Credit card companies told to stop encouraging debt

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Ministers have launched a consultation document on changes to industry practices to give consumers a better deal. Credit and store card firms usually make consumers pay off the cheapest debt first, while more expensive debt — such as cash withdrawn on a credit card — is left until last.

The Government is considering rules which would mean the most expensive debt is paid off first, as well as raising minimum monthly repayments from their low level. The consultation will run until 19 January.

Consumer Minister Kevin Brennan said: "Card companies have to get their act together and do more for consumers. My opinion is clear, the current relationship between card companies and consumers cannot go unchallenged. We need to put the customer back in the driving seat."

Other moves being considered by ministers are a ban on increasing credit limits without prior consent — possibly by forcing consumers to opt-in — and restrictions on rate hikes on existing debts without proper explanation.

The Government is already legislating to ban unsolicited credit card cheques next month.

Fiona Hoyle, head of consumer finance at the Finance and Leasing Association, said: "For many people the primary concern will be getting access to affordable credit. We must do nothing to make that more difficult."