Government to tackle unsolicited hikes in credit card limits

| March 17, 2009 | 0 Comments
Government to tackle unsolicited hikes in credit card limits

Credit card providers may be prevented from making unsolicited increases to spending limits on their customers’ accounts.

In efforts to curb the mountain of personal debt in the UK, the Government is proposing new legislation that will end the practice of providers making ad hoc increases in credit limits.

Speaking to the BBC, consumer Affairs Minister, Gareth Thomas, explains that ministers 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.”

Credit card cheques are particularly worrying in the current financial climate because customers can use them for purchases or payments that then appear on their next credit card bill.

However, charges for credit obtained in this way are frequently higher than for a credit card purchase with the same provider and the cheques do not provide the same level of consumer protection that comes with a credit card purchase.

Speaking in defence of credit card cheques, UK payments services body Apacs points out that they draw on a customer’s existing credit limit rather than increasing it.

In addition, only 7% of cheques mailed out are actually used, according to Apacs.

Latest figures show that the outstanding balance owed on credit cards in Britain stands at £53 billion.

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