Credit card companies appear to be targeting consumers that are struggling with debt, more so than the average consumer.
Research from Citizens Advice has shown that 18 per cent of those consumers struggling financially had seen their credit card limits increased without request. This compares to just 12 per cent of consumers overall.
It is estimated that around 3.3 million consumers are currently in persistent debt.
A recent report by the Financial Conduct Authority (FCA) stated that ‘customers in persistent debt are profitable for credit card firms, who do not routinely intervene to help them.’
The number of transactions on credit, debit, and charge cards rose by 12 per cent in the year to June, the highest annual rate of rise since the global financial crisis in 2008. The value of spending on the cards also rose by 7.2 per cent over the same period.
Citizens Advice has called for a ban on increases to credit card limits without the cardholder’s express consent. They also want better affordability checks to be used by lenders, as they believe that poor quality checks are making consumer’s situations worse.
Gillian Guy, chief executive of Citizens Advice, commented: ‘It is 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.’
She continued: ‘Banning firms from raising existing customers’ credit limits without seeking their express permission first would also help people take more control over their finances.’
A spokesman for the industry body UK Finance said: ‘Helping customers struggling with persistent credit card debt is a priority for our members.
‘The industry has already developed a number of proposals to address the regulator’s concerns and ensure that no customer in persistent debt will be offered a credit limit increase.
‘Where customers are in financial difficulty, the industry introduced a breathing space to allow customers to engage with a debt advice provider.’