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Tuesday 03rd of November 2009
September 25, 2007    

Crackdown on consumer credit

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by Kay Murchie

Britain’s biggest credit card issuer, Barclaycard, has slashed customer spending limits following a crackdown on consumer credit. Furthermore, it is rejecting applications for new cards.
Consumer borrowing has escalated over the last 10 years and currently stands at approximately £1.4 billion.

A spokesperson for Barclays commented that they have undergone a strict review since 2006 and lowered credit limits for half a million cardholders where customers are over their limits. Approximately 50% of all applications for new Barclaycards are now rejected. Barclaycard profits fell by 17% in the first 6 months of 2007 as bad debts rocketed to £1.5 billion.

Those with a poor credit history may find it very difficult to take out new cards and loans as banks steer clear of risky borrowers. However, this is bad news for the high street, many traders were prepared for a challenging Christmas as consumers cut debt and increase their savings.

The mortgage market is also showing indications of cutback with many large lenders including Halifax and Abbey raising their tracker rates by up to 0.2%.

Furthermore, analysts are predicting that first-time buyers are in for an even tougher time. Malcolm Hurlston, founder and chairman of the Consumer Credit Counselling Service, expects many borrowers to struggle to meet payments on their credit card borrowings and loans after their cheaper fixed rate mortgage deals expire shortly.

Approximately 300,000 fixed rate mortgages are due to come to the end of their terms by the end of the year. Consequently, a large rise in repossessions is expected. The counselling service is developing a specialist repossession unit to deal with borrowers who can no longer pay their mortgages and face losing their properties.

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