Sharp increase in legal proceedings for credit card debt in Türkiye

According to data from the Turkish Banks Association (TBB) Risk Center, the number of individuals falling into legal action due to unpaid credit card debt has surged dramatically in the first half of 2023, reflecting the severe economic challenges faced by citizens.

According to the TBB Risk Center, this figure has risen by 70%, exceeding 645,000 individuals, compared to the same period last year.

In the same period, individuals unable to repay their personal credit debt and subsequently placed under legal follow-up increased by 34%, from 399,377 to 536,020 people.

Economic pressures leading to payment difficulties

High inflation and increased reliance on personal credit and credit cards have significantly weakened purchasing power. This has resulted in a surge in consumer debt, particularly credit card debt, causing many citizens to struggle with repayment.

The difficulty in managing debt, exacerbated by high-interest rates, has led to a notable increase in the number of individuals under legal scrutiny for unpaid debt.

Data from the TBB Risk Center highlights that in the January-June 2023 period, 645,474 people could not repay their credit card debts, up from 379,591 in the previous year, marking a 70% increase.

The number of individuals falling into legal action due to unpaid personal loans also rose by 34%, from 399,377 to 536,020. Overall, the total number of individuals facing legal action for both personal loan and credit card debt increased by 43%, reaching 891,000.

In June alone, the number of individuals entering legal action due to debt rose from 118,362 last year to 213,989 this year. Among these, 118,855 were due to unpaid personal loans, and 142,028 were due to unpaid credit card debt.

Economic management and credit card spending

Following the general election, new economic management has scrutinized rising credit card expenditures.

Prior to June last year, maximum credit card interest rates and overdraft account rates were below inflation, making them advantageous. Consequently, credit card spending and cash withdrawals grew rapidly.

Although the Central Bank initially refrained from reflecting policy rate hikes on credit card rates, starting April 6, rates were increased. The method for calculating the maximum monthly contractual interest rate on credit card cash advances and overdraft accounts was revised, raising it from 4.42% to 5%. This led to a slowdown in cash withdrawals despite high credit card usage.

Persistent high credit card usage despite interest rate hikes

Despite interest rate increases, credit card usage remains high. Between July 19-26, individual credit and credit card debt increased by 52.7 billion TL, reaching a total of 3.34 trillion TL. In just one week, individual loan balances rose by 16.6 billion TL to 1.803 trillion TL, while credit card debt balances grew by 36.1 billion TL to 1.532 trillion TL.