Cardholders in debt receiving credit limit hikes of £1k

Cardholders struggling to pay debts are seeing their credit limits rise without their permission, tempting them further into financial difficulty, a consumer body has warned.

In the last year, more than eight million Britons have had their credit limits increased by an average of £1,481, according to Citizens Advice.

For some, credit limit rises can be a good thing, but 32 per cent told the rights body they could be tempted further into debt if their credit limit was increased.

Limit hikes: In the last year, over eight million Britons have had their credit limits increased by an average of £1,481

Around one if ten have seen their credit limit boosted by £3,000 or more in the last year, the research shows.

This is despite the fact 85 per cent of people think credit card firms should always ask the cardholder’s permission before introducing any new credit limits. 

Only 23 per cent of credit card holders who were given a rise said they had requested it.

In one case seen by Citizens Advice, a woman had built up £3,500 of credit card debt she was unable to pay back.

Initially she had a credit limit of £500 which she used for unexpected bills, but when she reached the limit her credit was extended without her consent. This happened multiple times.

Gillian Guy, chief executive of Citizens Advice, said: ‘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.’

Trade body UK Finance said its members are committed to responsible lending – and if a customer is struggling with repayments they should speak to their lender.

Richard Koch, head of cards at UK Finance, said: ‘Credit card providers are completely committed to responsible lending and the industry has come together to voluntarily agree new protocols to ask customers whether they would prefer to opt out or opt in for any credit limit increase offers.

Consumer view: 85 per cent of people think credit card firms should always ask the cardholder's permission before introducing any new credit limits

Consumer view: 85 per cent of people think credit card firms should always ask the cardholder’s permission before introducing any new credit limits

‘Furthermore, the customers who the Financial Conduct Authority and Citizens Advice are most concerned about will be excluded from receiving any such offers.

‘The regulator has confirmed that it is satisfied that the proposal relating to unsolicited credit limit increases achieves its objectives in an effective and timely manner.

‘The industry is committed to helping the minority of cardholders who do not use a credit card in a way which is in their best interests.

‘All our members undertake a thorough risk and affordability assessment of a customer’s finances whenever they apply for credit. This degree of rigour continues throughout the relationship, with ongoing monitoring of how the customer uses the credit product.’

The UK’s financial watchdog, the Financial Conduct Authority has agreed with credit card providers that they will start asking new customers for their consent before raising limits, and give them the option to carry on receiving uninvited increases.

Existing customers will also be given the option to ask their lender to require their consent.

But, Citizens Advice said unsolicited credit limit hikes should be banned altogether to prevent people at risk of mounting debts get into further difficulty.  

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