Dáil Éireann Debate, Tuesday - 20 March 2007
169 Ms McManus asked the Minister for Finance his views on the effect that the relentless pace of interest rate increases over the past 15 months may be having on families with high credit card debt; if there are plans to increase the resources of MABS in view of the difficulties that families are now having in meeting existing debts given the seven successive interest rate rises since December 2005; and if he will make a statement on the matter. [10218/07]
Amharc ar fhreagraMy function as the Minister for Finance is to provide an appropriate and robust legislative framework for regulation of the financial services sector with a particular focus on the consumer. I am satisfied that, since the establishment of the Financial Regulator and the Financial Services Ombudsman, such a framework is in place.
The Financial Regulator has prioritised the provision of information for consumers about the potential risk of excessive credit card debt. Credit card cost surveys have been undertaken by the Financial Regulator and are available to help consumers choose the credit card that best suits their needs. The Financial Regulator recommends in particular that consumers take on the right type of credit for the right purpose; credit cards are not suitable for long-term debt as the rates are considerably higher than other forms of credit. The Financial Regulator also issues information to help people who have problems with credit card debt. This information is available through its publications, help-line and website.
All credit card providers must comply with the Financial Regulator's Consumer Protection Code. This requires financial services providers to ensure that any financial products provided are suitable for the needs of the consumer. When a credit institution is changing its interest rates, it must state the effective date of the new rate. It must also update the interest rate details on its information services as soon as the change comes into effect. Credit card limits cannot be increased unless requested by the consumer.
The Deputy may wish to note that credit card debt represents less than 2% of personal sector credit, and less than 1% of overall private sector credit (PSC). In addition, credit card data refers to debt outstanding on all credit cards at end-month and includes balances that may be paid in full at the payment due date. The increase in the number of credit cards issued and the amount of debt outstanding is in line with a general trend of increased market penetration in the EU and a move towards electronic retail payment methods. The Deputy may further wish to note that, unlike interest rate increases in variable-rate mortgage products, interest rates on credit cards tend to remain relatively stable over longer periods of time.
The Money Advice and Budgeting Service (MABS), which falls under the remit of my colleague, the Minister for Social and Family Affairs, is a national, free, confidential and independent service for people in debt or in danger of getting into debt. Very substantial additional resources have been provided to MABS to support it in its work of reaching out to people in debt and helping them to regain control of their finances and budgets for the future. From 2006 to 2007, the budget for MABS has increased by30%, from 13.57 million Euro to 17.67 million Euro.
