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The Prosser Perspective.... a weekly column from Dover and Deal MP Gwyn Prosser.
29 October 2009

Dealing with debt is always difficult but during the current economic downturn it’s especially problematic. What I hear about time and time again in my advice surgeries are complaints about high interest rates, unfair practices and rip-offs.

The worse stories come from constituents who have been lured into borrowing from loan sharks at unbelievably high interest rates.

I recently had a family in my Dover office who had fallen behind with their council tax payments and when threatened with court action they felt forced to borrow the money from sharks and found themselves trying to pay off the debt at a staggering 312% interest rate.

In Parliament, I’m part of a lobby that’s urging Government to put a cap on these sorts of loans and we’ve been pressing for a crack down on the illegal market, but progress is slow.

One sector where the Government has taken action this week is in the credit card business. Complaints about over-the-top charges in credit card bills, credit repayment rates and the high cost of credit on things like store cards have persuaded Ministers that something needed to be done to help consumers.

So I was pleased to meet up with Kevin Brennan, the Consumer Minister this week and be briefed on his measures to put an end to the rip-offs.

Labour's plans will mean that companies have to raise the minimum monthly repayments levels to encourage people to pay off their debt faster – all too often, the current minimum payments leave people indebted for life.

We will ban un-asked for credit card cheques and the practice of increasing credit limits without prior consent. There will be restrictions on increasing the interest rate on existing debt and we will change the rules so that the most expensive debt on your credit card is paid off first - at the moment most credit card companies make you pay off the cheapest debt first which results in costing you more.

I warmly welcome these moves as they will force credit and store card companies to give people a fairer deal and prevent spiralling debts.

What concerns me most is interest rates being increased without proper explanation. Consumers using their cards responsibly and making payments on time should not pay the price for excessive risk-taking by financial institutions. So I will push for the Government to ban or at least restrict the re-pricing of existing debt.

People have a responsibility to manage their finances properly of course, but they also have a right to clear information to enable them to do that. Consumers should not feel each month as if they’ve been exploited or disadvantaged. It is not right that some card companies have complex and confusing terms and conditions which can leave people confused.

I will continue lobbying for caps on excessive interest rates and a crack down on the illegal loan sharks but for now – but this week’s announcement is a step in the right direction.