Government unveils plans for credit card cheques ban

18/03/2009

Unsolicited credit card cheques and unasked-for increases to balance limits could soon be outlawed, ministers have said.

The government launched new proposals for cracking down on credit card firms yesterday - saying that the practices could lead people into uncontrollable debts.

This follows the release of March figures from charity Credit Action recently, showing that each household in the UK holds an average of almost £22,000 in unsecured debts, where the household actually has some form of unsecured credit.

Consumer affairs minister Gareth Thomas said: "We are concerned that people may be tempted to borrow irresponsibly if credit card companies increase borrowing limits without this being requested by customers, or send out unsolicited credit card cheques."

Kevin Still, EuroDebt director, commented: "Whilst we are concerned about the inherent risks of raising credit limits and issuing credit card cheques without consultation with the client, there is also a risk that the government needs to properly consult the providers of these services and their trade associations before legislating. This is about responsible lending, consumer choice and service providers differentiating their services from others."

He added: "There is inevitably going to be negative implications from this for consumers using credit responsibly where such changes are imposed on credit issuers. As a Debt Management Company, we wouldn’t expect our clients to be offered these facilities where the creditors have been notified that their client is on a Debt Management Plan.”

Figures cited by financial website Moneynet.co.uk yesterday showed that a credit card cheque worth £500 might cost £650 to repay over 12 months.

A large annual interest rate and high attached fees to the provider explained the expensive nature of the credit.

Tags; Debt Management and Banking, Credit Card Lifestyle,

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