The FCA sent letters to credit card firms asking them to review policies for people “stuck in persistent debt,” and work to devise a repayment plan “in the best interest of the customer,” according to the FCA statement.
The letter sent to credit card CEOs said when firms reach out to customers in debt, it is required that “options must be reasonable.”
Under the FCA’s affordability rules passed in 2018, firms have to send a minimum of three letters detailing repayment terms that won’t have customers in the position of paying more in interest and fees than they are paying on the balance they owe.
“Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly,” according to a statement by Jonathan Davidson, executive director of supervision for retail and authorizations, FCA.
“My advice to consumers is don’t bury your head in the sand. 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,” he added.
The watchdog also wants to ensure that no cards are canceled when a customer is willing to work with creditors on repayment. In that situation, credit card firms should consider reducing, waiving or canceling any interest and fees to eliminate persistent debt.
Davidson estimated that customers could save as much as £1.3 billion annually on interest charges.
Last month, the FCA questioned banks about recently-hiked overdraft fees, some more than doubling. Financial institutions were asked to explain how they come up with overdraft pricing.
New FCA rules starting in April 2020 rules mandate that banks and building societies charge the same for all overdrafts.