The Financial Conduct Authority (FCA) has proposed measures for credit card companies to help the 3.3 million people in persistent debt, which it claims would save customers up to £1.3bn a year.
Under the FCA’s definition, credit card customers are in persistent debt if the cost of interest and charges has outstripped their repayments over an 18 month period.
In its consultation paper, the FCA told companies to take steps to help such customers repay their debit faster, and provide assistance if they cannot, such as a repayment plan.
Andrew Bailey, FCA chief executive, said that credit card companies had been reluctant to assist customers in persistent debt as long as they remained profitable.
He said: “We expect our proposals to reduce the number of customers in problem credit card debt, as well as putting customers in greater control of their borrowing.
“Because these customers remain profitable, firms have few incentives to intervene. We want to change the situation…and avoid persistent debt in the first place.”
The FCA proposed that where customers are unable to take steps to repay quicker, credit card companies must offer to reduce, wave, or cancel interest charges. The card would be suspended during this period.
The authority expects that lower interest payments resulting from fast repayment would save between £3bn and £13bn by 2030, amounting to between £310m and £1.3bn per year for the first few years.