A by-law to stop charity fundraisers from using "aggressive tactics" to collect in Birmingham City Centre has been rejected by the government.
The city council had wanted to bring the law in to stop "chuggers" or "charity muggers" obstructing or following people in the city centre.
It claimed they were flouting current national rules on charity collection.
Local Government Minister Brandon Lewis said he wanted the council to work with charities to reach a compromise.
The council said a consultation by the Community Safety Partnership showed 96% per cent of visitors to Birmingham said they had suffered unsolicited approaches by "chuggers" and 84% said this would put them off walking around the city centre.
Current rules by the Public Fundraising Regulatory Association (PFRA) already prevent charity collectors following a person for more than three steps or deliberately blocking their path.
'Intimidated and threatened'
The city council's director of regulation and enforcement, Jackie Kennedy, said those rules were being ignored.
"We've had complaints about people being harassed and chuggers being aggressive.
"People feel intimidated and threatened by the chuggers and that's not acceptable.
"We wanted a by-law because they're not complying with the code of conduct."
A statement by Brandon Lewis said: "Chugging techniques are deeply unpleasant but there are still many people who welcome the chance to donate to respectful fundraisers, therefore legal clampdowns should only be used as a last resort."
The PFRA's chief executive, Sally de la Bedoyere, said it was willing to help the council deal with the issue.
She said: "We are hopeful that over the coming months we can work together in partnership to find a balanced and sensible solution to this very real local problem."