RBS has announced its plans to postpone the introduction of cut-price credit cards and the Labour Party has pledged to back legislation limiting the amount of interest that can be charged on credit card debt. Key industry groups have responded to the developments in the consumer credit landscape.
Steve McNicholas, Managing Director – Credit and Marketing Data, Callcredit Information Group said “Over the last year, UK consumer debt has risen, particularly credit card debt. As a result, RBS has announced its plans to postpone the introduction of cut-price credit cards and the Labour Party has pledged to back legislation limiting the amount of interest that can be charged on credit card debt. The financial pressure is clearly pilling up for UK households.
“When combined with rising inflation outpacing wage growth, the record numbers of household debt has created a challenging landscape for the UK economy and as such there is a much greater need to focus on affordability. By leveraging existing technology to improve affordability assessments, organisations can play their part in preventing Brits from overextending themselves financially, help improve their living standards and ultimately better protect our economy.”
In response to the announcement that Labour plans to cap interest payments for people with persistent credit card debt, Mike O’Connor, Chief Executive of StepChange Debt Charity, said:
“We welcome the focus on the issue of persistent credit card debt and the role it plays in the financial problems faced by millions of people across the UK. The way in which financial products are designed, especially credit cards, with low minimum repayments and high credit limits, can allow people to rapidly build up substantial debt levels and become trapped in spirals of unsustainable borrowing.
“As well as action to limit the scale of debt problems, we need action to prevent people falling into and becoming trapped in persistent debt in the first place. With credit cards, increasing the levels of minimum repayments and fixing minimum repayments so that they don’t decrease alongside the balance are simple and low cost ways that this could be achieved. We urge the Financial Conduct Authority to consider these proposals as part of its forthcoming remedy package.
“With levels of outstanding borrowing approaching levels not seen since the economic crisis and households are increasingly financially vulnerable, debt is an issue that needs to become a priority for policymakers now. Both the Conservative and Labour Parties committed to proposals for a ‘Breathing Space’ scheme to help households affected by problem debt. This is a policy with cross-party support that can make a significant difference, and we urge the Government to act now.”