Government cracks down on 'unfair credit card practices'
Published On 25 April 2007
The government has decided to crack down on a practice used by credit card companies to generate an estimated £500 million a year from consumers.From October 2008, all credit card companies will be required to draw attention to the order of payments they employ when consumers pay off debt.
Currently, many providers make customers pay off the cheapest parts first, leaving the higher interest sections until the end.
Many consumers are unaware of the practice and critics say that it amounts to a "hidden source of profit for credit card companies".
However, the Department of Trade and Industry (DTI) has now decided that credit card companies must highlight the order of repayment on credit card statements and warn customers if more expensive debt is only paid off after other debt.
Nationwide, one of the only credit card companies which does not currently employ the practice, welcomed the move.
"Most providers apply repayments to the cheapest debt first making it more expensive for you and more profitable for them," said Jeremy Wood, the director of Nationwide.
"We welcome this move by the DTI, but ask them to consider implementing further changes to benefit credit card customers and we call on the industry to play fair by consumers and apply repayments to the most expensive debt first."
