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 acts to strengthen protections for customers using payment firms26/05/2020 14:10:00
The FCA recently (22 May 2020) launched a consultation on additional guidance for payments firms to strengthen the way in which they look after customers’ money.
FCA announces support for customers who are struggling to pay their mortgage due to coronavirus22/05/2020 12:20:00
The Financial Conduct Authority (FCA) has today announced proposals which will continue support for customers who are struggling to pay their mortgage due to coronavirus (Covid-19).
FCA confirms measures to help insurance customers who may be suffering financial difficulties as a result of coronavirus15/05/2020 12:20:00
The FCA has confirmed a series of temporary measures to help customers who hold insurance and premium finance products and who may be in financial difficulty because of coronavirus (Covid-19).
The Financial Services Regulatory Initiatives Forum launches Grid to help financial firms’ planning07/05/2020 13:20:00
The Financial Services Regulatory Initiatives Forum has today launched a new initiative to help financial firms prepare for upcoming regulatory work - the Regulatory Initiatives Grid.
FCA secures orders for victims of unauthorised share scheme06/05/2020 16:20:00
The High Court today ordered four individuals and one company to pay nearly £3.62m in restitution to members of the public who bought shares that were promoted unlawfully.
FCA seeks legal clarity on business interruption insurance alongside package of measures to help consumers and small businesses01/05/2020 16:10:00
The Financial Conduct Authority (FCA) has today announced it intends to seek legal clarity on business interruption (BI) insurance to resolve doubt for businesses who are facing uncertainty on their claims.
FCA commences civil proceedings in relation to alleged unauthorised investment advisers28/04/2020 12:25:00
The Financial Conduct Authority (FCA) has commenced proceedings in the High Court against 24HR Trading Academy Ltd (24HTA) and its sole director, Mohammed Fuaath Haja Maideen Maricar.
FCA confirms support for motor finance and high-cost credit customers27/04/2020 15:48:00
The FCA will be introducing the package of measures outlined last week to support consumer credit customers facing payment difficulties due to coronavirus (Covid-19).