Written by: Paloma Kubiak
‘Irresponsible offers’ mean one in five people struggling with debt has had their credit card limit raised automatically, according to a charity.
A fifth (18%) of struggling credit card users had their limit raised in the past year without requesting it, compared with 12% of all credit card holders.
Charity Citizens Advice revealed that people with credit card debts were also more likely to get into long-term debt than those with personal loans and were less able to pay their debt down.
Only 60% of people struggling with credit card debt were able to reduce it over two years, compared to 72% of people struggling with a personal loan – with credit card borrowers paying off £449 over two years, compared to a drop of £620 for people with personal loans.
It said poor affordability checks by firms are making people’s financial situation worse and the findings come as figures revealed consumer borrowing has risen to over £200bn with a third of this amount – £76bn – added to credit cards.
As such it’s calling for the following changes to be made to protect people:
- Firms to be banned from raising people’s credit limits without obtaining their explicit consent
- The regulator, the Financial Conduct Authority (FCA) to provide clear guidance to lenders stressing that before increasing a borrower’s limit, they must check their ability to repay it.
Last year, Citizens Advice helped nearly 66,000 people with over 140,000 credit card debt problems. In one case, a pensioner was repeatedly called by firms offering more credit cards despite the fact she could only afford to make minimum repayments on her existing cards. She used the cards to meet her essential bills and ended up with a total of 21 credit cards and debts totaling £70,000.
Citizens Advice chief executive, Gillian Guy, said: “Irresponsible offers of further credit are pushing people into long-term debt cycles.
“We help thousands of people each year with credit card problems – including those struggling with large debts on several different cards that will take them years to pay off.
“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.
“Lenders must act responsibly and direct people struggling with debt towards free and independent advice and support – rather than more credit.”