Credit cards
MPs have stepped up their criticism of the interest rates being charged by credit card companies.
A hearing of the Commons Treasury select committee on Tuesday saw bank chiefs under the spotlight over their charges and marketing techniques.
The committee has been waging a campaign against irresponsible lenders and called for more information to be made available to customers about the true cost of their borrowing.
Party Response: Liberal Democrat
Norman Lamb MP, Liberal Democrat member of the Treasury committee, said: "Credit card companies and banks have a duty to give clear information to all customers by telling it straight and simple.
"In the committee meeting I raised the tragic case of a constituent aged 21 who took his life after he found himself facing debts of over £15,000.
"Banks and credit card companies are on the front line of our 'spend, spend, spend culture' and have to take responsibility for ensuring that they give clear advice and show costs in pounds and pence. That way all people, but especially younger people, know what they are getting into."
Stakeholder Response: Which?
Laurence Baxter, senior policy officer for Which?, said: "We're glad that the committee is continuing to put pressure on banks. The main unresolved issues from today's hearing were how interest is calculated and data-sharing.
"It's clear that no real progress has been made on interest calculation. MP Nigel Beard's comments that banks are 'addicted to profits through deception', is in no small part due to the lack of transparency when it comes to calculating interest. Currently there are at least nine different ways of calculating credit. Industry must standardise the way credit card interest is allocated so that people can compare cards using the APR and summary boxes are not the answer to this.
"We also urge the committee to pursue the issue of data-sharing, an idea to which the banks have 'committed to consider'. Poor credit sharing is one of the chief culprits behind the UK's credit card serial borrowing crisis. The banks repeatedly claim that they lend responsibly by undertaking credit checks. Yet how can they if they lack access to full information about the applicant's existing debt burdens?
"Today, summary boxes were much lauded as the panacea for all problems relating to credit card interest calculation. We think summary boxes are great for simplifying complex terms and conditions, but they are not the ultimate solution."
Stakeholder Response: National Consumer Council
Claire Whyley, deputy director of policy at the National Consumer Council, said: "Today’s hearing demonstrates that the credit industry has a long way to go before the credit market works in the best interests of consumers.
"Full information sharing between lenders is vital so borrowers already overburdened with debt don't get tipped over the edge. Banks already share information on their mortgages customers, so why not on credit card customers too? The credit industry must stop dragging its feet.
"Putting summary boxes on the back of a promotional leaflet, in very small print - one of the examples highlighted by the committee - will not encourage borrowers to read the important information. Our research shows that people want key information clearly presented and grouped together at the front of the document. Today's hearing is a timely reminder to banks to ensure their 'summary boxes' are really useful to consumers - and not just a PR exercise."
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