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The Financial Conduct Authority (FCA) has warned credit card providers about customers in persistent debt. The organisation recommended lenders implement a plan for those stuck in this position for three years, helping clients deal with their debts.
If a customer is still unable to repay their bills, lenders may cut interest rates entirely – or reduce them so customers can get out of ‘persistent’ status.
You can be in persistent debt on an account if, over 18 months, you have paid more in interest rates and charges as opposed to what you’ve repaid on the amount owed.
For example, this can occur if you’re just making minimum payments on a credit card or catalogue. Although you’re actively trying to repay what you owe, the amount only covers the interest – keeping you in financial limbo.
To get out of this state, you should attempt to increase your payments. Understandably though, this might not be possible. Fortunately, there are a range of solutions available which can help you out of persistent debt.
The FCA also expressed concern that some credit card companies were planning to implement a “blanket” rule for those in persistent debt which involved suspending accounts. The organisation warned providers against this idea and stated that any suspension must be justified. Therefore, if you were looking to resolve your persistent debt with your credit card company, and they responded by terminating your account, this suggests that action from the firm may not have been suitable.
Instead, the executive director of the FCA – Jonathan Davidson – recommended the following steps:
“Firms must help customers to reduce the level of debt they have on their credit card more quickly,” He stated.
“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.”
“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.”
Being in a state of persistent debt is a sign that you need debt help. Although this announcement from the FCA is a welcome one, this is especially true about the warning on suspending accounts. After all, credit card providers should help customers with their finances, not punish them for something they cannot afford.
While these firms have been urged to help individuals in persistent debt, this is only one part of what could be a larger financial problem. Fortunately, if you’re struggling to get out of this position and trying to pay bills from other lenders, we’re around to throw you a lifeline.
We help hundreds of people every day and – with a debt solution – you could be well on the way to reclaiming control of your finances. Get in touch, and we could help identify the best option for you.
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