Ireland bans credit limit hikes

Banks in Ireland will soon be banned from raising a customer's borrowing limit on a credit card without getting their permission first. The Irish Financial Services Regulatory Authority is introducing the new rule in July as part of a comprehensive code which will govern all aspects of the relationship between banks and their customers.

Liam O'Reilly, the regulator's Chief Executive, told BBC Radio 4's Money Box programme the move is partly a response to the growing level of debt in Ireland. "It is certainly growing at or above the EU average at about 30% per annum," he said. "There is a need for a set of rules of engagement between the consumer and the financial institution. They need to be given more information and have explained what the consequences are." He said the code would not prevent the credit card providers raising limits, they just had to get the cardholder's permission first.

"It's perfectly valid for an institution to decide that a credit limit is too low. But they must say to the customer 'are you happy for it to be increased?' This is about making sure the customer is informed.

In the UK, the relationship between banks and their customers is governed by the Banking Code, a voluntary agreement drawn up by a board consisting of the banks, the Treasury and five independent directors. The code leaves the banks free to raise credit limits although customers can then decline them if they choose.