The Financial Conduct Authority (FCA) has announced a deadline for credit card companies to implement new rules designed to assist consumers with long term credit debts.
The regulator has given the companies until September to implement the new measures, which mean that they must intervene after 18 months of persistent debt.
Persistent debt is defined as when customers have paid more in interest and charges than they have repaid of their borrowing over an 18-month period.
The measures will begin with prompts encouraging people to pay back the debt faster and follow on to more in-depth guidance after three years, and the possibility of interest and interest being waived for the consumer.
Christopher Woolard from the FCA said: ‘Credit cards offer customers flexibility to manage their finances and repayments, but with this there is a risk that customers can build up and hold debt over a long period of time, without making much headway on the outstanding balance.’
He continued: ‘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.
The credit card firms have already pledged to allow customers to opt-out of unsolicited increases in their credit limit. Furthermore, those who have been in persistent debt for 12 months or more will stop receiving such credit limit rises.
Under the new rules the firms will contact customers after 18 months of persistent debt, suggesting they speed up repayments. If the customer fails to do so, their card could be suspended.
If persistent debt stretches to three years, credit card firms will also be required to offer customers a way to repay their balance in a reasonable period, and could cut, waive, or cancel any interest, fees or charges from that point if they are struggling to repay.
However, Peter Tutton of StepChange debt charity feels that more is required. He said: ‘The new rules do not address the continuing risk that firms will allow new profitable customers to rack up expensive debt for a long period – only to inflict unattractive compulsory action on them further down the line.’