Government announces ban on card cheques

02/07/2009

The government has announced that unsolicited credit card cheques are to be banned.

A new Consumer Advocate who would battle unscrupulous lending practices in the UK is also set to be created, following today's publication of the policy white paper.

Credit card cheques are commonly sent to customers alongside their statements.

They commonly function as "blank cheques" allowing the borrowers to take out extra credit - but consumer groups have criticised them for charging comparatively high rates of interest.

The extra paid on the cheques could be over £50 million a year in the UK, according to the Office of Fair Trading.

Commenting on the proposals, EuroDebt director Kevin Still said: "There is an issue here in terms of the government potentially limiting genuine consumer choice, which is the implication of banning unsolicited credit card cheques and increases in credit limits. A 'Consumer Advocate' on the other hand may more rapidly enable the identification of bad business practices or scams that are detrimental to consumers without appropriate warnings, like the claims management companies relating to unenforceable credit agreements.
"There is a danger that just dealing with the symptoms may result in consumers using alternative forms of credit that are significantly more expensive, like loan sharks, pay day loan providers and pawn brokers. One of the challenges is to get major lenders, including credit card issuers, to use the tools already at their disposal to properly assess credit risk, which would form an integral part of their responsible lending policies."

He added: "The 'Consumer Advocate' should also have a role in promoting non-borrowing solutions when consumers become over committed, as there needs to be a fair balance between responsible lending and responsible borrowing. Tackling excessive debt is not easy and is a long-term commitment not dealt with by gimmicky 'quick fixes', as has been demonstrated by some of the results from the Mortgage Rescue Scheme."

Tags; Debt Management and Banking, Recent Graduate Debt, Credit Card Lifestyle,

Regional Debt Advice; Debt Advice Battle,

• Share
• 
• 
• Store
• 
• Follow
•