Unsolicited credit card cheques to be banned

The Government will today set out details of its plan to ban lenders from sending out unsolicited credit card cheques to consumers.

The move will be outlined in its Consumer White Paper, which is also expected to contain measures to promote responsible lending and strengthen the rights of consumers.

The Government has been critical of credit card cheques, warning earlier this week that they could draw people further into debt than they intended to go.

Credit card cheques can be used like personal cheques, with the value of the transaction added to the borrower's card balance.

But the interest charged on the cheques is usually far higher than if a credit card had been used to make the same purchase, while handling fees often of 2 per cent of the value of the transaction are also charged, and there is no interest free period.

The Office of Fair Trading estimated in 2006 that people could be paying up to £57 million a year extra in interest and charges by using the cheques, compared with if they had used their credit card.

Consumer Affairs Minister Kevin Brennan will be launching the White Paper at an event in London hosted by consumer group Consumer Focus.