Credit card firms must do more to help those in debt

What does this mean?

The financial regulator has said that credit card firms must do more to help millions of customers with debt problems.

The Financial Conduct Authority (FCA) has come up with a new set of proposals, in extreme cases this could mean credit card companies will have to cancel any interest or charges.

Firms would need to work more closely with customers who are struggling, this could be in the form of coming up with a faster repayment plan.

The FCA says that “customers in persistent debt are profitable for credit card firms, who do not routinely intervene to help them”.

The regulator has also estimated that 3.3m people are in persistent debt.

FCA chief executive Andrew Bailey said: Credit cards can be a very effective product for consumers, but a significant minority of customers experience real difficulties. We expect our proposals to reduce the number of customers in problem credit card debt, as well as putting customers in greater control of their borrowing.”

“Persistent debt can be very expensive – costing customers on average around £2.50 for every £1 repaid – and can obscure underlying financial problems. Because these customers remain profitable, firms have few incentives to intervene. We want to change this situation so that firms and customers will deal with outstanding debt more quickly, and avoid persistent debt in the first place.”