New rules for creditors go into effect in 2011 due to the new Consumer Credit Directive, and they affect your credit cards and loans. Here is an overview of the changes, and what you, as a consumer, should expect.

Creditors must now provide a full explanation of the credit being offered, and consumers will have the right to cancel within 14 days of agreeing to credit terms. Consumers will be informed when their debt has been sold, or when creditors check potential borrowers’ credit worthiness.

Starting in January, credit card issuers have to pay off customers’ highest interest debt first on cards where different types of borrowing carry different interest rates. They must also notify customers twice, on different occasions, of interest rate increases and give customers 60 days to reject the increases and cancel their cards. Customers will have to be given a reasonable amount of time to pay off the debt on the cancelled card.

From 1 February 2011 Credit card issuers must  advertise rates that are representative, meaning rates that more than 51% of applicants are eligible for. They must also account for things like annual fees in calculating their rates, to give consumers a more representative APR when they compare credit cards.

But don’t think that card issuers won’t try to make up potential revenue lost as a result of the Consumer Credit Directive. Many of them are introducing new fees that won’t be affected, such as “dormancy” fees and increased charges for foreign currency exchanges.

For example, Santander will start charging store card customers £10 if they let their cards lie dormant for 6 months. Retailers like Debenhams and Topshop are following suit, making it harder for shoppers who only use cards for introductory offers. To get around this, customers should take advantage of introductory discounts on store cards, pay the bill in full, and then cancel the card.

As for foreign exchanges, card providers have started setting their own exchange rates for credit card customers, making foreign transactions cost more.

The Consumer Credit Directive is designed to protect consumers, but consumers should also be alert to creditors adding new fees in attempts to make up lost revenue.