On 28 February 2018, the British Financial Conduct Authority published its final policy statement on new rules for the credit card market which come into force on 1 March 2018 and which firms have to comply until 1 September 2018.
These changes seek to provide better protection for credit card customers in persistent debt or at risk of financial difficulties. It is estimated that consumers save between £310 million and £1.3 billion a year in lower interest charges.
These are the key aspects:
Currently, there are a total of 4 million accounts in persistent debt. Affected customers pay on average around £2.50 in interest and charges for every £1 that they repay of their borrowing.
The new rules require firms to take a series of escalating steps to help customers who are making low repayments over a long period.
Regarding customers in persistent debt for over 18 months, firms need to make contact prompting them to change their repayment and informing them that their card may ultimately be suspended if they do not change their repayment pattern.
For customers in persistent debt for 36 months, their provider has to offer a way to repay their balance in a reasonable period. If they are unable to do so, the firm must show the customer forbearance, which may include reducing, waiving or cancelling any interest, fees or charges.
Christopher Woolard, FCA Director of Strategy and Competition, said: “These new rules will significantly reduce the numbers of customers with problem credit card debt. Credit cards offer customers flexibility to manage their finances and repayments, but with this there is a risk customers can build up and hold debt over a long period of time – without making much headway on the outstanding balance. Under these new rules firms will have to help customers to break the cycle of persistent debt and ensure customers who cannot afford to repay more quickly, are given help.”
Source: Financial Conduct Authority