27 February 2018

FCA: New credit card rules introduced by the FCA

The Financial Conduct Authority (FCA) has published its final policy statement on new rules for the credit card market. The FCA estimates the changes will save consumers between £310 million and £1.3 billion a year in lower interest charges.

The new rules come into force on 1 March 2018, but firms have until 1 September 2018 to comply. The changes will provide more protection for credit card customers in persistent debt or at risk of financial difficulties.

The changes are being introduced following a comprehensive study of the credit card market. The study analysed the accounts of 34 million credit card customers over a period of five years, and surveyed almost 40,000 consumers.

Christopher Woolard, Director of Strategy and Competition said:

'These new rules will significantly reduce the numbers of customers with problem credit card debt. Credit cards offer customers flexibility to manage their finances and repayments, but with this there is a risk customers can build up and hold debt over a long period of time - without making much headway on the outstanding balance.

'Under these new rules firms will have to help customers to break the cycle of persistent debt and ensure customers who cannot afford to repay more quickly, are given help.'

Figures show that customers in persistent debt pay on average around £2.50 in interest and charges for every £1 that they repay of their borrowing. There are a total of 4 million accounts in persistent debt and firms have few incentives to help these customers because they are profitable.

Under these new rules firms will be required to take a series of escalating steps to help customers who are making low repayments over a long period, beginning when the customer has been in persistent debt over 18 months. After this time firms need to contact customers prompting them to change their repayment and informing them their card may ultimately be suspended if they do not change their repayment pattern.

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