Memorandum from APACS
OF APACS' CARD
(CPG). CPG IS THE
THE UK CARD
CPG MEMBERS ACCOUNT
THE UK, ISSUING
AND 71 MILLION
CPG IS THE
WITH BERR IN
APACS and its members believe that recent years
have seen significant improvements in the areas of transparency
and responsible lending, which have played an important role in
ensuring that customers better understand credit cards, including
how products work and how they can get help should they come across
The consistent aim has been to raise standards
across the industry via self-regulation, in the form of best practice
guidelines and/or additions to the UK's Banking Code, the industry's
voluntary code that sets standards of good banking practice.
We believe that such strong improvements in
the interests of customers are key factors to be considered within
a review of the "Banking Crisis", as they will undoubtedly
have led to tangible improvements around a customer's ability
to borrow responsibility, in parallel with the lenders commitment
to lend responsibly.
This was a core focus of the Treasury Select
Committee in 2003-04, with a strong message that there was a need
to significantly improve the levels of transparency in the credit
card industry. Today sees a continuation of this robust debate
with a broad range of stakeholders, including consumer groups,
politicians and parts of the media.
Examples of the industry's commitment to improving
transparency, over and above any regulatory/legislative requirements,
Summary Boxeshelping consumers
to make informed borrowing decisions and to compare products,
enabling at-a-glance information such as APRs, interest-free periods,
minimum repayments and charges. Summary Boxes now also cover credit
card cheques and pre-paid cards.
Health Warningskey information
for customers, such as on credit card statements, explaining the
impact of only making the minimum repayment on a regular basis.
Best Practice Guidelinesdeveloped
for the industry, with guidelines covering areas such as "credit
limit increases" and the provision of "credit card cheques"
and are encompassed in the Banking Code.
The credit card industry has a long established
commitment to responsible lending. The core message will always
be that it is in nobody's interests to lend money to customers
who cannot afford to repay.
Data sharing has, for many years, been at the
heart of the credit industry's commitment to responsible lending.
APACS and its members have championed improved data sharing in
the credit card industry. It is also imperative that such data
is used effectively.
Examples of such initiatives include:
Sharing Positive Data for Credit
Card and Loan Portfoliosthis commitment was made following
extensive discussion across the APACS/BBA membership, with all
such data being shared by the end of 2005, to the extent allowable
under UK law.
Credit Card Behavioural Data Sharinga
very significant initiative, relating to sharing additional data
such as details of minimum payments and cash advances, in order
to help identify and assist customers showing the early signs
of financial difficultiesa number of APACS members commenced
sharing such data in December 2008.
Non-consensual Data Sharingactive
industry engagement in BERR's Expert Group, examining the case
for the sharing of such data relating to accounts opened before
the existence of standard Data Protection Act notification/consent
The industry remains fully committed
to engaging with Government around other data sources which may
add value for lenders and consumers, including student loans,
council tax payments and utilities.
Early Stress Managementaligned
to commitments made in the revised Banking Code ("early intervention"),
work is ongoing to improve how the industry can identify and help
customers showing the early signs of getting into financial difficulties.
Data Sharing Governanceunderpinning
all of these data sharing initiatives is the industry's ongoing
commitment to a strong governance model, so that data is shared
and used appropriately.
5. CONSUMER HELP
This is an area where there has been a considerable
amount of activity in recent years, with a broad spectrum of proactive
and customer focussed work, such as:
Aligned to the Banking Code, the
industry is committed to treating customers in financial difficulties
sympathetically and positively, also informing them of sources
of free independent money advice.
APACS has developed www.choosingandusing.com
to help customers understand how credit cards work. Includes downloadable
guides such as "choosing a credit card", "understanding
your credit card statement" and "checking your credit
record". A "ready reckoner" also enables rapid
estimates of repayment timeframes and interest costs.
At an industry-level, APACS has worked
closely with various stakeholders, including the FSA, the Personal
Finance Education Group and the Government's Basic Skills Agency,
to ensure credit cards are suitably covered in work on financial
education and capability. This important work of engaging with
stakeholders will continue in 2009.
Substantial support provided to free
debt advice services by APACS members, including the Money Advice
Trust, Consumer Credit Counselling Service and Payplan.
Financial FringeAPACS continues
to work with other personal finance trade associations and parliamentarians
under the banner of the "Financial Fringe", where deliverables
in 2008 included an advice pack for MPs to use in their surgeries.
The industry believes it has been
vitally important to play a role in the work of the Government's
Over-indebtedness Taskforce and supports the strong progress made
against the Government's seven key strategic objectives. Going
forward, the industry will continue to engage with Government
around such matters in the broader context of the recently announced
Lending Panel and its work-streams.
6. ENGAGING WITH
APACS has welcomed the recent opportunities
to engage with Government in respect of the Credit Card Summit
held on 26 November 2008. This presented the industry with some
challenges around key areas identified by BERR and positive outcomes
were delivered in very tight timeframes.
Two core areas of change were agreed:
Risk-based re-pricing: an agreed
"Statement of Principles", providing additional customer
choice and transparency around such decisions. These were implemented
with effect from 1 January 2009.
It is important to highlight that APRs will
not necessarily fall in line with falling base rates. This is
because of the way that credit card lending works, where the risk
of lending has not fallen and may have actually increased. A credit
card APR is not actually an interest rate; it represents the total
cost of credit being granted. An APR will include all credit card
fees and charges, as well as the costs of operating an open-ended
line of credit, along with the costs of bad debt and fraud. Base
rates are only one factor in the level of an APR.
"Breathing Space": an immediate
commitment across the industry to provide some forbearance for
customers who come across financial difficulties, allowing them
time to engage with not-for-profit debt advice agencies in order
to agree an appropriate way forward.