Seymour Fortescue of the Banking Code Standards Board said in an interview that it is important that banks consider people’s ability to pay money back when issuing credit cards or loans.
Speaking on BBC One’s Breakfast, Mr Fortescue said: “There are a number of cases where people have clearly lent much more money than they can afford to repay.
“The banking code says that before somebody’s limit is increased, or before they are lent money, the bank must consider their ability to repay.”
His call comes as banks have finally started sharing information as to who they issue – or refuse – loans to.
While welcoming this move, Mr Fortescue said that people were still ringing up large debt, such as through the use of multiple credit cards.
However, with better sharing of information amongst banks, he hopes that incidences like this will decrease.
Commenting, David Mond, chief executive of debt resolution specialists ClearDebt, said: “Banks must start treating people as individuals again and make decisions on credit based on each person’s circumstances – not just by using group-based risk profiling and deciding how many customers they can afford to fail to meet their debts.”