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Voluntary agreement with credit card companies still leaves people vulnerable to problem debt

14 December 2017

Financial Conduct Authority (FCA) plans to change how credit card firms offer credit limit increases do not go far enough to protect consumers from problem debt, Citizens Advice says.

The update paper on credit cards and persistent debt released today shows the FCA has stopped short of the clear ban on unsolicited increases Citizens Advice is calling for.

The FCA today announces a new six week consultation period on the proposals, ending on the 25th January.

The proposals include a “voluntary agreement” with credit card companies which will see unsolicited credit limit increases remain the default option for existing customers - requiring people to opt out of receiving them.

The agreement will stop uninvited increases for people in persistent credit card debt for more than a year - but won’t prevent people from getting into debt in the first place.

Citizens Advice evidence shows that 6 million people received a credit limit rise they didn’t ask for last year. People who were struggling financially were more likely to be given credit limit increases they haven’t asked for than those who weren’t, which risks pushing people already facing problems further into debt.

With 85% of consumers opposed to unsolicited increases and evidence they are given most frequently to those who can least afford them,the charity is now calling on the FCA to take action and ban these rises - and if they won’t, the Government should direct them to do so.

Gillian Guy, Chief Executive of Citizens Advice, said:

“The FCA’s voluntary agreement with credit card companies still leaves people vulnerable to building up problem debt.

“Existing customers will still receive extra credit they haven’t asked for by default - unless they contact the card provider to opt out. This arrangement allows credit card companies to sidestep the real issue of lending more responsibly, and is unlikely to prevent people building up problem debt as people tend to stick to default options and are unlikely to opt out of uninvited increases.

“There isn’t a single good reason to allow unsolicited increases to continue. If we are to stop people getting trapped into debt spirals, the FCA should use the extended consultation period to reconsider the voluntary agreement and end the damaging practice of raising people’s limits without their consent.”

Notes to editors

  1. 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.
  2. 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.
  3. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
  4. 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.
  5. 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.
  6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.