The Government has today announced new proposals to try to ensure that credit and store card companies give people a fairer deal, in the latest of a series of reforms designed to make financial services work for consumers.

Consumer minister Kevin Brennan said: “Card companies have to get their act together and do more for consumers. “The Government is putting forward new measures today which we believe will give consumers a better deal.

"I want to hear from the most important people, the customers, about their experiences and to get their views on our proposals. My opinion is clear, the current relationship between card companies and consumers cannot go unchallenged. We need to put the customer back in the driving seat.

“It is not acceptable for card companies to impose complex and confusing terms and conditions that can leave people baffled, or to increase interest rates without a proper explanation.

"Consumers have a real responsibility to manage their finances properly, but they also have a right to clear information to enable them to do that. Consumers should not feel each month as if they’ve been exploited or disadvantaged.”

The Government has today published a consultation document giving the detail of proposed changes in the law on repayment policies imposed by credit and store card providers.

The consultation builds on action already taken by the Government.

It examines:

· Changing the rules that set out the order in which debts built up on a credit card are paid off. Most credit card companies make customers pay the cheapest debt off first.

This is a particular problem for consumers who withdraw cash on their card, typically charged at 25 per cent APR or more. They are often the most likely to be vulnerable to financial difficulties. The Government is considering rules that would mean the most expensive debt is paid off first.

· Raising the minimum monthly repayments levels to encourage people to pay off their debt faster.

Around one third of people who don’t pay off their credit card bill in full each month make only the minimum repayment. This can mean consumers take decades to pay off the debt. The Government is considering the introduction of a mandatory higher minimum payment each month.

· Banning the practice of increasing credit limits without prior consent

It is common practice for credit and store card lenders to increase credit limits without consent. According to recent research by Uswitch 5.7 million consumers saw their credit limits changed in this way in the last year. The Government is considering banning this practice or requiring consumers to opt-in to credit limit increases.

· Placing restrictions on increasing the interest rate on existing debt

The Government is concerned about interest rates being increased without proper explanation. Consumers using their cards responsibly and making payments on time should not pay the price for excessive risk-taking by financial institutions.

The Government is considering banning or restricting the re-pricing of existing debt.