Financial Conduct Authority
FCA tells credit card firms to review their approach to persistent debt customers
The Financial Conduct Authority (FCA) has written to credit card firms telling them to review their approach to borrowers who are stuck in persistent debt, where they are paying more in interest, fees and charges than they are paying of their balance.
The FCA require firms to help people who have been caught in a cycle of persistent debt for three years, by proposing and agreeing plans with customers to resolve the situation. Ahead of firms issuing letters setting out proposals to customers who have been in persistent debt for three years, and to make sure the firms’ approaches to the rules are working in the best interest of consumers, the FCA is outlining a number of areas firms need to review and ensure their approach is in line with expectations. This includes:
- a concern that customers may not respond to letters from their credit card provider, advising that they have been in persistent debt for three years. Firms must encourage customers to speak with them to discuss potential repayment arrangements. If customers can’t afford the options proposed by the firm, they must be treated with forbearance and due consideration, for example, by reducing, waiving or cancelling any interest or charges.
- a concern that firms may cancel or suspend credit cards for everyone in persistent debt, including those willing to engage and come to an agreement. In these circumstances, firms are not allowed to suspend a credit card without having an objectively justifiable reason.
Jonathan Davidson, Executive Director of Supervision for Retail and Authorisations at the FCA, yesterday said:
“Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly. If a customer cannot afford the firm’s proposals for how to do this, the firm must offer forbearance, potentially including reducing, waiving or cancelling any interest, fees or charges.
“My advice to consumers is don’t bury your head in the sand. If you can’t afford to meet the repayment schedule that the credit card firm is suggesting, don’t be afraid to tell them. If we find firms are not offering their customers the appropriate level of help, we will not hesitate to take action.
“If the firms do this right, we estimate that this could save customers up to £1.3bn a year in lower interest charges.”
If consumers are concerned about persistent credit card debt and/or have multiple credit cards they are dealing with, they can find information about free debt advice from Money Advice Service(link is external).
Notes to Editors
- Dear CEO Letter: Persistent Debt: Your approach to customers who have been in Persistent Debt for 36 months (PD36)
- PS18/4: Credit card market study: persistent debt and earlier intervention - feedback to CP17/43 and final rules
- The changes were introduced following a comprehensive study of the credit card market. The study analysed the accounts of 34 million credit card customers over a period of five years, and surveyed almost 40,000 consumers.
- Infographic: Help for consumers who are in persistent credit card debt
- Infographic: Helping customers in persistent debt
- Infographic: Persistent credit card debt – our expectations of firms
Latest News from
Financial Conduct Authority
FCA publishes evaluation of its work on the financial advice market04/12/2020 10:25:00
The FCA has published an evaluation of the impact of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).
1 month to go: FCA reminds firms to be ready for end of transition period02/12/2020 10:25:00
The FCA has reminded firms to be ready for the end of the transition period in 1 month’s time.
FCA charges Richard Jonathan Faithfull with one offence of money laundering27/11/2020 10:25:00
Following a joint investigation by the Financial Conduct Authority and City of London Police, the FCA has charged Richard Jonathan Faithfull with one offence of money laundering, contrary to Section 327 of the Proceeds of Crime Act.
Stephen Allen pleads not guilty to conspiracy to pervert the course of justice26/11/2020 10:25:00
Stephen Allen has pleaded not guilty by video link at Southwark Crown Court to the FCA’s charge that he conspired with Renwick Haddow to pervert the course of justice.
FCA fines TFS-ICAP £3.44 million for market misconduct24/11/2020 10:25:00
The Financial Conduct Authority (FCA) has fined TFS-ICAP Ltd, an FX options broker, £3.44m for communicating misleading information to clients.
Treasury, Bank of England and FCA convene working group to facilitate investment in productive finance20/11/2020 15:05:00
The Treasury, the Bank of England (Bank) and the FCA will be convening an industry working group to facilitate investment in productive finance.
FCA confirms support for consumer credit customers impacted by coronavirus20/11/2020 14:05:00
The FCA has confirmed updated guidance to firms setting out enhanced support that should be available to consumer credit customers experiencing payment difficulties as a result of coronavirus (Covid-19).
FCA confirms support for mortgage borrowers impacted by coronavirus18/11/2020 10:25:00
On 2 November, the Financial Conduct Authority (FCA) announced proposals to enhance support for borrowers affected by coronavirus (Covid-19).
FCA commences High Court proceedings over unauthorised collective investment schemes12/11/2020 10:25:00
The FCA has commenced High Court proceedings against Mr Robin Forster, Fortem Global Limited and Mr Richard Tasker, over alleged links to investments in care homes in which investors appear to have lost at least £30 million.