Business Essentials for Professionals


Customer Consent Would Be Sought By Credit Card Providers Before Enhancing Credit Limits

Customer Consent Would Be Sought By Credit Card Providers Before Enhancing Credit Limits
Recent research has found that raising of credit limits for credit cards is one of the major reason for individuals getting into a debt trap and suffering form debt related problems in the UK, following which credit card providers have reportedly agreed to comply with the Financial Conduct Authority suggestions to seek permission from customers prior to enhancing their credit card limits.
The Citizens Advice Bureau found that last year, there were 6 million credit card users who were not informed or their consent sought before raising of credit limits and the body has now urged Chancellor Philip Hammond to stop any form of unsolicited credit card increases when he presents his statement next week.
While referring to what is being called as "spiral of complacency" with relation to rising levels of consumer debt, the Bank of England officials had warned in the last summer that banks and other credit providers stood the chance of facing fresh action against careless lending.
Fears that individuals and the society at large and the economy was being put at risk of being debt ridden by credit companies have been stoked because about one third of the users whose credit limits were raised exhibited signs of struggling financially.
The research found that up to £1,481 on an average of the credit limit were raised for users without the credit card holders being asked. There were 12% users whose increase was £3,000 or more even as the study found that 85% of people were of the opinion that credit companies must ask the card holders prior to increasing their limits.
No explicit consent was asked for in the case of about 77% of the card users before their credit limits were raised while only 23% of such users had sought a credit limit raise. 
Gillian Guy, chief executive of the charity, 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.”
A danger to the UK economy is posed by a serious increase in personal loans, said Alex Brazier, Bank of England financial stability director in July.
In the last 12 months, there has been a 10% increase in the outstanding payments on car financing, credit card balances and personal loans even as there was a 1.5% increase in household incomes.
Brazier said: "Household debt – like most things that are good in moderation – can be dangerous in excess", and that the current trend was "dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy."

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc