A recent research led in the UK by Citizens Advice – a network of 316 charities that assist British consumers with financial and legal troubles – demonstrates that credit card lenders do not hesitate to target people already struggling with debts, dragging them down with new offers. Indeed, figures indicate that 18% of indebted consumers have seen their credit card limit raised over the past year without requesting it – compared to 12% of all credit card holders – encouraging them to accumulate debts. The Citizens Advice requested the Financial Conduct Authority (FCA) to ban such unfair practices.
Aside from ethical considerations, credit card issuers’ behaviour is also putting financial stability at risk. The Bank of England warned that unsecured lending is reaching alarming levels unseen since the 2008 financial crisis. Indeed, consumer debt grew by 10% over the past 12 months to about £201 billion, with credit card loans accounting for a third of the total. Authorities are concerned that people with financial troubles might fail to repay their debts in the event of another economic slowdown, thus threatening the British financial system.
The FCA estimates that 3.3 million Britons are affected by credit card debt. It is currently elaborating new regulations to better protect vulnerable consumers and address the situation, with focus on the booming car loan market. In addition, the financial authority aims to force credit card issuers to contact consumers struggling to repay their loans after 18 months and impose a repayment plan instead of holding them back with additional credit limits.
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