Credit card companies pushing people into long term debt

Charity warns

One in five people who are struggling with debts have seen their credit card limit automatically increased without them requesting it, a charity has found.

Citizens Advice are calling for the practice to be banned as it is pushing people into long term debt.

A new report by the charity found that people struggling with credit card debt were more likely to have their limit raised. 18 per cent of struggling credit card users have had their limit raised in the past year without requesting it, compared to 12 per cent of all credit card holders.

The findings come after the Bank of England issued a warning to lenders about how they are granting credit to consumers, and the charity says poor affordability checks by credit card firms are making people’s financial situation worse.  

 

Consumer borrowing has risen to over £200 billion and over a third of this, £67 billion, is on credit cards.

 

Citizens Advice Chief Executive, Gillian Guy, said “Irresponsible offers of further credit are pushing people into long term debt cycles.

“It’s clear that irresponsible behaviour by some lenders is making people’s debt situation worse – such as offering more credit when they already have thousands of pounds of unpaid debt,” she added.

“The regulator must ensure that lenders are taking into account people’s whole financial and personal situation before agreeing further credit. Banning firms from raising existing customers’ credit limits without seeking their express permission first would also help people take more control over their finances.

“Lenders must act responsibly and direct people struggling with debt towards free and independent advice and support – rather than more credit.”

The FCA has announced a range of proposals to help those struggling with long term credit card debt, who are spending more on credit card interest charges than paying off the total amount they owe.  

The regulator says lenders should contact customers who have been in this situation for 3 years to arrange a plan to pay their outstanding balance more quickly.