The Financial Conduct Authority has proposed that in some cases it might be appropriate for credit card lenders to reduce, waive or cancel interest or charges for customers stuck in a cycle of longer-term debt.
This was is mostly a last case scenario. Initially, the FCA has proposed firms should, at designated timeframes, prompt customers to make faster repayments or proposing repayment plans.
Only once it becomes clear that a customer cannot afford any of the options proposed to repay their balance more quickly should firms take further steps to assist them in repaying the balance in a reasonable period – such as through cancelling interest and charges.
These proposals follows an initial consultation period launched in April 2017, in which the FCA said there were 3.3m people in ‘persistent debt’.
It defined persistent debt as cases where the cost of interest and charges had outstripped their repayments over an 18 month period.
Under the proposals, the potential waiving or interest and charges would only occur after 36 months.
The regulator said it had received widespread support in principle for these initial proposals.
Andrew Bailey, FCA chief executive, said: “The proposals we are introducing will save consumers billions of pounds by reducing longer-term borrowing on credit cards, which can be very expensive and can hide real financial hardship. We remain committed to action to protect consumers in the credit card market as soon as possible.”
The new consultation will close on 25 January 2018.