Credit card companies pushing credit on millions of people who can’t pay

People who don’t think they can pay their debts are being given thousand of pounds of credit they haven’t asked for, Citizens Advice warns today.

Fresh evidence from the charity suggests that 6 million people have had their credit limit increased in the last year without their consent – and 32% of those showing signs of struggling financially were given a rise.

On average, credit card holders were given rises of £1481 without being asked, with 1 in 10 people (12%) receiving increases of £3000 or more. This is despite 85% of people thinking that credit card companies should always ask permission before increasing someone’s limit.

The figures show that credit card companies are not only lending too freely, but putting individuals and the wider economy at risk if people are unable to pay down their debts.

Research carried out for Citizens Advice shows that in the last 12 months, 28% of credit card holders (8.4 million people) received a credit limit increase.

However, only 1 in 4 (23%) credit card holders who were given a rise actually asked for it - the remaining 3 in 4 limit raises were initiated by credit card companies.

Worryingly, credit card holders who aren’t confident they can pay their current debts are more likely to have been given extra credit. 32% of people who aren’t confident they can pay back their current debts were given a rise, in comparison to 23% who were.

One woman came to Citizens Advice after building up £3500 of credit card debt she was unable to pay back. Initially she had a limit of £500 which she used for unexpected bills, but when she reached the limit her credit was extended. This happened multiple times. Unable to work and reliant on ESA, she is now considering a Debt Relief Order.

The Financial Conduct Authority (FCA) has agreed with credit card providers that they will start asking new customers for their consent before raising limits, and give them the option to carry on receiving uninvited increases. Existing customers will be given the option to ask their lender to require their consent.

With three quarters of credit limit increases initiated by credit card companies and low demand from customers, Citizens Advice is concerned that credit card companies aren’t being required to ask permission from their existing customers before raising limits.

The charity is urging the Chancellor to use his Budget statement next week to announce that he will protect consumers by banning unsolicited increases altogether, so people aren’t put at risk of building up debts they can’t pay back.

Gillian Guy, Chief Executive of Citizens Advice, said:

“It’s clear that credit card companies are contributing to the rise in consumer debt.

“Rather than credit card holders seeking to take on more debts, lenders are actively pushing it on people without enough consideration as to who can afford to pay and who can’t.

“Few consumers support unsolicited increases and our research shows that they make people’s debt problems worse. The Chancellor must step in to prevent credit card companies weighing people down with unwanted debt - particularly when they are already struggling to keep their heads above water.”

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Notes to editors

1. Citizens Advice worked with ComRes to carry out an online survey of 2033 GB adults between 8 and 9 November 2017. 1332 have credit cards. People were asked about their experiences of finances and debt in the 12 months to November. Full data tables can be found at www.comresglobal.com
2. The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
3. The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
4. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
5. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
6. Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.
7. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.