Julian Knight: No more banks behaving badly on card debt

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The Independent Online

You can tell the election is ahoy. Tomorrow, the Government will announce that it has come to an agreement with the banks over how consumer debt is to be handled.

It's a little like the agreement that was reached last year over the treatment of people in mortgage arrears. In short, the banks will agree to change the order repayments are allocated to credit-card debt. So, presumably, no longer will expensive cash withdrawals languish until all the cheaper debt has been paid. Also, consumers will be given the "statutory right" to reject interest-rate increases. Now, before you get excited, it will apparently only be on existing borrowings rather on debt that is accrued after the rate has been increased. The Government also promises to bring in "new regulations to stop irresponsible and unaffordable lending" as well as a "new" cooling-off period for consumers offered credit.

Much will depend on who wins the election. But if Labour does get back in and the banks stick to their commitments, which may yet turn out to be a bit wishy-washy, I welcome the idea that, finally, over order of repayments, the banks will start to act equitably. This has long been a massive money-spinner for them, and since the onset of the credit crunch they have exploited it more by changing the definitions of what qualifies as a cash transaction and so is subject to higher interest. But at this feverish political time we will just have to wait and see.

Whiter than white?

Like a washing powder brand, the Financial Services Authority is being relaunched. Outgoing chief Hector Sants was on the Today programme on Friday announcing that from now on the regulator is going to intervene before mis-selling takes place and before dodgy products come to the market, rather than wait for consumers to get ripped off and report it, sparking some never-ending consultation process.

OK, I am paraphrasing. There was little humility on Sants's part for the nine years of cock-up and cosying up to the City, for allowing financial services to run riot, lending irresponsibly. All he would say was that the FSA has raised its game – I suppose something has to justify its monumental cost.

But the past is another country and we ought to take Sants at his word, particularly as he is partly trying to underpin the morale of a failing organisation. But will the new, beefed-up, light-on-its-feet rather than light- touch FSA truly be able to take on the rotten core of financial services?

I'm talking here of intervening early with the banks. After all, it's the banks and their commission-hungry and sales-targeted staff which have been mainly responsible for mis-selling endowments, payment protection insurance, and overpriced, inflexible personal pensions. Even now, they are flogging risky "investment bonds" to people in their 70s and 80s. What Sants has set out will no doubt be the template for the FSA or its replacement (under the Tories, if they get in) post election. Does the FSA have the independence and the guts to follow through? Only an absence of mis-selling scandals will tell.

You wouldn't credit it

The closure last week of the Consumer Credit Litigation Solicitors' (CCLS) Manchester office by the Solicitors Regulation Authority should act as a massive warning to all those tempted to use no-win, no-fee law firms. The CCLS pledged to fight to get customers' credit agreements overturned, but what SRA investigators discovered was shocking: staff unpaid and thousands of client files in boxes, untouched. And, clients had been charged a handling fee of £495, refundable if the case was lost, although how it would ever get to court with files stuffed in a box is anyone's guess.

I don't have sympathy for anyone trying to get out of credit agreements via a technicality. Claims management, done well or badly, is an appalling blight on our society.

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