National advice charity Citizens Advice has expressed its concern over the apparent willingness of credit card providers to increase customers’ credit limits.
Citizens Advice claims that more than six million UK consumers had their credit limit increased in the past 12 months, even though they didn’t ask for this to happen. In total, 8.4 million people had their limit increased in the 12 months to November 2017, amounting to 28% of all credit card holders. However, as many as 77% of these 8.4 million people (equivalent to almost 6.5 million individuals) never actually asked the company to increase their limit.
It adds that 32% of consumers who exhibited signs of being in financial difficulty had their limit increased, and that only 23% of those who felt comfortable with their debt repayments received an increase. This appears to suggest that being in financial difficulty actually makes it more likely that a card provider will raise someone’s credit limit.
The charity also adds that 85% of people believe that card providers should never increase a credit limit without asking the borrower first.
The findings were based on an online survey of 2,033 UK adults by research agency ComRes.
In a press release issued earlier in November, Citizens Advice called on the Chancellor to introduce an outright ban on unsolicited credit limit increases in the Budget. However, no such announcement was made when Philip Hammond MP delivered his speech.
The Financial Conduct Authority has secured some sort of agreement with card providers on this issue, however this is somewhat limited in its scope. Card providers will now ask new customers for their consent before increasing a credit limit, and existing customers will merely be able to choose whether they want their lender to ask for their consent to any increase.
Gillian Guy, Chief Executive of Citizens Advice, said:
“It’s clear that credit card companies are contributing to the rise in consumer debt.
“Rather than credit card holders seeking to take on more debts, lenders are actively pushing it on people without enough consideration as to who can afford to pay and who can’t.
“Few consumers support unsolicited increases and our research shows that they make people’s debt problems worse. The Chancellor must step in to prevent credit card companies weighing people down with unwanted debt – particularly when they are already struggling to keep their heads above water.”
The charity has previously expressed its concern at Bank of England figures that show a 9.8% increase in consumer borrowing in the year to August 2017.
A recent bulletin from the Financial Ombudsman Service highlighted examples of consumers having complaints against credit firms upheld where the firm had failed to carry out sufficient affordability checks, or where they had increased the level of available credit even though they were aware the individual was in financial difficulty.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.