Credit Card Firms Urged to Deal with Persistent Debt
The FCA has recommended credit card companies do more to stop customers from staying in persistent debt. Potentially, your provider may cut interest rates.
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If you’ve ever been in persistent debt, you know how disheartening it can be. Even though you’re making minimum payments to your lenders, not making an impact on the balance is often a demoralising experience.
Fortunately, the Financial Conduct Authority (FCA) has issued a statement on this very matter – warning credit card firms they should help customers in this position.
"Blanket" suspension on accounts in persistent debt
The watchdog expressed concern over some lenders reportedly proposing a “blanket” suspension of accounts in persistent debt. Although this probably would not have helped customers to begin with, the organisation stated any account suspensions must be justified. Therefore, if your account was terminated while you were trying to repay your credit card provider, this warning from the FCA suggests this action may not have been reasonable.
Instead, if your account has been in persistent debt for three years, the FCA stated providers should come up with a sensible solution. For example, this could include a repayment plan.
Speaking on the matter, the executive director of the FCA – Jonathan Davidson – said:
“Firms must help customers to reduce the level of debt they have on their credit card more quickly,
“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.”
What is persistent debt?
Your account is generally regarded as being in ‘persistent debt’ if – over an 18-month-period – you pay more in interest rates and charges than you do on the amount owed. This is a state which is very easy to get into if you only make the minimum payments on accounts with high interest. Therefore, the best solution is usually to increase the amount you pay towards the creditor.
Understandably though, this is often easier said than done. This recommendation from the FCA should mean your provider will be more willing to help identify a better solution. Yet, if you’re struggling with multiple debts, this announcement may provide little comfort.
Instead, a consolidation loan could help resolve all these accounts – and leave you in a better financial state as you only make payments to one creditor.
How can debt consolidation help me?
It’s often quite easy for an account to enter ‘persistent debt’ but it’s also frequently regarded as an early indication you need debt help. Although there are a range of solutions to help with this, a debt consolidation loan could be one of the most straightforward.
This loan can be used to repay your lenders and simplify payments. Furthermore, as the money could be in your account within a couple of hours, you could repay your creditors by tomorrow.
To find out more, get in touch through the button below – it could be just the lifeline you’re looking for to get out of persistent debt:
Get Debt Consolidation
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Unsecured Loan Representative 69.9% APR
Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.
Secured Representative 11.7% APR
If you choose to add fees to the loan: Assumed borrowing of £25,000 over 120 months, plus a broker fee of £2,500 and a lender fee of £250 would result in monthly repayments of £345.55, the borrowing rate is 8.6% (variable), the APRC is 11.7% (variable), total charge for credit £16,466.00 and the total amount payable £41,466.00. You can opt to pay the lender and/or broker fees upfront, your adviser will discuss these options with you.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.
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