New laws requiring credit card companies to help customers to reduce their debt rather than encourage them to increase it will be proposed tomorrow.

What the Prime Minister dubbed “sharp practices”, including card companies raising people’s credit limit without being asked and increasing interest rates on existing debt, will be stopped.

Companies will be banned from using people’s monthly payments to pay off the cheaper debt left on the card while charges incurred for higher interest debt, for example cash withdrawals, are untouched.

This often means that people who make only low monthly repayments for years end up spending longer paying off their credit card than their mortgage.

Gordon Brown said that the proposals were aimed at making “credit and store card companies clean up their act and give people a fairer deal. Sharp practices by lenders — such as hiking interest rates on existing debts without explanation and raising credit card limits without being asked — these sharp practices should end.”

Kevin Brennan, the Consumer Minister, said that the Government wanted the credit card companies to change some of the unclear and unfair practices that had contributed to high levels of debt for many people.

“People may not realise that expensive debt like cash withdrawals could stay on their card gathering interest for years because their cheapest debts are paid off first.

“Some people are making low monthly repayments for years, meaning it can take them longer to pay off their card than their mortgage and costing them significant amounts in interest charges.

“When many people were struggling to pay their bills every month it was astonishing that credit card companies were continuing with practices which work against the interests of consumers.

“People have a serious responsibility to manage their finances effectively, but they also have a right to clear and unambiguous information about their finances from credit companies to enable them to do that.”

Government officials said that it was common for credit card customers to discover that their credit limit had been increased without their consent. Research by uSwitch, the comparison website, showed that in the past year, 5.7 million consumers had their credit limits changed without their agreement.

Ministers are also concerned about companies increasing interest rates without a proper explanation. They said that consumers who had used their cards responsibly should not pay for excessive risk-taking by financial institutions.

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