Xmas Debt-Easy to Get. Regulation Required.

Will your next credit card bill, remind you of how generous you were with your Xmas spending?  Did you spend more than you intended because your credit card company raised your spending limit without being asked to do so?  After all, they would surely only have increased your limit if they were confident you could afford to pay off the debt.  Or would they?

In September of this year this column featured a report published by Citizens Advice called  ‘Stuck in Debt’.  At that time the Bank of England had issued a warning to lenders that consumer debt was running at an alarming £200 billion, with over a third – £67 billion – being on credit cards. In spite of this, the report found that card companies were more likely to raise card limits (unasked) when the borrower was struggling with debt than when they were not.

According to evidence gathered for Citizens Advice, just over one in ten (12%) of credit cardholders not struggling with debt had their card limit raised without asking for an increase.  This compares with 18% of cardholders who were struggling with debt whose limit was increased unasked – half as many again. Citizens Advice believes that irresponsible offers of further credit are pushing people into long term debt cycles and that unasked for increases in credit card limits should be banned.

The regulator responsible for keeping a watchful eye on financial markets is the Financial Conduct Authority (FCA).  According to its website, the FCA aims to keep the markets “….honest, fair and effective so that consumers get a fair deal”.  Which makes the FCA update paper on credit cards and persistent debt, released just before Xmas disappointing.

Not only has the FCA stopped short of a clear ban on uninvited increases in available debt proposed by Citizens Advice, it has also put forward a voluntary agreement with consumers having to opt out from receiving unasked for credit card limit increases.  While the agreement will also stop uninvited increases for people with persistent credit card debt for more than a year, it won’t prevent people from getting into debt in the first place.  The FCA has announced there will be a consultation period on its proposals which ends on 25 January 2018.

Citizens Advice is urging the FCA to use the consultation period to reconsider its position as there isn’t a single good reason to allow unsolicited increases to continue. If the FCA does not act decisively and end the damaging practice of raising people’s available debt limits without their consent, people will continue to get trapped into debt spirals.

If you have a problem keeping up with your credit card debt remember that Citizens Advice helped nearly 66,000 people with over 140,000 credit card debt problems in the last year and can probably help you.  So, if you require help from Citizens Advice, or need information and advice on Debt, Benefits, Work, Consumer Issues, Relationships, Housing, Law and Rights, Education, Discrimination, Tax and Healthcare you can

  •  call 0344 848 7969 to speak to an assessor or make an appointment to talk to an adviser face-to face. (calls to this service cost the same as calling 01 and 02 numbers included as part of a mobile allowance or a landline call package.
  • visit https://www.citizensadvice.org.uk/ to access our comprehensive range of information and advice,
  •  or follow us on https://twitter.com/waverleycab
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