Recent research has shown that half of all people with a credit card had their credit card limits increased over the last three years, without being asked if they would like more credit.
A third of credit card holders had their credit limit doubled.
A recent survey of 2000 people revealed that one in three credit card holders had their credit limit doubled. One in twenty had their limits tripled and one in 100 found that their credit limit went up 4 times higher than their previous limit.
The rise in consumer credit card debt has prompted the Financial Conduct Authority, FCA, to bring in new rules for credit card companies to help those in persistent debt.
The FCA’s new rules mean that those with persistent debt for 12 months will not have their limits increased or be offered an increase.
This would mean about 1.4 million credit card holders each year will not receive such offers.
Applying for a credit card?
Those applying for credit cards now, will be given an opt-in or opt-out option to credit limit increases at the beginning of their agreement.
This change has come about after the FCAestimated 6.9 per cent of cardholders are in arrears, while 6.6 per cent of cardholders have persistent high levels of credit card debt which they may be struggling to repay.
There remain concerns, however, that these credit limit hikes could still be pushing vulnerable people further into debt.
The research found that one in four people (24 per cent) were given a rise of more than £4,000, while one in 14 (7 per cent) received an increase of more than £8,000.
One in three of these customers then went on to spend more on their credit cards after receiving an unprompted credit limit increase.
Concerns prompt Charities to speak out.
Charities such as the Citizen’s Advice Bureau, CAB, see this as another concern and have warned that as the regulator’s rules are only voluntary, they don’t go far enough.
The chief executive of CAB, Gillian Guy said: –
“While voluntary measures agreed by industry protect new customers from unsolicited increases, existing customers still have little say in the matter.
“Our research shows that an overwhelming majority of people think lenders should get permission to raise credit limits.
“We also know that people in debt are more likely to have their limit increased than those who aren’t, which leaves them vulnerable to deeper financial troubles.
“There is no good reason why lenders shouldn’t get approval from all their customers before increasing their credit card limit.”
Can people do anything about it if they have been wrongly given a higher credit limit?
One expert at Resolver, the complaints website, Martyn James said: –
“You can complain about irresponsible lending.
“While we all have to take responsibility for the money we spend – and don’t expect refunds for the goods you bought on the card – encouraging people to go further in to debt without their permission means you could ask for refunds on interest and charges.
“You can use the argument that had the credit provider not created the situation, you wouldn’t have got in to further debt.”
A spokesperson for the Financial Conduct Authority added:
“We analysed 34 million credit card customers and surveyed over 40,000 consumers.
“In the light of this evidence, we have agreed changes with the industry which give customers greater control over their credit limits.
“New customers are being given the option of ‘opting-in’ or ‘opting-out’ to credit limit increases at the start of their agreement. Existing customers can choose whether they want to ‘opt-in’ in future.”