Tactics of credit card lenders risk pushing people into debt problems, says Citizens Advice North Lincolnshire
Wednesday 30 August 2017
Citizens Advice North Lincolnshire is warning that tactics used by credit card lenders are putting people at greater risk of long term debt problems.
Today national Citizens Advice launches a major new report on long term debt, which finds that 1 in 5 people who are struggling to pay off their credit cards have had their credit limit raised without them requesting it – risking pushing them into further debt.
The Stuck in debt report also found that people with credit card debts were more likely to get into long term debt than those with personal loans and were less able to pay their debt down. Only 60% of people struggling with credit card debt were able to reduce it over two years, compared to 72% of people struggling with a personal loan – with credit card borrowers paying off £449 over two years, compared to a drop of £620 for people with personal loans.
Citizens Advice helped nearly 66,000 people with over 140,000 credit card debt problems in the last year.
One pensioner Citizens Advice helped was repeatedly called by firms offering more credit cards – despite the fact that she could only afford to make minimum repayments on her existing cards. She used the cards to meet her essential bills and ended up with a total of 21 credit cards and debts totalling £70,000.
Another man the charity helped owed £15,000 on four different credit cards, but despite only making minimum repayments on each card which just covered the interest, he was notified by all four providers that they were increasing his credit limit. He turned to Citizens Advice for help when his debts hit £30,000.
Citizens Advice North Lincolnshire is urging people who are struggling to repay their debts to seek advice and avoid entering into a debt spiral.
Alan Usher, Chief Executive of Citizens Advice North Lincolnshire, said:
“Irresponsible lenders are pushing people further into the red. Research from national Citizens Advice’s shows that some credit card providers are extending people’s credit when they’re barely keeping on top of their minimum monthly repayments – which leaves them in a worse financial position. It’s really important that anyone who is struggling to pay off their credit card seeks help from us as soon as possible. We can help you to work out the best way manage your finances and how to make repaying your debt more manageable.”
The national charity is calling for changes to protect people from falling into long term credit card debt, including:
- Firms to be banned from raising people’s credit limits without obtaining their explicit consent to give people more protection against ever increasing debt.
- The Financial Conduct Authority to provide clear guidance to lenders stressing that before increasing a borrower’s limit, they must check their ability to repay it.
Notes to editors:
- Citizens Advice commissioned a nationally representative opinion poll with a number of questions relating to household finances, life events, debt, savings, expenditure and other behaviours. Online field research with 2,116 respondents was conducted 23 to 26 June 2017. The figures have been weighted and are representative of all UK adults (aged 18+).
- The survey defined people in problem debt as those who felt their debts were a burden and had not felt able to afford household bills or debt repayments for more than a year.
- The number of people in long term credit card debt was calculated using longitudinal data from the ONS Wealth and Assets Survey. This found that of people struggling with debts in 2010-12 who used a credit card, 48% were still struggling two years later. This is equivalent to 900,000 people.
- Citizens Advice calculates that the average credit card debt of British adults is £1,600.