The FCA has today announced plans to clean up the credit card market including cracking down on unsolicited credit limit increases. So has yours ever been increased without your knowledge?
According to the Financial Conduct Authority (FCA), around 3.3 million people have persistent credit card debt, and are currently paying around £2.50 in fees and interest for every £1 they repay.
In its credit card market study, published today, the financial watchdog has outlined a remedy package to clean up credit cards.
In the report, it expressed concerns about unsolicited credit card limit increases, where credit card companies are found to be upping credit limits without knowledge or consent from their customers, and has put forward a number of voluntary measures for lenders to apply.
Credit card limits
Currently, it’s usual practice for credit card companies to offer unsolicited credit limit increases on an opt-out basis.
The FCA has agreed that this is likely to lead to some customers to passively accept the offer without considering whether they want or need it.
The regulator has also shared concerns that some credit card customers in financial difficulties appear to be receiving unsolicited credit limit increases that could contribute to making their financial circumstances worse.
As a result, the FCA has called on the credit card industry to commit to implementing voluntary measures around credit limit increases.
These voluntary measures are:
- All new customers will be given the choice of how credit limit increases are applied to their account. This will be whether their credit limit can only be increased with their express consent (opt in), or whether their firm can offer an increase to their limit with the option to decline it (opt out). Customers who don’t make a choice will be offered credit limit increases on an opt-in basis by default.
- Existing customers will be offered a more straightforward means of declining an offer of a credit limit increase, as well as the choice of having any future offers made on an opt-in basis.
- All customers will be made aware of their existing right to choose to no longer receive offers of credit limit increases.
- All customers will still be able to ask for a credit limit increase at any point.
The voluntary remedies also restrict customers from being offered credit limit increases when their borrowing behaviour may indicate unaffordable borrowing.
The industry has committed to implement these changes within the next year.
We previously called for a ban on unsolicited increases in credit card limits. Introducing an opt-in system should help, especially for new customers, but will it be enough?
Have you had a credit card limit increased without your knowledge? Do you think today’s remedies will be enough to clean up credit cards? Or do you think more will be needed?