Leading credit card companies have agreed to give more help to customers who are heavily in debt, after talks with government ministers on Wednesday.

Lord Mandelson, the Business Secretary, met with credit card companies and anti-poverty charities to push for fairer payment terms for credit card customers struggling to pay back their debt. In particular, he urged credit card companies to make clear to customers when rates change, as some credit card companies have been increasing their rates with little warning to customers, even as base rates have fallen sharply.

“The government is deeply concerned that borrowers aren’t getting a fair deal,” said Consumer Affairs Minister Gareth Thomas, who also attended the meeting. “That’s why we’ve taken swift action to bring the industry in to look at how costs are being applied to people’s existing debts.”

In a joint statement some of the UK’s largest credit card companies, including Barclaycard, Lloyds TSB and Capital One, said they would suspend interest for troubled borrowers for 30 days, giving them time to arrange a repayment plan with a debt adviser. The industry also agreed to review how often interest rates were changed on cards, and by how much. Credit card companies have reportedly raised interest rates by as much as 10 per cent for ‘high-risk’ customers. The statement said that the new measures would “help borrowers manage their debts during the downturn”.

Debt charities have welcomed the steps that credit card companies are taking to give borrowers some breathing space. A spokesperson for the Citizens Advice Bureau said, “It is a positive step that the industry has agreed to discuss the situation surrounding re-pricing. Consumers do not understand why credit card interest rates continue to climb while the base rate is falling.”

Britons owe more than £200 billion in unsecured borrowing such as personal loans, overdraughts and credits store cards, and statistics suggest that increasingly more people are taking out credit cards to refinance their borrowing because of limits set by banks and building societies.

Charities such as Christians Against Poverty offer a free advice service for indebted consumers. A debt advisor will help you work out a realistic budget and repayment plan, and will set you up a simple account, from which CAP distribute your money on your behalf. The Church of England website also offers advice on how to pay off your debts.

This entry was posted on Thursday, November 27th, 2008 at 2:57 pm and is filed under Banking, Credit, Credit Cards, Credit Ratings and Reports, Loans, Money Saving Tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.