To ask Her Majesty's Government what action they are taking to ensure that when a customer makes a payment against their credit card debt it is allocated to the debt attracting the highest rate of interest first. [HL1279]

The Government are concerned about the practice of allocating payments to the cheapest debt first and the extent to which consumers understand this, and its implications for their personal finances. We are therefore considering what action may be required as part of the current review of the regulation of credit and store cards which is being undertaken by the Department for Business, Innovation and Skills. Among other things, our consultation examines whether we should reverse the allocation of payments to ensure that expensive debts are paid off more quickly, as a very small number of lenders already do. We published a consultation document seeking views on potential reforms in October 2009. The consultation closes on 19 January 2010. The Government will issue final recommendations in the spring.