Consumer debt: Citizens Advice calls for crackdown on lenders increasing credit card limits for debt-laden consumers

A major charity has called for a crackdown on lenders increasing credit card limits for debt-laden consumers.

Nearly one in five people struggling with debts has had their credit card limit increased without request, a new report out today has claimed.

And those in long-term credit card debt are more likely to have their limit raised, according to charity Citizens Advice.

Its report, ‘Stuck in Debt’, found 18 per cent of struggling credit card holders had their limit raised in the last year without requesting it, compared with 12 per cent of all users.

The figures have emerged at a time when both the Bank of England and Financial Conduct Authority (FCA) are warning lenders over the state of consumer debt.

Last month, the Bank warned lenders of a looming “spiral of complacency” around consumer debt. Elsewhere, an FCA report in April found that around 3.3m people were stuck in “persistent debt”, where they pay out more in interest and charges than they have repaid from borrowing in the previous 18 months.

Citizens Advice also today warned that credit card debts are more likely to lead to long-term problems than those from personal loans. It found that 60 per cent of those struggling with credit card debt were able to reduce it in two years, compared with 72 per cent with personal loans.

The charity is calling for firms to be banned from raising credit limits without explicit consent and for the FCA to set out clear guidance to lenders stressing that they must check on a borrower’s ability to repay their debt before raising limits.

“Irresponsible offers of further credit are pushing people into long term debt cycles,” said Citizens Advice chief executive Gillian Guy.

“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.”

Read more: How to tell the difference between good and bad debt