(Corrects to remove previous ninth paragraph, which had used reference from PwC to fee for inactivity charged by Internet bank Egg. Egg says it does not charge customers a fee for inactivity)

* UK consumers could face higher credit card rates - PwC

* Card borrowing drops 3 percent, number of cards down 8 pct

* Bad debts may rise to 9 percent of balances by end 2010

LONDON, Nov 9 (Reuters) - British consumers face higher rates and fees on credit cards as lenders battle rising bad debts, funding constraints and reduced appetite for borrowing, accountants PricewaterhouseCoopers [PWC.UL] said on Monday.

These changes, combined with rising regulatory and government scrutiny, would shake up the market and prove the current model based on fee-free credit cards was unsustainable, PwC said in an annual report on consumer credit.

"Lenders will be unable or unwilling to increase supply sufficiently to match demand. This will leave consumers surprised at both the cost of credit and the difficulty in gaining access to it," PwC partner Richard Thompson said.