The Financial Conduct Authority (FCA) has written to credit card firms telling them to review their approach to borrowers who are stuck in persistent debt, where they are paying more in interest, fees and charges than they are paying of their balance.

New FCA  rules require firms to help people who have been caught in a cycle of persistent debt for three years, by proposing and agreeing plans with customers to resolve the situation. Ahead of firms issuing letters setting out proposals to customers who have been in persistent debt for three years, and to make sure the firms’ approaches to the rules are working in the best interest of consumers, the FCA is outlining a number of areas firms need to review and ensure their approach is in line with expectations. This includes:

  • a concern that customers may not respond to letters from their credit card provider, advising that they have been in persistent debt for three years. Firms must encourage customers to speak with them to discuss potential repayment arrangements. If customers can’t afford the options proposed by the firm, they must be treated with forbearance and due consideration, for example, by reducing, waiving or cancelling any interest or charges
  • a concern that firms may cancel or suspend credit cards for everyone in persistent debt, including those willing to engage and come to an agreement. In these circumstances, firms are not allowed to suspend a credit card without having an objectively justifiable reason.

Jonathan Davidson, Executive Director of Supervision for Retail and Authorisations at the FCA, said “Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly. 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.”

“My advice to consumers is don’t bury your head in the sand. 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”

“If the firms do this right, we estimate that this could save customers up to £1.3 billion a year in lower interest charges.”

StepChange Head of Policy Peter Tutton said “It is helpful to see the FCA reminding firms of their responsibilities under the new rules.”

“The FCA is unequivocal that firms should not cancel people’s cards wholesale. We particularly welcome the regulator telling firms to include in their letters a reminder that forbearance is available if people cannot afford what is suggested, and that they should signpost to independent advice, especially for those receiving letters from more than one card provider.”

Jane Tully, director of external affairs at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “These new rules from the FCA are ultimately designed to help people struggling with persistent credit card debt, and the regulator is right to have an eye on unintended consequences. It is crucial that credit card firms get this right – including by offering sustainable repayment options and forbearance where necessary.  A ‘blanket’ suspension of credit cards risks inadvertently making the financial situations of some customers worse, and the regulator is right to warn firms against this approach. ”

“We welcome the FCA’s reminder of the role of free debt advice in this complicated process, as many customers will be receiving letters from multiple credit card providers and may have other debts too.

“It is crucial that anyone receiving these letters engages with their credit card provider as soon as possible, and that firms signpost their customers to receive free, independent debt advice on the whole of their debt situation where necessary.”

Rachel Springall, Finance Expert at, said “The Financial Conduct Authority (FCA) may well have thrown struggling credit card borrowers a lifeline today, as its warning could stop lenders from cancelling a credit card without a justifiable reason.”

“There may well be borrowers out there who are keeping up with the minimum repayments but are unable to pay more each month, and these borrowers need support. ”

“Since the persistent debt proposals were announced, credit card providers have cut down the length of interest-free balance transfer offers, of which there is a record low amount of deals available now. Once the longest offer was for a 43-month interest-free balance term, while the longest today is just 29 months, a significant difference.”

“Hopefully this interjection from the FCA will protect vulnerable consumers who need more guidance on ways to reduce their debts. However, if card providers are forced to reduce or abandon interest charges on debts, then this could impact the range of credit card deals that they are prepared to offer overall. It will be interesting to see what credit card providers will do in the months to come.”

Gareth Shaw, Head of Money, Which said “Millions of people across the UK are trapped in persistent debt, so it’s right that the regulator is taking steps to encourage banks to help their customers break this cycle.”

“It’s crucial that the industry properly engages with all those identified as needing help and offers manageable plans that include reductions, waivers and even the cancellation of charges and interest.”

“The effects of living in persistent debt can be devastating, so it’s important that those who are likely to be impacted by the new rules take notice of how these new measures could affect their finances.”

A UK Finance spokesperson said “The FCA’s new persistent debt rules are designed to help customers to reduce the cost of their borrowing by encouraging them to pay back their credit card balance quicker, where they can afford to do so. Where customers have been in this position for 36 months, card providers will set out options to help them to repay their outstanding balance more quickly, usually within three to four years.”

“If a customer receives a letter from their card provider it is important that they do not ignore it and instead make sure they contact their card provider as soon as possible to discuss their repayment options. If they remain unsure or if they think that what is being asked for is unmanageable then we would encourage them to speak to their credit card provider or an independent debt charity to talk through the options and agree a way forward that does not adversely affect their financial situation.”