In a move that is bound to make them a lot of friends in the financial sector, the Labour Party has just announced plans for legislation that limits the amount of debt people have to pay on credit card debt.
According to Shadow Chancellor John McDonnell, three million people are 'trapped' by credit card debt. Under new changes set to be announced at the party's conference in Brighton, nobody would have to pay more in interest than the amount they originally borrowed.
It's a measure similar to the caps imposed on pay day loans two years ago, limiting the rate of interest to 0.8 per cent per day and ensuring people don't have to pay back more than twice the amount they originally borrowed.
This change comes after the Financial Conduct Authority called for new measures designed to help the three million people in 'persistent debt'. That means people who have paid more in interest (and other charges) than they have paid of the initial amount borrowed over an 18 month period. According to Labour has said that this new 'total cost cap' would help "tackle the persistent debt spiral", and claims growing levels of consumer debt are detrimental to the economy.
In response to calls for action, UK Finance (which represents the financial and banking industry) claimed that consumer credit is an important part of economic growth, and that it was committed to responsible lending practices. It also said that the last thing the industry wants is for vulnerable people forced to deal with "unscrupulous and unregulated lenders". You know, like those people on TV who break your kneecaps when you miss a payment.
Similarly the UK Cards Association (which represents major credit card providers) said the industry is "committed to helping the minority of cardholders who do not use a credit card in a way which is in their best interest". Meanwhile the Tories said action is already being taken make sure companies help customers clear their debts and to outlaw "rip-off credit card charges". Presumably part of that includes the upcoming ban on charging consumers extra fees when they pay by credit card.
Obviously the best way to deal with credit card debt is avoid it if possible, but sometimes that's easier said than done. Once you pick up the initial debt, it can easily spiral out of control. These new plans certainly can't be accused of rewarding people who end up in debt, but ensuring people can't end up in a position they can never recover from can only be a good thing. [BBC News]