Which!!! call for an end to '0%' credit cards
Since the FCA took over responsibility for consumer lending from the FSA, we’ve been impressed with how proactive they have been in identifying problems and trying to address them. They’ve even taken on the payday lending giants and the big banks in their financial conduct crusade. However, our friends over at Which!!! have decided they just aren’t doing quite enough and have offered them some pointers on where to go next- focusing on credit cards and unsecured borrowing in a new report.
According to Which!!! figures, UK consumers’ total unsecured debt remains fairly hefty at £158 billion and eight in ten (79%) people used a credit product last year. A significant proportion of those (21%) run out of money by the end of every month, a rise of two percentage points since 2012.
The report points out a few things that Which!!! are not happy about, where the FCA should get its finger out and intervene. One of Which!!!’s bugbears is the proliferation of 0% credit cards- not the principle of them but the name. After all, it’s only a 0% card after you’ve paid the balance transfer fee. Other complaints include:
Unfair and irresponsible lending practices, like setting up credit accounts automatically
Failure to explain risks, e.g. logbook loans might make you lose your car
Repeated credit searches preventing people from shopping around for the best credit deals
Which!!! have therefore drawn up a big long list of recommendations (to add to the ones they helpfully provided when the FCA first took over the job), the highlights of which are:
Banning the use of the term “0%”on credit products that charge more than 0%, for example credit card deals with an upfront fee.
Requiring high cost lenders (including those providing unauthorised overdrafts, such as banks) to show the cost of credit as pounds per £100 borrowed over 30 days as APRs are not always suitable in these circumstances and can mislead consumers. You don’t say.
Allowing consumers to shop around by requiring lenders to use ‘quotation’ searches, rather than ones that will affect credit rating.
Forcing lenders to set minimum repayments on credit cards at a level which strikes a fair balance between affordability and ensuring that the debt is paid off over a reasonable time. Ensure all repayments made in branch or online before midnight are received on that day.
Preventing retailers from automatically signing up customers for a credit account they didn’t actively apply for.
Which!!! executive director, Richard Lloyd said: “The regulator has so far rightly focused on the unscrupulous practices of payday lenders, however, we have found problems across the whole of the credit market. It’s now more important than ever that all credit products are up to scratch, so that consumers can more easily manage their borrowing.”
But are all of Which!!!’s recommendations what we really want or need as consumers, or is Which!!! just trying to babysit us too much? If people don’t realise they might lose their car if they don’t keep up the repayments on a logbook loan, should they be allowed to have their own money (or drive) at all?