FCA publishes update on proposed new rules to help credit card customers in persisten

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The Financial Conduct Authority (FCA) has today published an updated consultation on rules to help customers in persistent credit card debt.

https://www.fca.org.uk/news/press-re...card-customers


CONSULTATION ->>> CP17/43: Credit card market study: persistent debt and earlier intervention remedies - feedback to CP17/10 and further consultation

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Re: FCA publishes update on proposed new rules to help credit card customers in persi

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This follows an April 2017 consultation paper on proposed remedies to help millions of people get out of expensive longer-term credit card debt. These include firms, at designated timeframes, prompting customers to make faster repayments or proposing repayment plans, as well as intervening earlier if customers are struggling to repay.


It also proposes that where a customer cannot afford any of the options proposed to repay their balance more quickly, firms must take further steps to assist them to repay the balance in a reasonable period, for example by reducing, waiving or cancelling any interest or charges.


There was widespread support in principle for the FCA’s proposals, which are expected to lead to savings for customers from lower interest payments as a result of faster repayment. The FCA expects that the savings would peak in the first few years of the proposed rules being in place, at between £310m and £1.3bn per year, before reducing as fewer customers get into persistent debt over time.


Making low repayments on credit cards over a long period can be very expensive and can mask underlying financial difficulty. The FCA’s proposed remedies on persistent credit card debt rebalance incentives so that both firms and customers are encouraged to avoid credit card debt becoming persistent, and customers who cannot afford to repay more quickly are given help.


The consultation includes a revised analysis of the costs to businesses of the proposed remedies, to take into account additional data the FCA has received and some data that was omitted from previous calculations. The FCA is seeking further views before finalising proposals, in line with their statutory and public law consultation duties. The expected benefits to consumers from the FCA’s proposals remain significantly higher than the revised costs to businesses (up to £101m in one-off costs at an outside estimate and £18m per year).


The paper also sets out how the FCA’s has changed its thinking on aspects of its persistent debt proposals in light of the feedback it has received. It also gives interested parties the opportunity to submit new evidence or comments.


The consultation will run for six weeks, ending on 25 January 2018, and the FCA expects to make new rules as early as possible next year.



Andrew Bailey, FCA Chief Executive, said:


'The proposals we are introducing will save consumers billions of pounds by reducing longer-term borrowing on credit cards, which can be very expensive and can hide real financial hardship. We remain committed to action to protect consumers in the credit card market as soon as possible.'
The FCA’s remedies are based on its in-depth study of the credit card market, which analysed 34 million credit card customers’ accounts over five years and surveyed nearly 40,000 consumers to build up a comprehensive picture of credit card use.
The FCA also wants to ensure that customers are not given unaffordable increases to their credit limits and that they have proper control over those limits, and has agreed voluntary measures with the industry to address this. These include customers in persistent debt for 12 months not receiving offers of credit limit increases which would result in around 1.4m accounts per year not receiving such offers.
Notes to editors

1. CP17/43: Credit card market study: persistent debt and earlier intervention remedies - feedback to CP17/10 and further consultation
2. The consultation will close on 25 January 2018.
3. In April the FCA proposed new rules for credit card firms.
4. Inforgraphic: CP17/43: Credit card market study research
5. Infographic: CP17/43: Helping customers in persistent debt

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Re: FCA publishes update on proposed new rules to help credit card customers in persi

DRAFT - consumer credit (earlier intervention and persistent debt) instrument 2018

to make the following changes/additions ( rest is on https://www.fca.org.uk/publication/c...on/cp17-43.pdf page 62 onwards )

Business practices: credit cards
6.7.3A R A firm must monitor a credit card customer’s repayment record and any other relevant information held by the firm and take appropriate action where there are signs of actual or possible financial difficulties.

6.7.3B G (1) Circumstances in which there are signs of actual or possible financial difficulties include where there is a significant risk of one or more of the matters set out in CONC 1.3.1G(1) to (7) (Guidance on financial difficulties) occurring in relation to the credit card customer.

(2) Examples of appropriate action as referred to in CONC 6.7.3AR would include the firm doing one or more of the following, as may be relevant in the circumstances:

(a) considering suspending, reducing, waiving or cancelling any
further interest, fees or charges (for example, when a
customer provides evidence of financial difficulties and is
likely to be unable to meet payments as they fall due or is
only able to make token payments, where in either case the
level of debt would continue to rise if interest, fees and
charges continue to be applied);

(b) accepting token payments for a reasonable period of time in
order to allow a customer to recover from an unexpected
income shock, from a customer who demonstrates that
meeting the customer’s existing debts would mean not being
able to meet the customer’s priority debts or other essential
living expenses (such as in relation to a mortgage, rent,
council tax, food bills and utility bills);

(c) notifying the customer of the risk of escalating debt,
additional interest, fees or charges and of potential financial
difficulties; and

(d) providing contact details for not-for-profit debt advice bodies
and encouraging the customer to contact one of them.

(3) A customer paying the minimum amount required under the agreement is not, by itself, a sign of possible or actual financial difficulties under CONC 6.7.3AR. It may, however, be such a sign
where, for example, a customer with a pattern of paying more than the minimum required payment reduces the payments to the minimum required payment due, but their pattern of drawing down credit on the card does not materially change.

(4) In determining what is “appropriate action” under CONC 6.7.3AR, a firm should take into account any steps it has taken under CONC 6.7.30R, CONC 6.7.31R or CONC 6.7.37R.

6.7.3C R A firm must establish, implement and maintain an adequate policy for identifying and dealing with customers showing signs of actual or possible financial difficulties, even though they may have not missed a payment.

6.7.3D G The policy referred to in CONC 6.7.3CR is in addition to the policy required
under CONC 7.2.1R.