Cardholders pushed to the limit by credit rises

Cardholders who do not think they can pay off their debts are having significantly higher credit limits pushed on to them without being asked, according to evidence from Citizens Advice.

The charity estimates that around six million people across Britain have had their credit limit increased in the last year without their consent, and nearly a third (32%) of those showing signs of struggling financially were given a rise.

On average, credit card holders were given rises of £1,481 without being asked, with more than one in 10 people (12%) receiving increases of £3,000 or more.

This is despite 85% of people thinking that credit card companies should always ask permission before increasing someone’s limit.

Research carried out for Citizens Advice found that in the past 12 months, 28% of credit card holders – equating to 8.4 million people across the UK – received a credit limit increase.

But only around a quarter (23%) of credit card holders who were given a rise said they had actually requested it, suggesting the remaining threequarters of limit raises were initiated by the credit card companies themselves.

Citizens Advice found 32% of people who are not confident they can pay back their current debts were given a rise.

The charity said in one case it had been approached by a woman who had built up £3,500 of credit card debt she was unable to pay back.

Initially she had a limit of £500 which she used for unexpected bills, but when she reached the limit her credit was extended. This happened multiple times, Citizens Advice said.

The Financial Conduct Authority (FCA) 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 be given the option to ask their lender to require their consent.

Citizens Advice said unsolicited increases should be banned altogether to help prevent people from being put at risk of building up debts they cannot pay back.

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.”

Citizens Advice gathered its findings from a survey of more than 1,300 people who have credit cards.

Trade body UK Finance said its members are committed to responsible lending and recommended that customers struggling with their repayments 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.

“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 card holders 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.”