CAT poised to cap credit card interest rate charges

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The Independent Online

The long-awaited financial kitemarks for credit cards and basic bank accounts received a mixed reception yesterday when the guidelines for the two new CAT standards were published by the Government.

The long-awaited financial kitemarks for credit cards and basic bank accounts received a mixed reception yesterday when the guidelines for the two new CAT standards were published by the Government.

Possible conditions for a credit card product gaining the CAT mark could include capping the maximum annual interest charged on credit card balances, perhaps making it a certain number of percentage points above the base rate.

Qualifying credit cards may also have to offer a maximum limit on other charges and may be forced to cut down the plethora of different rates they charge to only two. One rate would be for new purchases, and the other could be offered on any debt balance that had been transferred onto the card from a different provider.

CAT marks, which stand for "charges, access and terms", are already used on mortgages and individual savings accounts and were introduced by the Treasury to provide clear benchmarks on charges and terms for the consumer.

The Treasury invited responses from the industry to the proposed new CAT marks by the end of April. The latest CAT marks are unlikely to be in use until the end of the year, as government officials privately expect to have to engage in a prolonged haggling process with the industry over the levels of the maximum charges.

Melanie Johnson, economic secretary to the Treasury, said the new CAT marks would offer consumers a better deal when selecting a credit card or a basic bank account.

Mick McAteer, senior policy researcher at the Consumers' Association, said: "We broadly welcome the announcement, as people are paying £4m more than they have to in interest and other charges on credit cards."

However, responses to other parts of the consultation document, which were examined by the Treasury Select Committee yesterday, were less positive. Edward Davey, a Liberal Democrat MP and a member of the committee, questioned whether a CAT standard on basic bank accounts would include the guarantee that use of cash machines would be free.

Miss Johnson, who addressed the committee on the subject of the new CAT marks, was unable to state categorically that a CAT would include the condition of free access. However, the Treasury said last night that this was its intention, but added industry may not agree.

The Treasury select committee also grilled some of the chief executives of the major banks over their breaches of the Banking Code. The committee cited evidence that showed that NatWest, in 57 per cent of cases, had taken more than 10 days to transfer customers who wished to leave. Ten days is the length of time the Banking Code gives as an acceptable period. The evidence was collected by Intelligent Finance, the non-branch based bank launched of Halifax.

Fred Goodwin, chief executive of Royal Bank of Scotland, which owns NatWest, conceded that there might have been problems in the past, but said that there were no "outstanding issues" with Halifax.

Halifax's chief executive James Crosby, called for regulation to enforce the 10 day rule if his competitors did not improve their record.

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