New rules proposed by the Financial Conduct Authority (FCA) could see credit card providers forced to help customers that are in persistent debt.
The FCA has estimated that 3.3 million people are in persistent debt, which means they are paying more in interest and additional charges than they are in loan repayments over an 18 month period. The financial watchdog has called for credit companies to take steps to help customers who are struggling to pay off their debt by offering assistance.
It is proposed that credit card providers should be required to prompt customers who have been in debt for 18 months to make larger repayments, explaining that it will reduce the cost of their debt over time. If the customer has been in persistent debt for another 18 months after that, further steps must be taken by the provider. This may result in agreeing a repayment plan with them. The FCA has outlined that this repayment plan should take place over a “reasonable” period of 3 to 4 years. If customers refuse or do not repay once they are in a position to be able to do so, their card would be suspended. If customers are unable to pay back their debt, providers may then have to reduce or waive interest charges.
How Will This Affect Your Credit Rating?
The Telegraph has looked at how potential changes could affect your credit rating. This would depend on how individual providers choose to implement the rules, and how they report repayment plan alterations to credit reference agencies. The scoring criteria by credit agencies would also play a part in the affect it has on an individual. There is further opinion and analysis on the Telegraph website.