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The government today warned credit card companies they could face an Office of Fair Trading investigation if they fail to stamp out bad practice within their ranks.
The business secretary, Peter Mandelson, said he would have "no hesitation" in asking the consumer watchdog to report to him about those firms which fail to "step into line" over complaints about unreasonable behaviour.
"We have a very tough consumer watchdog - the Office of Fair Trading - and I will have no hesitation, if these companies don't step into line and start treating people in a fair, responsible, consistent way, then I will ask the Office of Fair Trading to look into their practices, report to me and then I will be able to take even further action," he told GMTV.
Lord Mandelson's remarks came as he and consumer affairs minister, Gareth Thomas, prepared to hold a summit with credit card industry officials to discuss mounting concerns that customers are not getting a fair deal in the current economic downturn.
Despite the Bank of England's recent rate cuts, which have reduced the base rate to 3%, the average interest rate on a credit card has remained at more than 17% - almost six times the base rate.
After the last rate cut, card companies said they would not be cutting costs as their pricing was based on risk rather than the central bank rate.
However, it seems likely they will come under pressure to reduce rates at this afternoon's meeting.
Thomas said: "The government is deeply concerned that borrowers aren't getting a fair deal. That's why we've taken swift action to bring the industry in to look at how costs are being applied to people's existing debts.
"We want to work constructively with the industry to draw up a set of principles that will enable them to keep lending and will also ensure borrowers are treated fairly and in a way that best helps them pay off their debts."
The credit card industry has come under scrutiny by the OFT before, with the watchdog concluding they were making more than £300m in unlawful charges for defaults and late payments.
The companies were ordered to cut fees to a maximum of £12 - less than half what they were typically charging. Since then, however, they have been accused of hiking up charges for cash withdrawals and overseas payments to cover the lost revenue.
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