Credit-card providers should be banned from increasing people’s credit limits without customers specifically requesting the move.
The call is being led by Citizens Advice after the charity’s research found that nearly a fifth of those who are struggling with debt have had their limits raised without them asking for it.
It comes hot on the heels of the Bank of England warning about the dangers of reckless lending amid fears surrounding mounting consumer debt.
Alex Brazier, the Bank’s director for financial stability, said last month: “Household debt – like most things that are good in moderation – can be dangerous in excess; dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.”
Consumer borrowing has reached more than £200bn, with a third of that – £67bn – sitting on credit cards.
According to the Citizens Advice research, 18% of people struggling to manage their credit-card debt have seen their limits raised during the past year without requesting it, as opposed to 12% of all card holders.
As well as calling for lenders to be banned from hiking credit limits without obtaining users’ express consent, the charity also wants regulator the Financial Conduct Authority to provide clear guidance to lenders that they must check affordability before agreeing to a limit increase.
“Irresponsible offers of further credit are pushing people into long-term debt cycles,” said Citizens Advice chief executive Gillian Guy.
“[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.
“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.”
Dan Wass, director of banking and insurance at Nationwide Building Society, said: “Allowing customers to decide whether or not they receive an increase to their credit card limit not only helps them stay in control of their money, but could also prevent them getting further into debt.”
The Citizens Advice research unearthed some real horror stories involving card companies hiking up their customers’ credit limits.
One pensioner who could afford only the minimum payments each month was offered more and more cards, and she ended up with more than 20 of them and a debt of £70,000.
In another case, a man who owed £15,000 on four cards and was making just the minimum repayments each month saw his credit limits hiked on all four cards without asking for it. He ended up owing £30,000.