One in five people who say that they are struggling with debt have seen their credit card limit increased automatically – paving the way for more serious debt problems.

Citizens Advice said that the proportion of people struggling with debt who have seen saw their credit limit increased was higher than the proportion for general card holders.

18% of those struggling financially saw their limit increased without request, compared with 12% overall.

The charity has called for the Financial Conduct Authority to put a ban on automatic increases for everyone, after concerns were raised about a rise in unsecured lending earlier in the year.

A report published by the Financial Conduct Authority said that “customers in persistent debt are profitable for credit card firms, who do not routinely intervene to help them”.

The regulator has estimated that 3.3 million people are in persistent debt.

‘Making people’s debt situation worse’

Unsecured lending on things like credit cards and car finance deals rocketed to levels unseen since the 2008 financial crisis earlier this year. The Bank of England was forced to ring the alarm bells and warn lenders off unsustainable lines of credit.

And although there were some signs of a slowdown in consumer borrowing, recent industry figures showed a rise in the use of credit, debit and charge cards.

The number of transactions paid for on plastic grew by 12% in the year to the end of June, the highest annual rate since 2008.

The value of spending also rose, accelerating to 7.2%.

The Citizens Advice chief executive, Gillian Guy, said: “It’s clear that irresponsible behaviour by some lenders is making people’s debt situation worse – such as offering more credit when they already have thousands of pounds of unpaid debt.

“The regulator must ensure that lenders are taking into account people’s whole financial and personal situation before agreeing further credit.

“Banning firms from raising existing customers’ credit limits without seeking their express permission first would also help people take more control over their finances.”

‘Breathing space’

Raising an individual’s credit limit automatically can be dangerous because it allows the individual to slide into more serious debt without actively engaging with the process.

Banning automatic credit limit increases would make it more difficult to get into more serious debt trouble, but industry chiefs have also drawn up other plans to help tackle debt problems.

A spokesman for the industry body UK Finance told the BBC: “Helping customers struggling with persistent credit card debt is a priority for our members.

“The industry has already developed a number of proposals to address the regulator’s concerns and ensure that no customer in persistent debt will be offered a credit limit increase.

“Where customers are in financial difficulty, the industry introduced a breathing space to allow customers to engage with a debt advice provider.”

The FCA also suggested that credit card companies could cancel any interest or charges in extreme cases.

For individuals in the most serious credit card debts, and people struggling with multiple repayments, more serious debt remedy solutions may be required.

For more information on what help is available, speak to one of our qualified debt counsellors today. Call: 0800 611 8888 or visit our dedicated website at www.umbrella.uk