Ministers to get tough on unsolicited credit card cheques
By Teresa Hunter , Personal Finance Editor
06 February 2005

The government is about to launch a major clampdown on the unsolicited issue of credit card cheques, which lure consumers into easy spending and can trap vulnerable borrowers in mountains of debt.

At a select committee hearing into the Consumer Credit Bill, which is currently going through the Westminster parliament, Labour MP James Plaskitt (Warwick and Leamington) tabled an amendment which would have outlawed their unsolicited issue completely.

He pointed out that these cheques are received by 16% of UK households, which means millions of individuals. They are sent repeatedly, in multiple issue and are virtually always unsolicited.

Not only do the cheques encourage people into opportunist spending but they carry a number of serious disadvantages compared with a credit card.

Many recipients fail to realise that the minute the cheque is banked, interest is immediately charged whether they spend the cash or not. There is no interest-free period after either banking or spending it.

The interest which is charged on the cheques is generally higher, and there is often a 2% handling fee. Finally, consumers do not enjoy the same protections against faulty goods or bankrupt retailers as with a credit card.

Plaskitt told the committee: “Many people think credit card cheques are a menace and could be used fraudulently. Unsolicited issuing amounts to opportunist marketing of the worst kind.

“If the banks were honest about the reasoning behind such unsolicited issuing they would have to confess that their hope is their cheques drop on the doormat on the same day as the glossy holiday brochure.

“The customer puts two and two together and ends up paying six. It is a cynical ploy.”

The Consumers Association has lobbied hard for an end to the unsolicited issuing of those cheques and the Treasury Committee has twice recommended the practice be banned.

However, Plaskitt, who is also a member of the Treasury Committee, withdrew the amendment after being assured by consumer minister Gerry Sutcliffe that the government was aware of the problem and intended to address it via regulations which would be attached to the act when it became law.

Mark Lazarowicz, Labour MP for Edinburgh North and Leith who is also on the select committee, said he was delighted at the development.

He argued: “There is no doubt that issuing these cheques in an unsolicited fashion is a scandalous example of consumers being lured into greater debts than they intend or perhaps can afford.

“I find it very encouraging that the minister has indicated that the government is similarly concerned and intends to introduce measures.”

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