Credit card firms will be required to take an escalating series of actions to encourage customers to repay debts more quickly and avoid getting into ‘persistent’ debt in the first place, under new rules proposed by the Financial Conduct Authority after a market study revealed a ‘significant minority’ of UK credit card users experience real difficulties.

Customers in persistent debt are profitable for credit card firms, who do not routinely intervene to help them. ‘CP17/10: Consultation on persistent debt and earlier intervention remedies’* also proposes

  • to require firms to use available data to identify customers at financial risk so they can intervene as early as possible
  • a voluntary agreement under which firms would give customers greater controls over increases to their credit card spending limits

The FCA study estimated that over 3.3m people were in persistent debt – which it defines as paying more in interest and charges than in repaying borrowing over an 18-month period. It also estimated that 1.8m of them remain in debit over two consecutive 18-month periods.

The proposed sequential steps include

  • prompting customers in persistent debt for 18 months to make faster payments if they can afford to do so
  • proposing a repayment plan if they are still in persistent debt after a further consecutive 18 months
  • removing the ability to use their card from customers who do not respond or confirm they can afford to pay faster but decline to do so
  • helping those who can’t repay their balance in a reason able period by, for example, reducing, waiving or cancelling any interest or charges