Credit: bad for your health?

12th July 2009

The incentive is being launched to help people who are suffering from bad credit who simply do not understand the small print and legal jargon seen in over-priced mortgages and credit cards with high rates, meaning they do not have the adequate knowledge to find a good deal.

Similar to health warnings on cigarettes and nutrition warnings on food, it is hoped the impartial analysis of different credit cards can help people be deterred from obtaining a financial service which could worsen their situation.

One of the objectives of the system is to help alert consumers about credit cards which have a very high amount of interest and hidden charges which could affect the consistency of payments.

As repossession is estimated to become more and more likely as hundreds of thousands face the prospect of arrears, it is hoped the scheme could offer hope to millions of vulnerable consumers.

It is hoped that the track record of a company will be included in the critic of mortgages and credit cards, so consumers can be assured about the reliability of the financial institution that they are banking with.

Ed Mayo is the chief executive of Consumer Focus. The entity established by the Government has been trying to champion consumer rights by setting up campaigns for various sectors like the energy market, for example.

He said: "We welcome the signs that government will improve consumer protection in the financial services market. More needs to be done to help consumers switch between financial firms. [The companies] would soon take notice if consumers were given clear information about company performance and started to vote with their feet."

He believes that this new awareness of company performance in consumers could encourage companies to think hard about how good a practice they offer.

He added: "Consumers urgently need quick, cheap and effective redress."

As urgent as it may be in Mr Mayo's eyes, it does appear that the Government will not be launching this new initiative to the public in the urgent future. Current estimates place the launch of this new independent consumer watchdog in 2010, when the worst of financial turmoil could be over for most of us.