One of the largest credit card providers in the UK has been slammed for luring customers into increasing levels of credit card debt by hiking up credit limits without permission.
According to a report by The Times, Barclaycard has been increasing the limits on its customers’ credit cards, giving them just 30 days to opt out.
Lenders are entitled to increase the borrowing levels available to their customers without a request being made, but they must provide them with the option to reject the new limit. Barclaycard has been writing to its customers, allowing them 30 days to opt out of the new finance being offered.
However, despite the fact that Barclaycard has not broken any rules, debt charities have criticised the lender for encouraging customers to rack up spiralling levels of debt.
As a general rule, banks and lenders are expected to take a responsible approach when deciding how much credit to provide, making an affordability assessment, taking into account income and expenditure, as well as performing a credit check. But if they are already providing credit services, they are not bound by the same rules, even if most agree that it is good practice.
Francesca Toma from debt organisation, Step Change, described credit card balances as being one of the ‘main contributors to debt problems in the UK,’ adding that automatic credit increases were a ‘serious concern.’
Mental health charity Mind have also voiced their concerns, pointing to the link between mental health problems and financial difficulties. According to the group’s statistics, there are three times as many adults with mental health issues who have money problems than those who don’t.
Barclaycard has shrugged off the accusations, insisting that it is careful about who it provides additional credit to. A spokesperson for the lender said that if any individual was unhappy about being given the extra money, they could ‘reduce their limit at any time.’