing research

The OFT has published a discussion paper on how new fair trading laws might apply to common pricing practices such as 'three for two' deals or 'was £60, now £30' offers. Drawing on evidence from two new reports into consumer behaviour, the paper examines how the 2008 Consumer Protection from Unfair Trading Regulations might apply to practices such as:

drip pricing (where optional or compulsory price increments are added during the buying process) reference prices (such as was £100, now £60) bait pricing (when consumers are drawn in with offers of discounts although few items are available at the discount price) 'free' products offered as part of a package (buy ten, get one free) multiple unit price promotions (such as three for two) time-limited pricing. The legal discussion paper and the two new research reports have been issued as part of the OFT's wider market study into the advertising of prices, the final conclusions of which will be published in the autumn. Click here to read the OFT press release and a link to the reports.

FOS technical note on goods and services bought with credit

On 26 May 2010, the Financial Ombudsman Service (FOS) published a technical note on goods and services bought with credit which focuses on the application of section 75 of the Consumer Credit Act 1974 (CCA). Section 75 of the CCA applies to three party debtor-creditor-supplier agreements under the CCA. The note explains when section 75 is likely to apply to transactions, common misunderstandings in this area and the financial limits for the transactions it covers. The note also explains, with case studies, the FOS's approach to typical consumer complaints in this area. Click here for a link to the technical note.

FLA against reform of orders for sale relating to CCA debts

On 24 May 2010, the Finance and Leasing Association (FLA) published its response to the Ministry of Justice's (MoJ) February 2010 consultation on order for sale applications relating to Consumer Credit Act 1974 (CCA) debts. Generally, the FLA does not believe that the case for reform of order for sale applications has been made by the MoJ. As a result, it believes any statutory reform is unjustified. The FLA considers that lenders continue to use orders for sale in a proportionate way and, as a result, customers rarely lose their homes. Further, it considers that introducing a minimum threshold for orders for sale will restrict how lenders are able to help customers in financial difficulties, fetter the court's discretion, and could adversely affect the cost and availability of credit. This may also result in lenders being forced to use other debt recovery methods, such as bankruptcy. In addition, the FLA refers to the OFT irresponsible lending guidance, which was published in March 2010. The FLA explains that the OFT would consider it unfair and irresponsible for a lender to use the threat of court action to intimidate customers in financial difficulties to pay more than they can afford. If a threshold is introduced, the FLA suggests that it is set at around £5,000 to £10,000, to enable the lending industry to use orders for sale in a proportionate way. Click here to read the FLA's response.


Competition Commission consults on provisional decision on PPI remedies

On 14 May 2010, the Competition Commission published for consultation its provisional decision on remedies in the payment protection insurance (PPI) market. This reconsideration follows the judgment of the Competition Appeal Tribunal (CAT), which, following a challenge by Barclays, quashed the Competition Commission's decision to impose the point-of-sale prohibition (POSP) remedy. Taking into account the comments of the CAT and changes in the market since its 2009 final report, the Competition Commission has provisionally concluded that its original package of remedies, including the POSP, would be effective and proportionate to remedy the adverse effects of competition identified in the PPI market generally. In relation to retail PPI, however, new evidence (mainly a customer survey) has cast doubt on whether the advantages of introducing the POSP alongside other measures would outweigh the disadvantages. It is, therefore, consulting on possible remedies in relation to retail PPI. Click here to read the Competition Commission's provisional decision.

FSA temporarily extends time limit for referral of PPI complaints to FOS

On 28 May 2010, the FSA introduced a temporary rule giving customers who have recently complained about their purchase of a payment protection insurance (PPI) policy more time to refer complaints to the Financial Ombudsman Service (FOS). The temporary rule, which suspends the existing six month time limit for referring complaints to the Ombudsman, will come into effect from the 28 May 2010 and run for five months, until 27 October 2010. The rule applies to recent PPI complainants who have already been sent a final response from a firm between the dates of 28 November 2009 and 28 April 2010 inclusive. Click here to read the FSA press release.


ASA Adjudication on Individual Credit Solutions Ltd

A national press ad for Unfair Credit Direct was headlined "Mis-sold Mortgages". Text in the body of the ad stated "Your unsecured loan & credit card agreements may be unenforceable? Call us now to find out! Do...

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