Credit Card Firms Told to Cut Fees for Customers in Persistent Debt

Credit card firms have been urged by the Financial Conduct Authority (FCA) to cut or reduce fees for customers struggling with persistent debt.

Currently, lenders can suspend or cancel certain customers’ credit cards if they have been stuck in debt and have been making minimal repayments for 36 months. However, the financial regulator has now told credit card providers it must instead reduce or waive fees for those struggling with persistent debt.

According to the FCA, around 1.78 million people in the UK are struggling with persistent credit card debt. This is defined as when the amount they are paying in interest and fees is higher than the amount of debt they are actually paying off.

The FCA bought in new rules back in March 2018 to help people struggling in debt, but from this month thousands of credit card customers could have their credit cards suspended. The FCA has now told providers they must have a valid reason for suspending any customer’s cards.

“Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly,” said Jonathan Davidson, executive director of supervision for retail and authorisations at the FCA.

“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.”

Peter Tutton, head of policy at debt charity StepChange, said: “It is helpful to see the FCA reminding firms of their responsibilities under the new rules. The FCA is unequivocal that firms should not cancel people’s cards wholesale.

“We particularly welcome the regulator telling firms to include in their letters a reminder that forbearance is available if people cannot afford what is suggested, and that they should signpost to independent advice, especially for those receiving letters from more than one card provider.”