The United Kingdom (U.K.)  payments association, APACS– along with some of the major players in the credit card industry– met with the British government last week to outline a new industry standard restricting the imposition of interest rate increases for debt-ridden customers, while providing help for those struggling with their finances. APACS (Association for Payment Clearing Services) is the trade body that gives credit card issuers, building societies and banks a forum where they can work together on industry issues. Their charter is to manage the way that businesses and individuals in the U.K. move their money around — this covers cash, credit and debit cards, personal checks and automated payments such as direct debits, salary payments and online and telephone transactions.

So what gives with the Mother country– why are they in such need of breathing space? According to a study by the Datamonitor Research Group, the U.K. has the highest level of credit card debt of the 14 European countries that were included in the research. With the current economic climate dictating that more people than ever before will be needing help and support, the government is hoping to avoid an avalanche of personal bankruptcies and credit problems that could deepen the effects of the economic downturn there.

From the APACS official website, these are the two changes have been agreed upon to help customers struggling with their finances:

Breathing space for customers in trouble: the first is the creation of an agreed breathing space for any customer working with one of the free debt advice agencies to establish a debt repayment plan. This will give those customers a minimum of 30 days, whilst they agree a repayment plan, during which time the credit card company will suspend collection activity. If discussions remain ongoing after 30 days, there is an option of extending this by an extra 30 days to ensure agreement can be finalised. This change will be invaluable to customers when they are under the most stress.

Increased transparency on risk-based repricing: The second change will increase transparency for customers in the area of risk-based repricing. Many credit card companies use risk-based repricing to calculate the risk of lending an open-ended, unsecured line of credit to a customer whose financial position can change over time. Risk-based repricing can result in changes to the overall cost of credit to a customer. These agreed changes will ensure that customers will be notified when their interest rate is being changed as a result of risk-based repricing, and critically, if their interest rate goes up they will be given sufficient time to close their account or be offered an alternative product, where available. Credit card issuers have also agreed that they will not increase the interest rate on a card on the basis of risk during its first twelve months, or more often than six monthly thereafter. No risk-based repricing decisions will be taken after 01 January 2009 that do not comply with these principles.

I guess it’s comforting to know the U.S. isn’t the only country struggling with these difficult economic times. Or is it???

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