Credit cardholders in the United Kingdom will gain more control over their card accounts in the New Year because of recent changes in industry policy.

The changes were announced in March, when the UK Department for Business, Innovation and Skills and the UK Cards Association released new “rights” for credit cardholders (see story).

One change that takes effect Jan. 1 involves a requirement that card companies apply the highest-cost debt on credit card account payments first. Changing the way cardholders’ payments are allocated is beneficial for “consumers using their credit cards for a multitude of purchases and to withdraw money,” a UK Cards Association spokesperson tells PaymentsSource. Overall, about 25% of all cardholders will benefit from this change, she says. The association represents the UK’s major credit, debit and charge card issuers and acquiring banks.

Changes that take effect Jan.1 also include improving how issuers communicate with cardholders concerning adjustments in spending limits and interest rates, the spokesperson says. If an issuer decides to increase a cardholder’s annual percentage rate, the cardholder will receive clearer correspondence explaining why, the spokesperson explains. Cardholders then have 60 days to reject or accept the change.

Cardholders also have 30 days to accept or reject credit-limit increases and may do so online.

Additionally, card companies must regularly contact cardholders making only minimum or near-minimum payments to make them aware of the consequences of doing so. And card companies also no longer may send out unsolicited checks to access credit card accounts.

In March, card issuers must change their minimum-repayment amounts so that even if consumers pay the minimum, their principal balances will decrease. The new minimum repayment plan covers the interest, fees and charges as well as 1% of the outstanding balance. The Lending Standards Board, a self-regulatory body, will monitor and enforce such initiatives, the spokesperson says.

This change only applies to new accounts because “otherwise it could have a disproportionate effect and increase the minimum payment for existing accounts,” she explains. Subsequently, new accountholders may end up with higher minimum payments.

Cardholders also may set up a regular payment for an amount they choose instead of paying the minimum amount due to pay off their card debt, according to the association.

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