Forum Brief: Credit cards

Banks and credit card issuers face a clampdown on the widespread practice of mailing credit card cheques to card customers who have not requested them.

They will face greater restrictions on sending out credit card cheques to people aged 25 and under.

Forum Response: Consumers' Association

A spokesman for the Consumers' Association said: "Consumers' Association is disappointed that the government did not heed the damning evidence Treasury select committee gave in their report on credit cards, or indeed follow up on the previous consumer minister Melanie Johnson's call for 'credit card cheques not to be sent out unsolicited'.

"While we acknowledge that the proposed moves to improve screening of 'ability to repay' would go some way to address the problem, we feel the best solution is to ban the practice of issuing them unless requested. Even when requested, credit card cheques should be accompanied by a clear non-jargoned health warning about charges, lack of interest free-period and loss of Section 75 protection.

"The government has missed another opportunity to send a strong message to the credit industry to clear up its act and behave in the interests of consumers.

"We are also concerned that several key obstacles to creating a transparent credit market have not yet been addressed in the new consumer credit legislation or via the Banking Code to date, including:

- consumers not being able to find the cheapest credit card by looking at the APRs, since the card companies' nine different ways of applying interest mean that there can still be up to a 76 per cent difference in the amount charged by two cards with exactly the same APR on exactly the same borrowing.

- companies not having to state the APR in all advertising for credit products, when the cost of borrowing is the most important thing to consider when taking out any credit product.

- companies not having to share full information on their customers' borrowing and repayment levels with credit reference agencies. It's impossible for credit companies to truly lend responsibly if they don't know the extent of the applicant's credit commitments and record of repayment.

"We believe these issues need to be addressed to create a credit market which is genuinely transparent, allowing consumers to make informed choices."

Forum Response: Association for Payment and Clearing Services