Credit card firms ignore persistent debt, says FCA

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A total of 1.4 million people in the UK have only made the minimum repayments on their credit cards for three years in a row, the City regulator has said.

The profits made from these customers mean credit card firms do little to address persistent debt, the Financial Conduct Authority (FCA) said.

Nearly half of them have borrowed more than 90% of their credit limit consistently for three years.

Lenders have now agreed to help with warnings about growing debt.

In its final report on the UK credit card market, the regulator said: "Credit cards are suited to short term borrowing and can be an expensive way to borrow large amounts over a long period. We are concerned about the volume of borrowing behaviour that does not fit this pattern.

"We consider that firms could do more to help those with persistently high credit card debt to reduce debt burdens before they become problematic, and to prompt those repeatedly making minimum payments to repay quicker when they can."

Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: "We need to do more to help this group of people, who are just about keeping their head above water without making a serious dent in repaying what they owe."


The FCA inquiry analysed the five-year history of 34 million cardholders and released an interim report late last year.

It found the credit card market was working fairly well for most customers, with competition leading to a string of deals to choose from.

The regulator displayed more concern for those in persistent debt, who would be exposed to financial difficulty were they to lose their jobs or fall ill.

The industry has agreed to variety of alerts to be sent to these customers, such as information about when promotional deals are coming to an end, warnings about how much they are borrowing on their cards, and allowing customers to choose their payment debt to match their payday.

These new alerts are voluntary. The watchdog is also looking into further changes such as allowing customers to have more control over their credit limit and telling credit card firms to intervene when debts are building up to set up a repayment plan.

Any such changes were unlikely to come into force before 2019.

"Most credit card companies intervene effectively when people miss their payments. We need to get help to people earlier, so that those who are regularly making just their minimum repayments receive the free advice they need," Ms Elson, of the Money Advice Trust said.

Hannah Maundrell, of price comparison site, said: "Right now, it has never been easier to make sure your credit card stays interest-free for a small fee but having a plan to pay off what you owe is even better. Rewriting the rulebook for minimum repayments is a step in the right direction which I hope will empower people to borrow smart."

Richard Koch, of the UK Cards Association, which represents the major credit card companies, said: "There is a real industry commitment to going further and we are in discussion with the FCA in respect of other practical measures to help customers.

"The credit card industry will continue to engage constructively with the regulator in the coming months to ensure that effective and proportionate remedies are developed for these customers."

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