August 1 2014 Latest news:
Adam Aiken, Editor
Wednesday, February 1, 2012
Updated lending rules designed to prevent the hard-sell of store cards in the high street has come into force.
The changes follow an announcement at the tail end of last year of an agreement between the government and the finance industry.
High-street shoppers will no longer be offered discounts as an incentive to sign up for store cards. Consumer groups have long complained that the offer of big discounts at the till in return for signing up for cards had led to many people taking up unsuitable offers.
Although the initial discounts can be tempting, store cards traditionally charge high interest rates, and they often prove to be uncompetitive products.
Under the new guidelines, offers such as free gifts, credits or discount vouchers will not be available for the first seven days after a card has been taken out, and shop staff can no longer earn commission payments for persuading customers to take store cards.
The Finance & Leasing Association (FLA) said its new lending code was binding on its 50 members in the consumer credit market.
Other changes include a requirement for lenders to ensure customers are aware of the total cost of short-term loans, including fees and charges, before they apply, and to make sure consumers realise short-term loans are unsuitable for long-term borrowing.
“The FLA lending code has been providing additional protection for credit customers for over 20 years,” said Fiona Hoyle, head of consumer finance at the FLA.
“The new measures for store-card sales and short-term loans reinforce the commitment of all FLA members to responsible lending.”