The government proposes banning some unfair credit card terms as it launches a consultation paper aimed at cleaning up the industry and giving consumers a better deal. 

The current consultation runs until January 19 2010 and interested parties, such as the body representing UK card issuers, The UK Cards Association, have said they will study the proposals and respond. DebtWizard will also participate. 

This latest announcement arises from an earlier White Paper, launched in July this year that has resulted in legislation, due in November, banning the issuing of unsolicited cheques. 

The key points of the proposals are to: 

• stop the tradition of raising credit limits without the borrower’s consent 

• change the order of priority for credit card repayments: this means that the most expensive debts such as cash advances, will be paid until cleared 

• increase the minimum amount that is required to be paid each month so that the debt is cleared much quicker 

• restrict or stop the increase in interest rates on debts already incurred. 

Will this affect store cards as well? 

Yes, currently credit and store card providers usually make consumers pay off the cheapest debt first, while more expensive debt, such as a cash withdrawal on a credit card, will be left to last. This makes more money for the provider, but at the cost of the consumer. 

How log will it take to clear a £2,000 credit card debt if I just paid the minimum amount each month? 

Some say between 18 and 22 years according to the interest rate set; now you can see why these proposals should have come in years ago.

DebtWizard comment

This issues raised by the White Paper should have been aired several years ago, with any leglislation not likely until  ‘after’ the next election. 

Many would argue that it is the borrower’s own fault for getting into credit card debt, but remember over the past decade this country’s economy has been fuelled by around 1.5 trillion pounds of consumer borrowing. 

Morally and socially we have been encouraged to spend and pay later through slick marketing and the easy availability of credit.  From this we have developed a culture of must have now. 

We also have triggers in our life, perhaps when a relationship breaks up, with a loss of employment or with an illness and it has been all too easy to fall on the credit card back up. 

That said, consumers should not feel as if they have been exploited or disadvantaged and they have a right to clear information to enable them to help them avoid that. However they also have a responsibility to manage their finances properly.   

One concern is that the plans could mean that some borrowers will be forced to pay back more of their debt earlier, which they may not be able to afford.

The proposals could go further by capping interest rates on credit cards making them in line with the bank base rate; for example, the card interest rate would always be say 10% above base rate, that way the card provider is protected should interest rates go up and the consumer if they come down, a bit too simple really.

One last point, I can see credit card providers laying off staff in the future as these proposals will seriously reduce their income over the coming years and reverse their current business models! Can't say I’m sorry to see this, they had it coming.

Need help with your budgeting? If so then try our free budget wizard.

Thinking of a 0% credit card balance transfer? You may think again after reading our 0% credit card balance transfers - warning