The Financial Conduct Authority (FCA) has told credit card providers they must do more to help people with persistent credit card debt.

The financial watchdog has introduced new rules that take effect from 1 March 2018, but has given credit card companies until 1 September 2018 to comply.

Credit card customers with persistent debt or at risk of financial difficulties will be given more protection, although banks will still be able to suspend a credit card where a customer fails to make any progress in repaying their debts.

Companies will now have to take a series of escalating steps to help these customers, starting when a customer has been in persistent debt for over 18 months.

The FCA says that credit card customers in persistent debt pay on average around 2.5 pounds in interest and charges for every pound they repay of their borrowing. It added that, not surprisingly, banks have little incentive to help these customers, as the debt is profitable.

Under the new rules, if after several failed attempts to get customers to change their repayments, a bank should look at reducing, waiving or cancelling any interest, fees or charges. A card may ultimately be suspended.

Automatic credit card limit increases

Customers can also opt out from receiving automatic credit limit increases on their cards. The FCA said that customers in persistent debt for 12 months will not be offered credit limit increases.

According to the watchdog, 30 million consumers have a credit card in Britain, or 60 per cent of the population, and its study found that in 2014 around 5.6 million people were in arrears, had defaulted, or held a balance above 90 per cent of their credit limit for over a year.

Firms who do not comply with the new rules could be subject to action by the FCA.

If you would like to discuss this topic with one of our experts, please contact a member of our Business Recovery & Insolvency team.

 
 
 

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