The Government published a consultation document giving the detail of proposed changes in the law on repayment policies imposed by credit and store card providers. 

The consultation builds on action already taken by the Government. It examines issues such as the fact that most credit card companies make customers pay the cheapest debt off first. Read More: Credit Card Confusion.

This is a particular problem for consumers who withdraw cash on their card, typically charged at 25 per cent APR or more.  They are often the most likely to be vulnerable to financial difficulties.  The Government is considering rules that would mean the most expensive debt is paid off first.

Government Acts on Store and Credit Cards

Other issues under investigation include practises such as raising the minimum monthly repayments levels to encourage people to pay off their debt faster and banning the practice of increasing credit limits without prior consent.

"Card companies have to get their act together and do more for consumers,” says Consumer Minister Kevin Brennan.

"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 a proper explanation. 

Brennan went on to argue that while consumers have a real responsibility to manage their finances properly, “they also have a right to clear information to enable them to do that.  Consumers should not feel each month as if they’ve been exploited or disadvantaged.”

Citizens Advice Bureaux dealt with over 300,000 new enquiries about credit, store and charge card debts over the last year making it the biggest single issue that they have enquiries about.

"The Government’s determination to develop a more responsible framework for credit and store cards is very welcome,” said Citizens Advice Director of Public Policy, Teresa Perchard of the announcements.

"In particular we see far too many people on low incomes who have drifted into very high levels of borrowing as a result of unsolicited increased access to credit.”
The decision to clamp down on dodgy credit and store card practises was welcomed by consumer group Which? also.

"For too long, card companies have been allowed to apply the tricks of their trade to the detriment of millions of consumers,” said Which? personal finance campaigner, Phil Jones.

“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.”

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