Credit cards criticised for targeting customers in debt
New research from Citizens Advice has discovered that nearly one in five of credit card holders struggling with debt have had their borrowing limit raised without having asking for it. Among all people with credit cards, however, only one in ten have seen their maximum go up. The charity has therefore argued that companies are using the practice to target those in financial difficulties.
According to the report, 18% of those who have money to repay have had their credit limit increased without being consulted. Citizens Advice points out that if you owe money on a card, you're also more likely to struggle to settle the full amount. Just 60% of credit card borrowers have managed to reduce their debt over the last two years, compared to 72% of people with personal loans.
This could have particular significance given recent trends. The use of credit, debit and charge cards has grown by 12% over the last year, as have problem debt and personal insolvencies, according to StepChange and The Economist.
As a result of their findings, Citizens Advice is calling for stronger measures to protect those stuck in a cycle of missed repayments. The Financial Conduct Authority (FCA) has already announced rules requiring lenders to contact customers who have been unable to decrease their debt for three years. This is intended to help them devise a plan to reduce their outstanding balance.
However, Citizens Advice believes that the trigger should be a maximum of two years of steady or growing debt. The organisation is also calling for a ban to prevent unrequested increases to customers’ credit limits.
The Bank of England has raised concerns that consumers will struggle to repay their debts if the economy enters another downturn and has ordered banks to boost their reserves to protect against mass write-offs. Consumers must also act to prevent themselves against such worst case scenarios.
Applications like the Citizens Advice debt remedy tool can help you manage your debts, but if you’re unable to pay you should seek expert advice, as should lenders facing missed payments.
For more information about what we at Dukes Bailiffs do and how to repay your debts, contact us today.