Government set to launch review of consumer credit facilities

The UK government, via the Department for Business, Innovation and Skills, will undergo a major review of consumer credit facilities in the UK over the next few months. There is concern that many consumers in the UK have been locked into credit card and other credit arrangements due to the amount of capital debt they have built up and the relatively high interest rates charged by credit providers. So what is the UK government looking to do?

A number of potential recommendations have already been discussed such as a seven-day cooling off period for store cards and credit cards but one issue which will be welcomed across the board is a potential cap on credit card and store card interest rates. While there is no doubt this would help those suffering from debt issues, and also avoid as many problems in the future, is it really fair to limit interest rates in a free market?

It is likely the government could attempt to cap interest rates via some form of comparative test against base rates and money markets to see whether the rates being charged are fair. However, there is no simple solution to this issue and whatever the authorities decide there will be pros and cons.