FCA writes Dear CEO letter on persistent debt customers

The FCA has written to credit card firms telling them to review their approach to borrowers who have been stuck in a persistent debt cycle for three years. The regulator requires firms to propose and agree plans with customers to address and resolve the situation and has outlined a number of key areas firms must review to ensure their approach is in line with FCA expectations. These include:

• a concern that customers may not respond if credit card providers write to them advising that they have been in persistent debt for three years. Firms must encourage customers to discuss repayment options with them however, if customers cannot afford the options proposed by the firm, they must be treated with due consideration, e.g. by reducing, waiving or cancelling any interest or charges.
• a concern that firms may suspend or cancel credit cards for those in persistent debt, including those willing to engage and come to an agreement. Firms are not allowed to suspend a credit card without having an objectively justifiable reason.

The FCA estimates that this could, if done right, lead to consumer savings of up to £1.3bn a year in lower interest charges.