The Bill seeks to update the 30-year-old Consumer Credit Act by tackling problems the government has identified, such as forcing credit providers to make their deals more transparent, tackling loan sharks, providing a way for consumers to report unfair practices, and helping to tackle over-indebtedness.
But checkmyfile.com belives the Consumer Credit Bill doesn’t tackle longstanding issues such as giving consumers the right to be told a reason for credit refusal. Currently two in three credit card applications are declined and the applicant more often than not has no idea why their application has been turned down.
It said although credit card ‘stealth charges’, which sting consumers for late payments or going over-limit, must now be displayed more prominently, the Bill fails to ensure that these are factored in to the APR calculation. For those trying to rebuild their credit rating, the real APR, taking account of stealth charges can be as much as 30 per cent more than that calculated on interest rates alone. Late payments appear on most credit files, each one usually incurring a £25 fee, which is a material part of the total cost of credit, yet remains outside the calculation of APR – which is intended to be an easily comparable yardstick for the consumer.
It added that the Bill makes no provision to make lenders use data from all three credit reference agencies rather than just one, so decisions on credit applications will continue to be made on a small subset of a consumer’s financial situation, rather than on the whole picture, which would result in much more fair assessment.
Barry Stamp, joint managing director of checkmyfile.com, said, "While the Bill does provide for improved credit licensing and also gives consumers an alternative for dispute resolutions other than the law, it misses the opportunity to help consumers become more fully informed about credit and to be more fairly assessed."
Stamp added: "It’s ludicrous in this day and age that lenders are not compelled by law to give a reason for declining applicants. The Consumer Credit Bill does nothing to extend the current legal requirement upon lenders which must state the name and address of any credit reference agency that has been consulted. In isolation, this gives an unintentional inference that the credit reference agency has declined the application, which it has not."
"People often go to the expense of obtaining their credit files, only to find the decision remains a complete mystery. Only if credit scoring has been used in the decision making process, and then only if the lender is one of relatively few which subscribes to a voluntary code, will a principal reason for the decline be provided to the applicant, but not otherwise."
"In my view we will need more consumer friendly legislation soon, as this reform certainly won’t last 30 years. Some fundamental issues, known to most credit active consumers, have just not been addressed," he said.
