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Government announces curbs on Credit Card dodgy practices
Unfair credit card practices are likely to be outlawed in new proposals by the government
Currently, credit card companies are able to give consumers some nasty surprises including:
- Raising interest rates on existing debts
- Raising customer's spending limits without their authority
- Using repayments to pay off the least expensive debts first
As well as stopping these common practices, which often contribute to leading consumers into a spiral of debt, the government is also going to force the credit card companies to raise the level of the minimum repayment to ensure debts are paid off faster and don't lead to spiralling debt.
While the credit card companies reacted negatively, claiming it would affect consumer choice and increase the cost, the government insisted that the card companies clean up their act, labelling the relationship between them and their customers 'unfair':
"It is not acceptable for card companies to impose complex and confusing terms and conditions that can leave people baffled, or to increase interest rates without proper explanation," said Consumer Minister Kevin Brennan.
"Consumers should not feel each month as if they have been exploited or disadvantaged," he added.
Consumer groups, who have long criticised the credit card industry, welcomed the proposals:
"For too long, card companies have been allowed to apply the tricks of their trade to the detriment of millions of consumers," said Phil Jones of Which?
"We think it's simply wrong to entice people into spending more than they can afford and then to squeeze as much money out of them as possible."
Malcolm Hurlston of the Consumer Credit Counselling Service (CCCS), said: "The government has put its finger on the four main problems that consumers have with credit card debt."
"We believe that the banks should be able to change their practices on each of these but if they can't, regulation will be necessary," he added.
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