The Government announced a deal this week made with credit card lenders that Gordon Brown claims will end their high interest charges.
Last year the Government threatened credit companies with regulation after it discovered that many store and credit card issuers were using minimum repayments from customers in order to pay low interest debts before high interest loans in order stack up more debt for customers.
In response, the industry and Government have decided to establish five new ‘rights’ that all card borrowers are allowed to exercise.
According to the new rules, lenders cannot raise the interest charges on customers with existing loans until the consumers have had an allotted amount of time to reject them. Along the same line, customers are also now allowed to refuse credit limits if they like.
Another right includes the agreement that issuers will use all repayments month to month to pay off the highest debts first and for customers that open new accounts the first minimum payment will be placed towards fees and charges, interest, and one percent of the principal balance.
Card companies now will also agree to work with consumer groups in order to offer customers an annual statement that will let them compare the charges between different lenders.
The new rules will be in place by the end of 2010 on a voluntary basis but if credit companies do not start working under the new guidelines the Government has pledged to put enforce the codes with formal regulation.