The Government recognise the difficulties that many individuals as well as businesses are having in obtaining credit at the moment. The Government are particularly concerned about access to credit for low income families.
The Government have implemented a number of measures to support low income families during these difficult times. We are investing £80 million in the Growth Fund to support the expansion of affordable credit alternatives through credit unions. The Growth Fund is tackling financial exclusion in England, Scotland and Wales and has already supported more than 130,000 loans to financially excluded people, worth over £56 million.
We have also acted decisively and without delay taking action to stamp out unfair treatment of borrowers to ensure access to credit for all is maintained throughout the downturn. Following the credit card summit in November 2008 we secured agreement from credit card lenders to develop fair principles for any interest rate increase they introduce on reviewing an individual’s risk profile. These came into force in January 2009 and provide extra protections when a customer or group of customers’ interest rate is changed as a result of a perceived change in their ability to repay their debts.
Where a lender increases their rates customers will be given the option to close down their account and repay their remaining balance at the existing rate of interest. Lenders also agreed not to increase rates for customers who have failed to make two or more consecutive minimum payments, where an agreed repayment plan is in place for the account, or where lenders have been notified by a not-for-profit debt advice agency that the customer is in serious discussion with it.
Credit card lenders will also give a breathing space of up to 60 days to borrowers in difficulty. During this time lenders will not commence debt collection proceedings, giving borrowers time to agree a repayment plan with the help of a not-for-profit debt advice agency.
I have established the Consumer Finance Forum to allow the Government a platform to continue to monitor the credit market closely throughout the downturn. The forum will regularly bring together representatives from the financial services industry, consumer groups and Government to address issues facing borrowers during the downturn.