Barclaycard accused of putting profits before customers' well-being with automatic credit limit hikes

Barclaycard has been accused of putting profits before customer's well-being by automatically increasing credit limits and running the risk of encouraging customers into further debt and unmanageable finances.
The UK's biggest credit card provider has been automatically increasing credit limits, giving customers 30 days to opt-out of the rise or else be automatically opted-in, The Times newspaper reported.
Francesca Toma, of the debt charity StepChange, said: 'Credit card debt is one of the main contributors to debt problems in the UK and we are seeing a number of cases where banks are automatically increasing credit card limits.

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'This is a serious concern because it further undermines the position of many financially vulnerable households.'
It is expected of banks to check their customers' ability to repay debt and overall creditworthiness before increasing their credit limits; they must check with a credit reference agency, consider the customer's income, financial commitments and how they have handled their finances in the past.
However, credit card providers like Barclaycard are entitled to raise credit limits at any time and, according to the 2011 bank and building societies agreed lending code, lenders must write to customers with 30 days notice and outlining the increase and the customer's right to reject it.
Ms Toma said: 'The increase of credit accelerates debt problems and pushes people into further financial difficulty.

 

'Banks should give serious thought to whether further credit is needed and crucially that customers can afford to pay their credit card debt especially in a change of circumstance such as employment, illness or relationship breakdown.'
The Times reported that Barclaycard customer William Watts, a 34-year-old with mental health problems, who has been out of work and received long term disability benefit for eight years, was given thousands of pounds of additional credit.

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Due to his fragile mental state, William was more than happy to spend the £4,000 extra credit that had been gifted to him by Barclaycard which ultimately resulted in William's father Peter Watts paying a monthly interest bill of £100 out of his retirement savings to clear the debt.
Andrew Bond, spokesman for Barclaycard said the company is unable to discuss William's case but vowed that Barclaycard would never increase a customer's limit if there was any concern that it was unaffordable.
Mr Bond said: 'Customers can reduce their limit at any time and there is no obligation to accept a credit limit increase or for customers to use their full limit if they feel it may be unaffordable for them.
'We also put a lot of effort into ensuring that customers that need additional support get it.
'We have created a specialist team of advisers to help customers who may be experiencing difficulties with mental health issues and we also provide extensive credit guidance on our website including a help line for customers experiencing financial difficulty.'
Emma Mamo, policy and campaigns manager for mental health charity, Mind, explained that often financial difficulty and mental health go hand in hand.
She said: 'If you are struggling to keep control of your money, you may find that your mental health is affected.

'Likewise, if you are experiencing a period of mental ill health you may find that you get into financial difficulties. There are three times as many adults with mental health problems reporting money problems than those without.'
Due to the tough economic climate Mind are now hearing from a record number of people who are struggling with personal finances, whether they are adjusting to lower incomes and increased costs, redundancy or anxiety over losing their job. 
Ms Mamo said: 'Our infoline has experienced a surge in calls from people concerned about debt, unemployment  and welfare cuts.'