Estimates suggest that around 3.3 million people in the UK are in persistent debt. To help combat this, the FCA has published new proposals that call for credit card companies to cancel interest and charges in ‘extreme’ cases.
Under the new proposals, credit card companies would be required to work closely with people in debt by drawing up faster repayment plans or, in some cases, waiving interest fees and charges entirely. The plans are designed to help prevent people who are in credit card debt from spiralling into higher levels of debt.
For the purposes of these proposals, the FCA defines someone as being in credit card debt if they have paid more in interest and charges than they have repaid of their borrowing over 18 months.
Depending on a person’s level of debt, the FCA has various suggestions of how credit card companies should help their customers:
- After 18 months, companies should prompt customers to make faster repayments if they can afford it.
- After three years, firms should propose a repayment plan to help clear debt
- If a customer still cannot afford to repay the main debt more quickly, credit card companies should reduce, waive, or cancel any interest of charges.
In addition to this, the FCA is also suggesting that credit card companies intervene more quickly when they spot signs of customers in financial difficulties. Firms currently have reams of data available to them that the FCA says they should use to help customers in financial difficulties.
The FCA has estimated that these proposals could save customers between £3bn and £13bn by 2030, depending on how firms respond to the proposals.
Last updated: Tuesday, 4 April 2017
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