New storecard rules may come too late for some in debt

New rules for the way storecards work will be in force from many providers sooner than the deadline of the end of this year, it has been noted.

Head of consumer finance at the Finance and Leasing Association Fiona Hoyle noted a range of measures is already being introduced by providers in time for the height of the Christmas shopping season.

One of these is a change in the order of payments in which it is now the most expensive debt that gets paid off first.

She also noted there is “an increase to the minimum repayment levels, which will avoid too much debt accruing; more control over your credit limit; a right to choose not to accept an interest rate increase and to pay off your balance at the prevailing rate”.

Such measures – which were negotiated with the outgoing Labour government – were agreed in March and may help some people avoid adding to their debts.

However, for those who have already run up large amounts of interest through storecard spending, they may be too late and for these people taking out an individual voluntary arrangement may be a good way of bringing down debts of £15,000 or more.

These work by proposing to pay a reduced amount to creditors over a period not exceeding five years, which requires at least 75 per cent of them to accept to ensure the rest are obliged to fall in line.

Such storecard measures will not be the only ones to come into force, with the Coalition agreement in May pledging to give regulators powers to cap storecard rates, an idea supported by both the Conservative and Liberal Democrat election manifestos.

By Amy White