Recent figures suggest that people in the UK are being forced to turn to payday loans and credit cards such as Vanquis in an attempt to keep themselves above water. This results in crippling interest rates that families will struggle to pay back. Credit firm Provident Financial receives 2,700 applications per day for its Vanquis card, according to the Mail Online.

The Telegraph recently revealed that one in five Britons have three or more credit cards, with 17% using one of their cards at least once a day. A quarter of the UK’s 30 million credit cards saw an increase in interest rate over the last year, with credit card debts of £2,000 now taking two years to clear if you pay back £100 a month.

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The government has put forward a series of proposals to outlaw unfair credit card terms. These include stopping card firms raising interest rates on existing debts, and increasing someone’s spending limit without first asking their permission.

Under the proposals, credit card companies would also have to ensure that a customer’s most expensive debt is paid off first, and the size of minimum repayments would be raised in order that debts be paid off faster.

The UK Cards Association (UKCA), which represents British card issuers, said it would study the proposals.

“We need to be able to demonstrate what impact these would have on consumer choice and the costs to customers of using credit cards,” said UKCA chairwoman Melanie Johnson. “We will be reviewing the evidence and we expect the government to do the same.

“These proposals risk disadvantaging more customers than they protect,” she added.

The government has called on credit and store card companies to “clean up their act” with regard to “unfair” charges that are not explained properly to the customer.

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A county court judge has told a lender that it cannot demand payment of an £8,000 debt, possibly paving the way for thousands of borrowers to default on repayments.

Judge Jacqueline Smart at South Shields county court has ruled that the MBNA credit card company cannot demand that a customer repay her debt. The company tried to force Lynne Thorius to repay the £8,000 she owed on her card.

However, Judge Smart decided that there had been an unfair relationship between MBNA and Ms Thorius because of the way in which the firm sold her payment protection insurance.

The credit card was sold to Ms Thorius in the official Sunderland Football Club shop in 2002, along with payment protection insurance, which is designed to cover debt repayments in case of illness or redundancy.

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The Financial Services Authority has told banks and building societies to compensate customers who may have been mis-sold payment protection insurance.

The ruling covers firms that have sold more than 40% of their “single premium” PPI policies at the same time as giving unsecured personal loans. The FSA will also target other companies that have mis-sold PPI when offering secured loans or credit cards.

The regulator has asked firms to reopen 185,000 rejected complaints about PPI.

Payment Protection Insurance is designed to cover debt repayments if you can’t work because of illness or redundancy, and is usually offered whenever you take out a loan, mortgage, credit card or store card, or bought something on credit.

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The high street bank HSBC has announced it is cutting the cheque guarantee limit on debit cards for some of its customers.

Currently around 300,000 HSBC customers have a cheque guarantee limit of £250. This will now be reduced to the standard £100 cheque guarantee available to the majority of the bank’s customers. However, debit card payments up to £250 will still be guaranteed.

HSBC said that it was cutting the higher cheque guarantee limit in an attempt to minimise losses from cheque fraud and to discourage people from spending money they did not have.

The banking industry as a whole is planning on phasing out cheque guarantee cards by 2011. Many retailers no longer accept cheques, and only 7% of cheques written are backed up by a cheque guarantee card.

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The number of fraudsters taking over people’s bank accounts and credit cards is on the rise, a watchdog has warned.

A report by the fraud prevention service Cifas reveals that cases of ‘takeover fraud’ in the UK increased by 75% last year.

In the past, fraudsters who gained access to your personal details may have taken out credit cards or loans in your name. Now, however, lenders are more reluctant to give out credit and are more stringent in checking whether applicants are suitable to take out a loan or credit card.

For this reason, criminals are trying to take over existing credit cards and bank accounts in order to gain access to people’s funds. Customers may not even be aware that their account has been taken over, until they receive a large or unexpected bill.

Criminals will often create a website based around a popular story or event in order to entice customers. When someone visits one of these websites or opens an email their computer can be infected with malicious software which tracks the websites they visit and what they type in, including usernames and passwords. With this information, criminals are then able to access your account.

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The Ministry of Justice has warned customers to be wary of firms which claim they can help write off debts.

The ministry said that hundreds of claims management companies are charging large fees for an initial consultation, and are making misleading claims about the chances of success.

Steve Sharrock, an oil engineer from Manchester, told the BBC that he had received a phone call from a debt management company which claimed there was a 99.9% chance he could get his debts written off. However, after paying an up-front fee of £275, Mr Sharrock never heard from the firm again.

“It’s a con,” he said. “They’re obviously only concerned about getting money off you as quickly as they can. It’s a con.”

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The Bank of England is expected to keep interest rates at a record low of 0.5% for the third month in a row as it continues to pump money into the economy.

The European Central Bank is also likely to retain its 1% interest rate following last month’s cut.

Economists in the City widely predict that the Bank of England’s Monetary Policy Committee will set rates at 0.5% again, the lowest level in the Bank’s 315 year history, as it seeks to breathe new life into the UK’s ailing economy. However, of more interest to economists is what the Bank says about its money printing plan, which has already seen £75 billion ejected into the economy.

However, the MPC may decide to delay the programme of quantitative easing, known colloquially as ‘printing money’.

Purchasing managers’ indexes in the past few days have suggested the recovery may be coming faster than expected. The pound has also reached its highest level against the dollar for seven months, suggesting that traders believe UK rates could rise sooner rather than later.

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Britain stands to lose its AAA credit rating that provides access to cheap borrowing on international markets after the international credit ratings provider Standard and Poor’s downgraded its estimation of the country’s economic outlook yesterday.

The agency expressed concern about the UK’s massive budget deficit and changed its outlook from “stable” to “negative”, prompting more calls from the Conservatives for an immediate general election.

S&P said that there was a “one in three” chance that it would remove the UK’s current AAA credit rating on its sovereign debt. A lower credit rating makes borrowing more expensive.

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Young people are significantly more pessimistic about the state of Britain’s finances than their parents’ generation, Post Office figures reveal.

According to a report published today by Post Office Financial Services, almost one in four 18-24 year olds in Britain believe that living standards will take over a decade to return to pre-recession levels. A further 34% of people in this age group believe that the UK will not experience economic recovery for another five years. The survey found that the younger generation is more pessimistic about Britain’s economic outlook than any other age group.

In comparison, only 5% of 45-54 year olds believe that the recession would go on longer than a decade, possibly because that generation has already lived through a recession and seen Britain’s economy grow since.

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