The rates of interest charged to customers for borrowing funds using store and credit cards will be capped.
The new coalition Government has revealed its designs to appoint a regulator in order to decide what an "excessive" rate of interest is and make sure that credit card providers can no longer charge them.
This might mean that any credit card charging a rate of over 25% banned, potentially scrapping plenty of credit cards from the market.
Financial specialists pointed out that although the move is welcome, it is likely to be meaningless if the Government fails to tackle the wider issue of high debt charges across the whole UK finance market.
The coalition document which detailed the new Governments key owner areas, did not, for example, highlight door step lending or paydayloans - methods of lending that can see borrowers charged annual percentage rates of around 2,000% on short-term loans.
Despite the historic lows to the Bank of England base rate – currently at 0.5%, plenty of forms of borrowing have become more pricey over the last couple of years. According to the Bank the average credit card rate rose from 15.26% to 16.53%.
The credit card industry was taken by surprise by the announcement. A spokesman for the United Kingdom Cards Association, the trade body, said: "The DTI looked at a cap back in 2004 and decided there was no need for one. The devil will be in the detail. They must speak to the Government to understand exactly what they mean."
The new coalition Government has revealed its designs to appoint a regulator in order to decide what an "excessive" rate of interest is and make sure that credit card providers can no longer charge them.
This might mean that any credit card charging a rate of over 25% banned, potentially scrapping plenty of credit cards from the market.
Financial specialists pointed out that although the move is welcome, it is likely to be meaningless if the Government fails to tackle the wider issue of high debt charges across the whole UK finance market.
The coalition document which detailed the new Governments key owner areas, did not, for example, highlight door step lending or paydayloans - methods of lending that can see borrowers charged annual percentage rates of around 2,000% on short-term loans.
Despite the historic lows to the Bank of England base rate – currently at 0.5%, plenty of forms of borrowing have become more pricey over the last couple of years. According to the Bank the average credit card rate rose from 15.26% to 16.53%.
The credit card industry was taken by surprise by the announcement. A spokesman for the United Kingdom Cards Association, the trade body, said: "The DTI looked at a cap back in 2004 and decided there was no need for one. The devil will be in the detail. They must speak to the Government to understand exactly what they mean."
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