Credit Card Debt ‘Harder to Escape than Previously Thought’

January 9, 2018

Credit card debts are more difficult to escape from a borrower’s perspective than experts had previously understood to be the case.

According to a trio of finance experts from the Bank of England and from the Financial Conduct Authority (FCA), official data in recent years has not taken full account of the extent to which credit card users move their debts around but remain effectively in much the same state of arrears after having done so.

“We find that although a consumer may clear their debt on one credit product, it is not uncommon for them to remain in debt as they transfer balances, take out new credit products or draw down on existing credit lines (such as credit cards),” the experts wrote in a blog recently posted on both Bank of England and FCA websites.

Figures that are now believed to reflect a more accurate picture of indebtedness in the UK suggest that, in November 2016, as much as 89 per cent of all credit card debt was held by people who also had credit card debts two years earlier.

In recent months, the FCA, which regulates the entire financial services sector in the UK, has been working to find ways in which it might force credit card companies to do more to help heavily and persistently indebted consumers throughout the country.

The regulator said last year that it feels credit card companies don’t do enough to support people with problem debts because they can be so consistently profitable for them.

“Because these customers remain profitable, firms have few incentives to intervene,” Andrew Bailey, the FCA’s chief executive, said at the time.

“We want to change this situation so that firms and customers will deal with outstanding debt more quickly, and avoid persistent debt in the first place,” he said.

For its part, the Bank of England has repeatedly expressed concerns in recent months that the rapid rise in personal debt levels across the UK could represent a real risk to health of the overall British economy.

If you live anywhere in Scotland and you’re struggling to cope with your personal debt problems then Scotland Debt Solutions can help. You can contact any of our offices directly to arrange a FREE and confidential consultation.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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