A plan to stop lenders automatically raising credit card borrowing limits has been announced by the government.
It is part of a package of measures unveiled by the Prime Minister on Tuesday to help consumers struggling to make ends meet during the economic downturn, and to prevent people from getting further into debt.
Speaking at an event hosted by Which? to tackle financial problems facing consumers, Gordon Brown said: ‘We will bring forward legislation to stop irresponsible credit card practices and I know that we have to deal with two particular problems – unsolicited rises in people’s credit limits and unsolicited credit card cheques which come to people.
‘In the legislation we will bring forward, we will bring in greater control over this and, I believe, will help to clear up some of the very bad practices in the credit card market.’
Which? chief executive Peter Vicary-Smith said: ‘Credit card companies have been allowed to get away with encouraging people to spend more than they can afford for far too long. Sending people unsolicited credit card cheques and extending their credit limits without being asked, in the hope of tempting them to overspend, is not just irresponsible – it’s immoral.
‘If the government moves quickly to stamp out these temptation tactics, it will send a clear message that there is no going back to the irresponsible lending of the past.’
Which? credit card specialist Martyn Saville said: ‘Borrowing large sums using a credit card is expensive if you cannot clear your balance at the end of the month. The average interest rate on UK credit cards is currently around 17% – compared with just 6.8% on the Barclaycard Simplicity credit card and 7.8% on a Which? Best Buy loan from Your personal Loan.’