Credit-card lenders have agreed to ease pressure on struggling customers after a marathon meeting with the Business Secretary, Lord Mandelson, yesterday.
Apacs, the credit card industry group, said lenders would suspend interest for troubled borrowers for 30 days to give them time to arrange a repayment plan through a non-profit debt agency. The measure is intended to avoid putting further pressure on customers' finances after they have admitted they are in financial difficulty.
The industry also agreed to come up with common practice on how often interest rates would change on cards and to be clearer with customers when rates change. The Independent revealed earlier this month that some lenders were putting up rates even after base rates had fallen sharply.
The meeting at the Department for Business, Enterprise and Regulatory Reform was scheduled to finish at 4pm but went on for an extra two hours as ministers, the card companies' bosses, consumer groups and regulators hammered out terms. Ministers had taken an aggressive stance to the industry before the meeting, which was attended by about 30 people, telling lenders to turn up with constructive proposals that would help ease the plight of cash-strapped borrowers.
More than £200bn is owed by Britons in unsecured borrowing, including personal loans, overdrafts and credit and store cards – almost one-fifth of total lending. Official figures have suggested that borrowers have turned to credit cards to refinance their borrowing because lenders are limiting mortgage and other unsecured finance.
The agreement is the latest move by the Government to try to reduce pressure on debt-laden consumers after households racked up more than £1trn of borrowings during the era of cheap credit.
Apacs said: "Today's meeting has been very constructive. We've welcomed the opportunity to hear the Government's views."