Credit card firms 'must be forced to change

Consumer groups have welcomed MPs' calls for changes in the credit card industry, but urged the government to use its force to ensure the changes are drastic enough.

Heads of credit card companies came in for fierce criticism in a report published today by the Treasury select committee, accusing them of operating opaque charging structures which make it "virtually impossible" for consumers to work out which card would be cheapest.

The leader of the committee, John McFall, called for a standardisation of the way in which interest rates and charges are applied to credit card debts, and said he would welcome an Office of Fair Trading investigation into the penalty charges imposed on customers for late payments and for going over their credit limit.

He called for a ban on the sending out of unsolicited credit card cheques, which allow people to spend on their cards even in places which do not accept credit card payments. These transactions often attract a far higher rate of interest than normal credit card payments, often more than 20%, and customers generally miss out on any interest-free period the card provider would ordinarily offer.

Mr McFall added that credit companies had a responsibility to offer more protection to consumers in danger of getting into serious debt problems by sharing information. "Cases of extreme debt are growing so the need for companies to share information on customers has never been greater. Credit card companies, together with the government, must work to achieve this.

"By sharing information on customers, and encouraging responsible borrowing, credit card companies can provide people with better advice and prevent consumers from building up unsustainable debts," he said.

The consumer group Which?, formerly the Consumers Association, said that the committee's report clearly showed that "misleading and confusing practices are still rife in the credit card industry."

Emma Bandey, personal finance campaigner at Which?, said the government needed to "force its hand" to make sure a shake-up was implemented fully.

"We repeat our calls for a standardised method of calculating interest, for lenders to share full customer credit history between them to ensure responsible lending, for more openness over charges and an end to unsolicited credit card cheques."

Jill Johnstone, director of policy at the National Consumer Council (NCC) said that the committee's key recommendations had homed in on problem areas which had not been addressed by the consumer credit bill, currently on its way through parliament.

"NCC and other consumer groups are already lobbying for amendments to the consumer credit bill to fill the gaps - on clearer information about interest and calculation methods, comprehensive data sharing by credit card companies, and a ban on unsolicited credit card cheques," Ms Johnstone said.

"Today's report is a timely alert to government. It must trigger urgent action, otherwise the full potential benefits of fairness and clarity promised by the new credit laws are at risk."