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Government bans credit card cheques

Government bans credit card cheques

Category: Economy

Updated: 02/07/2009
First Published: 02/07/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Credit card cheques have been banned as part of measures to protect vulnerable consumers, the Government has said.

In a White Paper, plans to introduce a Consumer Advocate, who will help people who run into problems with debt or find themselves at risk from rogue traders, were also outlined.

Credit card debt accounts for approximately £55.4 billion of the £233 billion the UK public owe on cards, overdrafts and loans.

However, with concern mounting over consumer debt, the Government has decided to ban credit card cheques. The practice, whereby lenders send out blank cheques to their credit card customers, has long been a target for criticism from the public and consumer groups alike.

This is because credit cards cheques do not offer the same benefits as the credit cards themselves. Specifically, customers can expect to incur handling fees for utilising them, while there are no interest free periods when using the method of payment.

Levels of protection are also vastly inferior compared to credit cards.

Roger Ramsden, chief executive of Saga Services, said the group welcomed the move to stop people being encouraged to take on more debt by tempting them with unsolicited credit card cheques.

The new measures will also see the introduction of a Consumer Advocate who, as well as adding consumers who run into financial difficulty, will be expected to identify important issues faced by customers. He or she will also help large groups of people seeking compensation or refunds take their cases to court when the matter represents a matter of national importance.

A review of card fees and charges has also been announced.

The Consumer Focus Group, where the Consumer Advocate is to be based, welcomed the move, with chairman, Larry Whitty, commenting: "These are particularly tough times for consumers and these measures will give people stronger rights to take action, backed by tough legislation and a powerful Consumer Advocate.

He added that the announcement that high cost credit is to be tackled was welcomed and represented good news for consumers who have paid over the odds for many years.

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