The FCA has announced credit card companies have until September 1st to implement new changes to the way they deal with people in debt, in a bid to protect consumers.
Following a study of 40,000 consumers by the Financial Conduct Authority, it is believed customers who are persistently in debt with credit card companies are paying an average of around £2.50 in charges & interest for every £1 they owe.
The new changes will mean credit card customers who are in persistent debt will have to be offered help to deal with their outstanding balance.
Credit Card Debt: When Is Help To Pay Offered?
The initial help should start when a customer has been in persistent debt for 18 months, with the credit card companies expected to offer the customer a warning about their financial situation and that they may have their card suspended.
Should a customer be in debt persistently for 36 months, the credit card companies will be required to offer an affordable repayment plan and possibly even reduce, waive or cancel any interest, fees or charges
Christopher Woolard, from the FCA, said
"Credit cards offer customers flexibility to manage their finances and repayments, but with this there is a risk customers can build up and hold debt over a long period of time, without making much headway on the outstanding balance,"
"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."
The FCA has estimated consumers will save "between £310 million and £1.3 billion a year in lower interest charges", thanks to the new changes being implemented.
Charity trustee of Debt Support Trust, Stuart Carmichael, welcomed the new changes and said:
"The problem with debt is that it's like being stuck in a hole. You want to be debt free and live a life without overbearing financial concerns, but the repayments to climb back out of debt are too steep - the problem has become too severe and it's almost impossible. Addressing the debt and helping consumers to repay what they owe in a manageable plan will mean fewer consumers are likely to turn to other forms of lending, which can often just make the situation worse.
If you have credit card debts and want advice on how to resolve them, you can speak to Debt Support Trust in confidence today on 0800 085 0226. A charity advisor can help you with all forms of lending and offer advice on which solutions may be best to get the debt back under control.