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.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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