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.

“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 have welcomed the new 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.”

Citizens Advice said that it received more enquiries about credit, store and charge card debt than anything else last year. It added that the practice of raising someone’s credit card limit without their express permission had led many people on low incomes into serious debt which they could not afford to repay.

This entry was posted on Tuesday, October 27th, 2009 at 12:05 pm and is filed under Credit, Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.