In an effort to placate the Commons Treasury select committee in advance of the DTI’s much threatened ‘radical review’ of UK consumer credit laws, UK credit card providers have come up with a new wheeze.
Who: Her Majesty's Treasury, the DTI and UK credit card providers
Where: The UK
When: Autumn 2003
The UK's credit card providers came under attack and pressure from various quarters, whilst the DTI announced a "radical overhaul" of the Consumer Credit Act 1974, as well as the 1989 Consumer Credit (Advertisements) Regulations introduced under its auspices.
In a related development, Barclaycard, the UK's biggest credit card provider, bowed to pressure from the OFT, without admitting it was doing anything wrong, and pulled advertising and DM material promoting a "0% forever" offer.
This involved punters transferring the amounts outstanding on their other credit cards to Barclaycard. The catch in the "0% forever" offer according to the OFT, was that it only applied so long as the transferred debit was outstanding, not to other new debits on the card. Another condition was that the cardholder had to spend at least £50 a month using the card, and all monthly repayments made by the cardholder had to be applied first of all to paying off the transferred balance.
The OFT branded the promotion "materially misleading" and therefore contrary to s.46 of the 1974 Consumer Credit Act, which makes it an offence to publish materially false or misleading consumer credit advertising.
If Barclays hadn't pulled the promotion, the OFT said it would have applied to the courts for a banning injunction. The OFT has clearly been rattled by "limp wristed" charges laid at its door by the House of Commons Treasury Committee. Barclays are no doubt right that the small print fully explained the offer, but the OFT felt that the small print contradicted the headline.
On a more constructive note, UK credit card providers have shown a willingness to co-operate voluntarily with an earlier proposal by the Treasury Committee, led by MP John McFall, that they should take an early step, in advance of any legislative changes, to make life easier for credit card users.
The proposed change was to deal with perceived confusion amongst consumers about APRs (Annualised Percentage Rate of interest). These are supposed to make it easier for customers to compare offers, but they are complicated to work out and there are different ways of calculating them. The fix for this which the committee proposed in July 2003 was the introduction by the end of March 2004 of a so-called "honesty box". The idea was that this would appear in all marketing literature relating to credit cards in the UK.
The box has to include information about interest rate, fees and charges, any interest free periods and minimum repayment amounts, all in standard format so consumers can make like-for-like comparisons between cards.
Why this matters:
Clearly, there is mounting concern over growing consumer debt, and over perceived lack of clarity in credit card advertising over the deals on offer. The DTI's radical overhaul of consumer credit laws in the UK has been promised for some while and with the white paper still not having materialised, there is little chance of any law changes occurring much inside at least a year from now. In the meantime it is to be hoped that the "honesty box" does what it says on the tin and won't become yet another wedge of small print to ignore.