Menu
26/08/2004
Credit law reform will not have interest rate ceiling: DTI
An interest rate ceiling will not be introduced as part of the government's shake-up on consumer credit law, Consumer Minister Gerry Sutcliffe announced today.
The announcement was made after it emerged that research published today showed that interest rate ceilings can "limit low-income borrowers' access to credit, diverting them to less transparent and less appropriate products, or even to illegal loan sharks", the government said.
An interest rate ceiling is when a limit to the amount of interest that can be charged is set at a certain level.
However, the government has said that it would keep the question of an interest rate ceiling under review.
The study, commissioned by the DTI, examined the effect of interest rate ceilings in France, Germany and the USA and found that lenders do not provide credit for small loans repayable over a short period, excluding some low-income consumers from the market or leading others to take out larger loans than they need.
A ceiling also reduced the choice of products available, thereby limiting competition. And the percentage of consumers who admitted to having borrowed from unlicensed or illegal lenders was twice as high in Germany and France as in the UK, the study revealed.
Consumer Minister Gerry Sutcliffe said that alternatives to an interest rate ceiling provide a "better way to deal with problems in the market now, such as the high cost of credit and financial exclusion".
He added: "In fact, our evidence shows that ceilings can often have a negative effect, such as excluding low income consumers from the market or leading them to use products that they know are not really suitable for their needs and which make it difficult for them to control their levels of borrowing. However, this is an issue we will keep under review."
Teresa Perchard, Director of Policy, Citizens Advice Bureau welcomed the DTI's decision not to put a ceiling on interest rates.
"Our evidence is that extortionate credit is about much more than the interest rate - high pressure selling, unfair terms and conditions, hefty charges for letters and statements, expensive add-ons like insurance can all hide behind an interest rate."
(gmcg)
The announcement was made after it emerged that research published today showed that interest rate ceilings can "limit low-income borrowers' access to credit, diverting them to less transparent and less appropriate products, or even to illegal loan sharks", the government said.
An interest rate ceiling is when a limit to the amount of interest that can be charged is set at a certain level.
However, the government has said that it would keep the question of an interest rate ceiling under review.
The study, commissioned by the DTI, examined the effect of interest rate ceilings in France, Germany and the USA and found that lenders do not provide credit for small loans repayable over a short period, excluding some low-income consumers from the market or leading others to take out larger loans than they need.
A ceiling also reduced the choice of products available, thereby limiting competition. And the percentage of consumers who admitted to having borrowed from unlicensed or illegal lenders was twice as high in Germany and France as in the UK, the study revealed.
Consumer Minister Gerry Sutcliffe said that alternatives to an interest rate ceiling provide a "better way to deal with problems in the market now, such as the high cost of credit and financial exclusion".
He added: "In fact, our evidence shows that ceilings can often have a negative effect, such as excluding low income consumers from the market or leading them to use products that they know are not really suitable for their needs and which make it difficult for them to control their levels of borrowing. However, this is an issue we will keep under review."
Teresa Perchard, Director of Policy, Citizens Advice Bureau welcomed the DTI's decision not to put a ceiling on interest rates.
"Our evidence is that extortionate credit is about much more than the interest rate - high pressure selling, unfair terms and conditions, hefty charges for letters and statements, expensive add-ons like insurance can all hide behind an interest rate."
(gmcg)
Related Northern Ireland Business News Stories
Click here for the latest headlines.
31 July 2001
Consumer credit could grow further if interest rate is cut
A rise in consumer credit that has outstripped City forecasts, and could herald a further cut in interest rates to buoy up the economy. According to the latest figures, released on Monday 30 July, UK consumer credit has grown by £1.
Consumer credit could grow further if interest rate is cut
A rise in consumer credit that has outstripped City forecasts, and could herald a further cut in interest rates to buoy up the economy. According to the latest figures, released on Monday 30 July, UK consumer credit has grown by £1.
04 September 2001
Bank likely to leave interest rate unchanged
The Monetary Policy Committee (MPC) of the Bank of England are likely to leave interest rates unchanged at 5 per cent. The Committee are due to begin their latest two-day meeting amid a spate of calls for another cut in the interest rate.
Bank likely to leave interest rate unchanged
The Monetary Policy Committee (MPC) of the Bank of England are likely to leave interest rates unchanged at 5 per cent. The Committee are due to begin their latest two-day meeting amid a spate of calls for another cut in the interest rate.
08 January 2004
UK Interest rates sticks at 3.75%
As expected, the Bank of England has decided to hold the base rate at 3.75% today. The Bank's Monetary Policy Committee (MPC) opted to hold the rate following a quarter point rise in December - the first rise in four years. However, analysts are continuing to warn consumers that rises are imminent in the year ahead.
UK Interest rates sticks at 3.75%
As expected, the Bank of England has decided to hold the base rate at 3.75% today. The Bank's Monetary Policy Committee (MPC) opted to hold the rate following a quarter point rise in December - the first rise in four years. However, analysts are continuing to warn consumers that rises are imminent in the year ahead.
14 August 2001
Inflation rate fall may herald a further interest rate cut
Speculation is growing that a fall in the underlying inflation rate, down to 2.2 per cent, may give the Bank of England’s Monetary Policy Committee further room for manoeuvre to lower interest rates. Continued severe pressure on manufacturing industry has prompted further calls from industry leaders seeking another cut in the UK interest rate.
Inflation rate fall may herald a further interest rate cut
Speculation is growing that a fall in the underlying inflation rate, down to 2.2 per cent, may give the Bank of England’s Monetary Policy Committee further room for manoeuvre to lower interest rates. Continued severe pressure on manufacturing industry has prompted further calls from industry leaders seeking another cut in the UK interest rate.
06 May 2011
Bank Rate Decisions 'Good And Bad' For NI
News that the Bank of England's Monetary Policy Committee this week voted to maintain the official bank rate paid on commercial bank reserves at 0.5% has been greeted as a 'curate's egg' by a local economist. The previous change in the rate was a reduction of 0.5 percentage points to 0.
Bank Rate Decisions 'Good And Bad' For NI
News that the Bank of England's Monetary Policy Committee this week voted to maintain the official bank rate paid on commercial bank reserves at 0.5% has been greeted as a 'curate's egg' by a local economist. The previous change in the rate was a reduction of 0.5 percentage points to 0.
-
Northern Ireland WeatherThis Evening and Tonight:It will be cloudy with a spell of heavy rain pushing south through late evening and the early hours, soon followed by some clear spells. Minimum temperature 6 °C.
