The Government is planning a crackdown on the credit-card industry.
THE Government is planning to ban credit-card cheques as part of a major crackdown on high-risk lending.
Companies will be outlawed from sending out unsolicited credit-card cheques, or raising the credit limit of a customer when this has not been requested.
Gareth Thomas, the Consumer Affairs Minister, said: “We are concerned that people may be tempted to borrow irresponsibly if credit-card companies increase borrowing limits without this being requested by customers, or send out unsolicited credit-card cheques. It’s vital we protect consumers at this time and we are exploring these issues carefully.”
Credit-card cheques are issued as an alternative way of drawing on a card account where the card itself it not accepted, by a tradesman for example. However, they have fees as high as 3 per cent and often charge interest rates in excess of 20 per cent. They also leave users without “Section 75” consumer protection which allows them to claim refunds from the credit-card company if they receive faulty or undelivered goods costing between £100 and £30,000.
Research by Uswitch.com, the price comparison site, suggests that lenders earned £571 million in fees and interest from credit-card cheques each year, and that hundreds of thousands of consumers are using them to pay gas and electricity bills.
In 2006, the credit-card industry came under pressure from the Office of Fair Trading to rein in the practice of mass-mailing blank credit-card cheques to customers. As a result, credit-card companies agreed to assess customer risk-profiles before sending them the cheques, and to provide clearer information on the costs involved in using them.