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Credit card cheques to be banned

Gordon Brown tells Which? of plans to tackle debt

Three credit cards on a white background

It’s worth paying off debts before you invest

Which? has welcomed a plan to stop lenders sending unsolicited credit card cheques to consumers.

The plan is part of a package of measures unveiled by the Prime Minister 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 told Which? editor Martyn Hocking: ‘It is our duty to act where there are irresponsible practices that can be dealt with and outlawed, and we are saying that we are prepared to legislate on this matter.

Unsolicited cheques

‘There are two issues that have concerned us – one is unsolicited credit card cheques, which are an invitation to run up more and more debt and the second is the practice of raising people’s credit card limit without even telling them – that is an unsolicited way that people are invited to get themselves into more debt. We are going to deal with some of these practices.’

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.’

Card protection 

Which? credit card specialist Martyn Saville said: ‘Credit card cheques are never a good idea. They cost more than using your credit card and, importantly, they don’t give the same protection as paying by card. Banks sending out unsolicited cheques also increases your chances of falling victim to ID theft – if you don’t know the cheques are coming, you won’t be able to spot when they go missing in the post.’

Under Section 75 of the Consumer Credit Act, when you pay for goods or services with a credit card that cost more than £100 and less than £30,000 you can claim your money back from the card company rather than the retailer for breach of contract or misrepresentation – for example, if the shop goes bust or goods are faulty. Credit card cheques don’t give you this protection.

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