Credit card industry offers to ban unsolicited credit limit increases

Tuesday, 19 January 2010 12:51

By myrfinances.co.uk staff

The credit card industry has bowed to pressure from the government to limit the number of people offered credit limit increases.

The UK Cards Association, which represents the UK credit card industry, made the concession as part of its consultation with the government which has been conducting a review of credit and store card companies' practices.

Previously credit card companies have been criticised for increasing the credit limits of customers without their knowledge, although the industry was at pains to point out that only 8 per cent of customers were offered credit limit increases last year.

As part of the proposals the UK Cards Association says lenders will contact habitual minimum repayers to advise them that only paying off the minimum payment is the most expensive way to clear their credit card debt.

This would be tied in with an industry wide change in practice so that all payments above the minimum payment are allocated to the most expensive debt first. The UK Cards Association says this proposal will benefit a quarter of all credit card accounts.

But the most significant change is the ban on unsolicited credit limit increases for customers facing difficulties. Customers offered a credit limit increase will in future, if the government considers the measures sufficient, be offered a 30-day notice period and simple means of "opting-out".

Melanie Johnson, chair of the UK Cards Association said the credit card industry was keen to give consumers as much control of their finances as possible.

"The package of changes we are proposing is based on evidence from a number of highly-regarded independent sources. Our approach will deliver big improvements to customers without smothering competition and choice, which customers value and gain significant benefit from. It will also maintain features which are vital to lenders being able to lend responsibly," she added.

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