Citizen’s Advice has recently released a report which states that 1 in 5 people struggling with debts have seen their credit card limit automatically increased. This is a higher proportion for card holders in general. The Financial Conduct Authority (FCA) has stated that it estimates there are 3.3 million people in the UK who are in persistent debt. It states that, “customers in persistent debt are profitable for credit card firms, who do not regularly intervene to help them.”
Recent industry figures show that debt in the credit card industry has increased in the calendar year to June, at its highest rate since 2008.
Citizen’s Advice is campaigning for a ban on increases without a card holder’s explicit consent. The charity says,
“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 debt situation before agreeing further credit.
A debtor can easily get into a difficult situation and owe too much, becoming insolvent. While the debtor obviously doesn’t have to spend the money they are perhaps not helped by the fact that the credit card company raises the borrowing limit without their consent.
Sometimes the debtor will reach a tipping point and the debt will have got out of control. At that point they may need to look at a formal insolvency procedure such as bankruptcy or an Individual Voluntary Arrangement (IVA).
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.”
The FCA has also suggested that credit card companies could cancel any interest or charges against debtors in extreme cases.
Firms have to work more closely with people in debt, such as drawing up a faster repayment plan, it proposed.
If you are struggling with credit card debts that you are unable to pay, it is vital you speak to an experienced insolvency solicitor at the earliest opportunity. Contact Farleys Solicitors on 0845 287 0939 or email us and we will provide confidential advice on the best way to proceed.