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Credit card cheques face ban
The credit card industry could face radical changes as the government plans to ban irresponsible lending practices including credit card cheques
Thursday, 19 March 2009
Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk
The government has floated a plan to ban credit card cheques as part of a major crackdown on irresponsible credit card lending. It says it will also look into prohibiting lenders from raising the credit limits of its customers who have not requested an increase.
Speaking to consumer advice groups on Tuesday, Prime Minister Gordon Brown said that a white paper proposing new consumer rights laws would be published in the summer. He said: “We have got to give real help to people now. We can’t be in the situation where we walk by on the other side when people are in difficulty.”
Commenting on the announcement, Peter Vicary-Smith, chief executive of Which?, said that sending people unsolicited credit card cheques is “not just irresponsible – it’s immoral.”
He said: “Credit card companies have been allowed to get away with encouraging people to spend more than they can afford for far too long,” and added that if the government acted fast to stamp out these “toxic credit practices”, it would send a clear message that “there is no going back to the irresponsible lending of the past.”
Teresa Perchard, director of policy at debt advice charity Citizens Advice, said: “This package of measures shows the government has been listening to people’s concerns and is responding to the problems they are experiencing as a result of the downturn.”
While the news was welcomed by many, it came as an unwelcome surprise for the credit card industry. Stephen Sklaroff, director general at the Finance & Leasing Association (FLA) said: “We are surprised that the Government appears to be pre-judging discussions which have yet to take place.”
Chris Eagle, commercial manager at CreditChoices.co.uk said: “In the current economic climate, it’s essential that customers are protected from irresponsible lending practices.
“Credit card cheques are terrible products. Not only do they tempt you to spend more, they will normally also accrue an enormous amount of interest. Banning these has been a long time coming and we can only hope that the government follows through on this promise soon.”
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