The Financial Conduct Authority (FCA) of the UK has published new credit card rules intended to aid customers who are in persistent debt or at risk of financial difficulties.
Effective from 1 March 2018, the new rules are expected to save around £310m ($430m) to £1.3bn annually for cardholders in terms of lower interest charges. Card issuers are required to adopt the new policies by 1 September this year.
The move follows a five-year survey that involved analysis of 34 million credit card accounts and nearly 40,000 consumers. It was found that four million accounts are in persistent debt and firms make little efforts to assist such customers.
With the revised regulations, FCA is asking companies to help customers making low repayments over a long term, starting from persistent debt for more than 18 months.
After exceeding 36 months, consumers must be given an offer to repay within a reasonable period or forbearance such as decreasing, waiving or cancelling any interest, fees or charges.
The companies will, however, have an option to suspend the card if a customer continues to have problems with repayments.
FCA Strategy and Competition director Christopher Woolard said: “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.”
Meanwhile, FCA has imposed a fine of around £2m on credit card lender Vanquis as the firm allegedly failed to provide appropriate information on the price of an add-on product called Repayment Option Plan (ROP).
FCA ordered Vanquis to repay a total of about £168m to customers who were not aware of the full price, which included additional interest component, at the time of purchasing ROP.