Credit card providers must cut or stop fees for those who are caught in a cycle of persistent debt, the financial watchdog has said.
In a letter to the chief executives of credit card firms this morning, the Financial Conduct Authority said lenders must come up with a repayment plan for customers who have been in debt for three years.
If the customer is still unable to make the payments, firms must either cut, waive, or cancel fees.
“’Firms must help customers to reduce the level of debt they have on their credit card more quickly,” said FCA executive director Jonathan Davidson.
“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.”
The watchdog said the new measures could help save customers up to £1.3bn per year in lower interest charges.
The FCA introduced new rules in 2018 to help customers who have, over a period of 18 months, paid more in interest, fees and charges than they have repaid on the principal balance of their credit card.
In this morning’s letter, the regulator said it was concerned firms were proposing repayment options to customers that were not reasonable.
It also said that some firms may be planning a “blanket” suspension of credit cards for their customers in persistent debt, and warned firms against the idea, and said they must justify any suspensions.
“’My advice to consumers is don’t bury your head in the sand,” said Davidson.
“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.”
The FCA added that customers concerned about persistent credit card debt can get free information and advice from the Money Advice Service.