Regulator Rebukes Credit Card Firms for Keeping Debtors in the Red
November 4, 2015
The Financial Conduct Authority (FCA) has criticised the practices of credit card companies in the UK for the ways in which they deal with customers who are persistently indebted.
Customers should be encouraged to pay off more of their debt more regularly, if they can afford to, rather than be left to only make minimum repayments on a monthly basis, the regulator has told the industry.
However, for credit card companies, there is currently an incentive to keep people with persistent debts in that same position because they pay out more money to lenders as interest over extended periods of time.
This though should change in order to better protect the interests of consumers who find themselves in debt to credit card companies, the FCA has said.
“This is a really important market in the UK. Around 60 per cent of adults have at least one credit card, and there is an estimated £61 billion in outstanding balances,” said Christopher Woolard, director of strategy at the FCA.
“Our study suggests that the market is working reasonably well for most consumers, with a range of cards on offer. However, for a significant minority who are in persistent levels of debt, the market could potentially work better.”
The FCA’s view is that while credit card companies are quick to contact and try to help people who have reached the point of defaulting on their debts, the same cannot generally be said of people who only make minimum monthly repayments.
Anyone defaulting on their debts is not profitable from the lenders’ point of view, which is why service providers are quick to become proactive in seeing their issues addressed, the FCA says.
On the other hand, having their customers be persistently in debt without defaulting is actually a benefit to lenders and so these people tend not to be contacted about their issues.
This though is a problem because many of the borrowers who manage to avoid defaulting but still struggle with debts could be among those most in need of advice and support on how to manage their money and their credit cards, the FCA has suggested.
If you are finding it difficult to cope with your credit card debts then Scotland Debt Solutions can help. Call one of our experts today to arrange a free consultation.
The start of a new year is the perfect time to take stock of your finances and put plans in place for a financially savvy year ahead. While you may feel your problems are insurmountable, there are always things you can do to help, most of them surprisingly easy. Here are 7 ways you can […]
If you have credit card debt which is attracting a high level of interest, moving this balance onto a lower interest card could save you a considerable amount of money. This process is known as a ‘balance transfer’, and if done correctly, this process could save you money and also reduce the time it takes […]
Many thousands of young Brits are being actively encouraged towards taking on debt and spending borrowed money even before they reach their 18th birthdays. That’s according to the price comparison website comparethemarket.com, whose research suggests that roughly one in four 16 and 17 year olds in the UK have been offered credit cards or asked […]
If you’re in serious debt with no hope of repaying your unsecured creditors, you don’t have to wait for a creditor to take legal action against you. You may be able to take matters into your own hands and apply for sequestration (bankruptcy in Scotland). This also prevents your situation from worsening. There are two […]
If you’re looking to save some money it’s a good idea to make a detailed budget that lets you see where your cash is currently being spent, and offers an overall view of your finances. You’ll need to collect together your income and expenditure details, including annual costs such as insurance, car expenses, birthdays and […]
Scotland has a number of formal debt solutions that can help you deal with a difficult financial situation. It’s advisable to take action as soon as possible, however, to prevent your levels of debt escalating when interest and other charges are added. Obtaining professional advice is key in this respect. An approved money advisor or […]