This week, the Government has announced proposals to give people in debt six weeks breathing space where they will be protected from further interest, charges and enforcement action to give them time to seek advice.
Citizens Advice welcomes the move to help prevent people’s debt problems from escalating, but says action is also needed from the Financial Conduct Authority (FCA) to stop people getting into problem debt.
In August, research from Citizens Advice revealed that 1 in 5 people struggling with credit card debts had their credit limit raised without them requesting it - showing that lenders were increasing people’s access to debt without the proper affordability checks.
The charity is seeking a ban on unsolicited credit increases and has called on the FCA to compel credit card companies to step in sooner when someone is struggling to pay their debts.
Gillian Guy, Chief Executive of Citizens Advice said:
“It’s good to see the government taking action on problem debt - an issue we help thousands of people with every week.
“Providing breathing space is one way to help people get back on track, but action must be taken to stop them getting in problem debt in the first place.
“That's why we're calling for an end to irresponsible lending from credit card companies. For example, no one should have their credit limit raised without them requesting it - something which risks pushing them further into debt.
“With prices rising faster than wages, household finances are increasingly stretched. The FCA should step in to protect borrowers by banning credit card companies from automatically raising credit card limits and making lenders support customers who are starting to struggle.”
Those suffering from problem debt to get vital ‘Breathing Space’