Credit card giants have been given two weeks to agree to stop charging exorbitant rates to borrowers or risk losing their operating licences.
Ministers said they were giving Britain's major lenders one last chance to prove they were not profiteering from the downturn. The ultimatum was delivered at a four-hour Whitehall summit called after The Independent disclosed some credit card and store card providers had raised interest rates – in some cases to 30 per cent – even though the cost of borrowing had fallen.
The credit card companies agreed last night to give borrowers who run into trouble paying their bills a "breathing space" of up to two months before they face action. They also pledged to draw up a clear "statement of principles" over their rates by 9 December. It will commit them to give clear information to borrowers, not alter rates constantly and charge "proportionate" levels of interest.
Lord Mandelson, the Business Secretary, and Gareth Thomas, the Consumer Affairs minister, told leaders of the industry that they were alarmed by lenders increasing their rates overnight without justification.
Government sources said they were encouraged by the companies' initial response, but demanded watertight commitments from them within a fortnight. Ministers warned they were prepared to refer firms that exploited borrowers to the Office of Fair Trading (OFT), the consumer watchdog.
The OFT has the authority to revoke licences from credit companies as an ultimate sanction.
In total, 13 credit card providers – including Royal Bank of Scotland Group, Lloyds TSB, HBOS, and Santander – attended the summit at the Department for Business, Enterprise and Regulatory Reform in London. Also there were big credit card prov-iders and smaller lenders. Consumer groups also attended
Ministers said they were giving Britain's major lenders one last chance to prove they were not profiteering from the downturn. The ultimatum was delivered at a four-hour Whitehall summit called after The Independent disclosed some credit card and store card providers had raised interest rates – in some cases to 30 per cent – even though the cost of borrowing had fallen.
The credit card companies agreed last night to give borrowers who run into trouble paying their bills a "breathing space" of up to two months before they face action. They also pledged to draw up a clear "statement of principles" over their rates by 9 December. It will commit them to give clear information to borrowers, not alter rates constantly and charge "proportionate" levels of interest.
Lord Mandelson, the Business Secretary, and Gareth Thomas, the Consumer Affairs minister, told leaders of the industry that they were alarmed by lenders increasing their rates overnight without justification.
Government sources said they were encouraged by the companies' initial response, but demanded watertight commitments from them within a fortnight. Ministers warned they were prepared to refer firms that exploited borrowers to the Office of Fair Trading (OFT), the consumer watchdog.
The OFT has the authority to revoke licences from credit companies as an ultimate sanction.
In total, 13 credit card providers – including Royal Bank of Scotland Group, Lloyds TSB, HBOS, and Santander – attended the summit at the Department for Business, Enterprise and Regulatory Reform in London. Also there were big credit card prov-iders and smaller lenders. Consumer groups also attended
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