Credit card firms will be told today to stop luring customers into higher borrowing as part of an overhaul of consumer rights. Lenders will be banned from raising credit limits without asking the customer first and ordered to stop sending unsolicited credit card cheques through the post.

They will also be banned from raising interest rates on existing debts and have to put repayments towards paying off the most expensive debt — rather than the cheapest as most now do. Minimum monthly payments will have to rise.

The Consumer White Paper to be published today will also include proposals to deal with online scams where people pay for goods that never arrive. A consumer advocate will be appointed to help people who feel they have been cheated. A new team of police, trading standards and Office of Fair Trading officials will be set up to pool resources to counter scammers.

The proposals will be subject to a three-month consultation. The Finance & Leasing Association, the trade association for credit and store card providers, said that the change could make matters worse. Geraldine Kilkelly, of the association, said: “The lack of wholesale credit and the torrent of new regulation currently facing the industry pose the real risk that the size of the market will reduce even further, with serious implications for consumers — especially those who are most vulnerable.”

The credit card companies — which have raised their interest rates to an average of 17.9 per cent, even though the base rate is at 0.5 per cent — have been criticised for policies that could lead people further into debt. About one in five people had maximum borrowing increased without consultation in the past year, according to a survey by uswitch.com, which found that only 68 per cent of credit card users cleared their debt in full each month. Last week Barclaycard cut the minimum repayment for some customers from 2.25 per cent to 1.5 per cent. That means a borrower with £5,000 on the card, who paid only the minimum each month, would take 67 years longer to repay the debt — and pay £16,400 more interest.

The proposals to tackle scam websites comes as the number of people being cheated has grown. Consumer Direct, the City watchdog’s advice service, received more than 28,000 calls in the first three months of this year about disputed online transactions, an increase of 14 per cent on last year.

Jonathan Brown, of the Society of Ticket Agents and Retailers, said: “Scam websites have become increasingly sophisticated and professional-looking, making it very difficult for consumers to tell if they are dealing with a reputable trader. Consumers lose thousands of pounds every year to these con artists.”

Consumer groups will be disappointed that the White Paper does not go further. Citizens Advice had called on the Government to force all creditors, including the Government itself, to give borrowers struggling with repayments a “30-day breathing space”, to seek debt advice. At present only credit card providers are obliged to do this.

It also wanted to see an end to charging orders on small debts — these allow a lender to secure a debt against a homeowner’s property, meaning that borrowers may eventually lose their home over a relatively small credit card or personal loan debt. Since 2000 there has been a 722 per cent increase in the number of charging order applications, according to the Ministry of Justice. About 74 per cent of the 132,000 applications in 2007 were agreed by the courts.