The interest rates charged to customers for borrowing money using store and credit cards will be capped
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The new coalition Government has revealed its plans to appoint a regulator in order to determine what an "excessive" interest rate is and ensure that credit card providers can no longer charge them.
This could mean that any credit card charging a rate of over 25% banned, potentially scrapping a number of credit cards from the market.
Financial experts pointed out that although the move is welcome, it is likely to be meaningless if the Government fails to tackle the wider problem of high debt charges across the entire UK finance market.
The coalition document which detailed the new Governments key policy 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%, many forms of borrowing have become more expensive 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 UK 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. We need to speak to the Government to understand exactly what they mean."