Unsolicited loans and credit cards to be banned, ministers say

Unsolicited offers of credit cards and loans are to be banned this week amid further evidence of irresponsible lending.

Unsolicited offers of credit cards and loans are to be banned this week amid further evidence of irresponsible lending.

Around £140m-worth of pre-approved credit application forms were mailed to customers before Christmas by finance firms.

Among aggressive marketing techniques used are facsimile cheques for thousands of pounds written out to potential customers.

The pre-approved forms mean that often all that borrowers need to do is sign on the dotted line. The flood of easy credit is luring many people into debt that they cannot afford, MPs warn.

Now ministers are indicating that they will ban finance companies from sending the pre-approved forms when new laws tightening the rules on consumer credit are debated in the Commons this week.

Chris Bryant, the Labour MP for Rhondda who has been pushing for the change, said: "These sort of promotions are simply irresponsible. They can lure people into debts they first don't understand and then can't pay."

The finance industry has been fighting a desperate rearguard battle to save pre-approved mail-shots. Paul Rodford, policy head of card services at the Association of Payment Clearing Services, said companies already encouraged "responsible borrowing".

"If used wisely credit cards are a way of spreading the load of increased expenditure during Christmas over the first few months of the following year," he said.

The industry is increasingly on the defensive, however, as stories of personal tragedy linked to credit card debt underline the dangers.

It was reported yesterday, for example, that Richard Cullen, a 65-year-old grandfather, killed himself after running up debts of more than £130,000 on 23 cards over six years.

The mechanic had started borrowing to pay household bills when he gave up work to care for his wife when she fell ill with breast cancer.