New clause 4 - CHANGES IN CREDIT LIMITS
Consumer Credit Bill
6:00 pm
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
I beg to move, That the clause be read a Second time.
We are making good progress, and we have perhaps reached the debate when the Minister will not just say that something is excellent but go along with us on it.
Again, the proposal deals with an issue raised on Second Reading. In that debate, I referred to my experience of having a credit card that I used only for petrol, perhaps spending £200 a month on it. Without any request from me, the card issuer has raised the limit on several occasions so that it is now £3,500. The issuer has never checked whether I could afford to spend to that limit, and the hon. Member for Hartlepool (Mr. Wright) expressed concern about that issue, too.
I recognise that the banking code has been changed, but I hope that the Committee will see that there are grounds for doing more. The banking code says that all issuers must assess a customer's ability to repay before increasing a limit and must make appropriate checks on the customer's risk profile and apply proportionate increases. They must not apply increases to accounts in arrears or those that fall below credit scoring thresholds, they must consider emergency limit increases individually—when a specific transaction will go over the customer's pre-agreed limit—and they must always assess the customer's ability to repay.
What the code does not include is any requirement to contact the customer. Banks can just go through records, contact credit agencies and find out what the person's credit rating has been. They do not have to contact the person to ask whether such an offer would be welcome and reasonable or to ask what assurance they could give that they could repay the money. The new clause would put the onus on the lender to ensure that the customer can afford a higher limit and to get the customer's agreement in writing before finalising an increase.
The new clause must be seen against the background of concern about rising debt levels, which we discussed earlier. There is growing anxiety in the Bank of England about debt levels, and we are right to address that now. We are seeing a growth in the number of people who cannot pay their debt and a growth in mortgage arrears and repossessions. All that should make us wary of allowing a situation to continue in which people can simply have their credit card limit increased. As the hon. Member for Hastings and Rye (Michael Jabez Foster) said, before those people have such a limit available to them, it must be certain that they can repay the money. Currently, the debtor's circumstances are currently not checked when those limits are raised. That cannot be considered responsible lending.