Banks and building societies will be able to withdraw credit cards from people who have been cautioned for or convicted of accessing images of child abuse on the internet.
New powers under the Data Protection Act allow the police to pass on information about alleged paedophiles to that person's card issuer. Banks are then free to cancel or suspend the cards and accounts used to commit the offence. The new powers come into force on 26 July.
The order results from collaboration between the Department for Constitutional Affairs, the Association for Payment Clearing Services (APACS ), the Child Exploitation and Online Protection Centre (CEOP), law enforcement agencies, children's charities and the Home Office.
The news has been welcomed by the Internet Watch Foundation (IWF). The organisation, which works with the internet industry, police and Government to stamp out the problem of child abuse images online, recently released its latest report.
This showed that there is a growing trend for US free hosting systems to be used to host images of child abuse and an emerging trend to distribute child abuse videos online.
Apacs, the UK payment association said the new powers were also good news for the banks. It released a statement saying no card provider wanted to be associated with those who commit these crimes and the law helped banks take away the cards of offenders.
However the amendment known as the Data Protection (Processing of sensitive personal data) Order 2006 will only cover the card or cards the alleged offender has used to buy illegal images. It does not preclude offenders applying to another bank for a different card.
Apacs told Computeractive that this was because the data on an individual can't be shared among banking groups.
"A bank will have no idea what other cards someone may own," a spokesperson said.
The Department for Constitutional Affairs said it knew the order could not stop paedophiles but was vital disrupting and curtailing paedophiles activity on the internet.
"It makes it harder and is seen as a deterrent. Imagine how hard it will be for [an offender] to explain to their partner why their credit card had been taken away," a DCA spokesperson added.
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