Government plans credit card crackdown

Tuesday, 17 March 2009 12:00

The government has announced plans to crack down on credit card companies that increase borrowing limits without customer consent.

The Business, Enterprise and Regulatory Reform (BERR) department wants to put an end to "irresponsible lending" by restricting credit card firms from tempting consumers into further debt.

Under the proposals, credit card companies could be banned from upping the borrowing limit or sending out credit card cheques to customers who have not requested them.

A BERR spokesperson said: "We are concerned that people may be tempted to borrow irresponsibly if credit card companies increase borrowing limits without this being requested by consumers, or send out unsolicited credit card cheques.

"It is vital we protect consumers at this time and we are exploring these issues carefully."

However, industry association Apacs believes consumers may not be helped by legislation.

A spokesperson said: "We are not convinced that the proposed legislation is the best way forward and we are disappointed that the government is talking about taking action before appropriate consultation and fully understanding the issues."

Apacs added there are already checks to make sure customers are not granted credit card cheques or increased limits if there are doubts over their ability to repay their debts.

Peter Harrison, credit card expert at moneysupermarket.com, said: "If the government actually wanted to make a substantial difference to credit card lending practises, it would insist that payments made by people were assigned to the highest interest debt first and that people weren't allowed to exceed their credit limit.

"At present, most providers assign payments to the lowest interest debt initially. As for credit limits, people are generally allowed to exceed their limit once, which means they are charged a £12 fee and lose any zero per cent offers they might be on. Each of these slips by a person can cost them hundreds of pounds in interest."

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