There's nothing worse than being stuck in a spiral of debt, yet unfortunately, credit card companies don't always make it easy to escape, with research from Citizens Advice finding that nearly one in five of those struggling with debt has had their credit limit raised without requesting it. This could make it even harder for someone to get out of the cycle, which is why it's a practice the charity wants to see banned.
The Bank of England has already issued a warning to lenders about how they grant credit to consumers, with a report earlier in the year finding that the level of household debt has risen to the highest seen since before the financial crisis. Yet this doesn't appear to have changed providers' stance to credit, with Citizens Advice saying that poor affordability checks are making individual financial situations worse.
Figures show that consumer borrowing has risen to over £200 billion, with £67 billion of that being on credit cards, so there are concerns that many are entering into unmanageable debt territory. This is particularly the case given that those struggling with long-term credit card debt are more likely to have their limit raised, with 18% having it raised in the last year, compared with just 12% of all credit card holders.
Perhaps as a result of that, the charity's report found that those with credit card debts were more likely to get into long-term debt than those with personal loans, and were also less able to pay down their debt – 60% of those struggling with credit card debts were able to reduce it over two years, paying off an average of £449 in the process, compared with 72% of those struggling with personal loans, who repaid £620 over the same period.
Not only that, but Citizens Advice said that it helped nearly 66,000 people with over 140,000 credit card debt problems in the last 12 months, so there's clearly a need for more to be done to help those in problem debt – and ideally, help ensure they don't fall into it in the first place.
The charity is therefore calling for measures to be put in place to help prevent people from falling into long-term credit card debt, including a ban on firms raising credit limits without obtaining consent from the individual, and clear guidance stressing that lenders must check borrowers' ability to repay the balance before raising the limit.
It also wants lenders to intervene to help those with problem debt sooner – the FCA, the UK's financial regulator, has already set out plans to require lenders to help customers who have been spending more on interest charges than repaying the balance for the previous three years, yet the charity wants this to happen "at the very latest after two years".
"Irresponsible offers of further credit are pushing people into long term debt cycles," said Citizens Advice chief executive Gillian Guy. "Citizens Advice helps 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.
"Lenders must act responsibly and direct people struggling with debt towards free and independent advice and support - rather than more credit."
If you're struggling with unmanageable debt, don't go it alone. Start by devising a plan of action on how to tackle it and contact your lender to see if there's anything they can do to help, and don't be afraid to speak to an organisation such as Citizens Advice for additional support.
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