A fortnight ago, Consumer Affairs Minister Gareth Thomas gave credit card companies a deadline of two weeks to report back with a statement of fair principles, warning that he would ask the Office for Fair Trading to investigate if strong commitments to fairer treatment were not agreed.
Following the meeting with lenders on Thursday, Gareth Thomas said: "I am pleased by the commitments card companies have made to me today.
"I recognise that these changes will not be without financial pain for credit card companies, but it was vital that we nipped in the bud the bad practices that were causing real hardship for borrowers.
"These commitments will help families manage their finances and cope with repaying their debts"
The statement of risk based assessment principles will bring about three main changes for borrowers.
* They set out how lenders will deal with cases we have been seeing of people having their interest rate significantly increased - sometimes by 10% or more, and at short notice. On this, lenders have today agreed that borrowers will always be offered an alternative if a lender seeks to increase their rate. All customers will be given the option of closing their account and paying off their debts at the existing rate of interest.
* Second, they've agreed to give people at least 30 days notice of an increase in their rate and to limit how often they will they increase it. This will make sure people have time to shop around for a better deal and plan ahead for changes to their family budgets.
* And thirdly, for struggling borrowers, industry has agreed that they will not increase rates for customers who've failed to make their minimum payments for two months or more, or if the borrower has sought help from a debt advice agency.
These commitments come on top of the agreement reached at the Minister's Credit Card summit last fortnight that the industry will give a breathing space of up to 60 days to borrowers in difficulty. That means they won't chase a debt where somebody is trying to get back on their feet and to agree a repayment plan with the help of a not-for-profit debt advice agency.
Those borrowers who have already experienced hikes should complain to their card provider if they felt their rate increase was unfair. If they are unhappy with the handling of their complaint, borrowers can take their case to the Financial Services Ombudsman Service. If the interest rate has been increased without justification, the Ombudsman can require the lender to compensate the borrower.
The Government will ask the OFT to monitor industry's progress on implementing these principles into the New Year.
