Debt taskforce targets credit cards

Clearer notification of credit card rates and a clampdown on certain types of marketing are understood to be among the recommendations of a taskforce set up by consumer affairs minister Kim Howells.

A full-scale review of the Consumer Credit Act is expected to be implemented by the Department of Trade and Industry following recommendations by the taskforce, which was set up last year to consider "indebtedness" and any steps the financial industry might take to help prevent consumer debt spiralling out of control.

The so-called debt taskforce, which recently held its last meeting, is understood to have recommended that financial firms make the interest rates on their credit cards easier to understand and compare with other card providers. When offers of market-beating rates expire, companies should contact the cardholder and inform them of the new rates.

The taskforce, set up last October and including representatives of a wide range of industries, is thought to have suggested that further research needs to be carried out to analyse the nature of debt and how much it affects people.

Among the concerns expressed in the report is the way companies use advertis ing and mailshots to offer deals such as immediate £10,000 credit limits. This type of marketing could entice some customers to get into debt, the taskforce believes.

The report also highlights store cards, and says financial firms might find it difficult to gauge the level of potential customers' debt because they could hold an array of different store cards.

The taskforce is thought to have concluded that a review of the Consumer Credit Act may be necessary. This is the act which lays out the rules for any loans under £25,000.

When Dr Howells set up the taskforce last year three parameters were set: improving transparency of information provided to consumers, adopting principles of lending, and giving clearer notification to consumers on low-interest agreements.

The taskforce is thought to have suggested that banks and other financial firms providing credit should not just rely on traditional scoring techniques such as scrutinising postcodes or previous addresses. However, this may cause some concerns for financial firms. The DTI refused to comment on the taskforce's report, which had been scheduled for publication this week but is now thought to have been knocked off course by the election.

The National Consumer Council, which did not sit on the taskforce, said: "One of the reasons behind indebtedness is that people are not sure what they are letting themselves in for. If they get more useful information they won't fall foul of the small print."