New rules set to make card firms more responsible

CREDIT card companies are to be banned from raising interest rates and credit limits for borrowers in financial hardship, it was announced yesterday.

Under new guidelines agreed by the government and the credit card industry, card users will be able to repay their most expensive debts first and will have the right to reject increases in their credit limit.

But critics claimed the measures did not go far enough, with a proposed increase in minimum repayment levels scrapped and a mooted ban on unsolicited credit limit hikes now covering only those in financial difficulties.

The measures, to be introduced by January 2011, were unveiled by Prime Minister Gordon Brown, who said the government wanted to make credit card companies behave responsibly and act fairly towards their customers. Under the rules, consumers will be given 60 days to reject changes in the interest rates charged on their existing debts and 30 days to opt out of unsolicited credit limit increases.

Alizeh Hussain, policy officer at Citizens Advice Scotland, said the measures did not go far enough. "We want the credit card companies to push through these changes quickly, and then we want the banks and other lenders to follow suit," Hussain said.

John Thurso, Liberal Democrat business spokesman, said: "It's right that the most expensive debt should be paid off first but the government's lack of action on minimum repayments means that credit card debt will still take decades to repay."