Shadow chancellor John McDonnell made the promise at the Labour Party conference. He told delegates: "I am calling upon the government to act now and apply the same rules on payday loans to credit card debt. It means that no-one will ever pay more in interest than their original loan. If the Tories refuse to act, I can announce today that the next Labour government will amend the law."
The Financial Conduct Authority (FCA) launched a consultation earlier this year to look at ways of tackling credit card debt, through requiring more oversight by credit card providers. The consultation closed in July and a policy statement is expected in the next quarter.
The FCA proposed earlier intervention by credit card providers to identify and help customers at risk of financial difficulty.
Under the proposed new rules, customers who pay more in interest and charges than they do in repayment of credit card debt over an 18 month period will also need to be helped by credit card providers. Those customers, who the FCA said would be classed as being in 'persistent debt', would need to be informed by their credit card provider at the end of that 18 month period that they could reduce their cost of borrowing and time for repaying their debit if they increased their current rate of repayment, and that the firm could suspend their use of their card if they continue to make low repayments for a further 18 months.
Meanwhile the FCA confirmed in July it was maintaining a cap on the fees charged on high-cost short-term credit – or 'payday loans' – after finding the cap had benefited consumers. The cap means consumers never have to pay back more than twice what they had borrowed.
It also said it would consider reforms to the rules governing unarranged overdrafts in its review of retail banking.
"The FCA has intervened regarding payday loans and debt management, as well as looking closely at the charges applicable to overdrafts. Credit cards are a natural next step for regulatory attention, in particular, the understanding of customers and the fairness of any relevant charges or interest," said financial services expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com.
"Any changes would most likely result in the reduction of interest free deals and credit card providers adjusting their risk profile and business models. Only time will tell if this proposal gets any traction but it is inevitable that changes will flow from such regulatory and political attention," he said.
The FCA took over responsibility for consumer credit from the Office of Fair Trading (OFT) on 1 April 2014, backed by stronger powers to clamp down on poor practice than those that were available to its predecessor.