The FCA is taking steps to address problems faced by borrowers who are in persistent debt due to ever increasing credit card balances. Where a credit card customer is in a situation where, for a period of 3 years or more, they have been paying more in interest, fees and charges than they are paying off their balance, the FCA has told credit card companies they must propose and agree a plan with such customers to resolve the situation.

The FCA has prescribed guidelines that credit card companies must pay heed to so as to ensure that they are acting in the best interests of consumers. The guidelines include:

• Addressing the fact that customers may not respond to letters from their credit card company where they have been in persistent debt by encouraging customers to speak with their credit card company to discuss potential payment arrangements. The guideline does not go as far as requiring credit card companies to actively contact their customers by telephone although that may well come to be viewed as best practice as this new regime takes hold.

• Where a customer simply can’t afford the options proposed by their credit card company, then the company must actively consider taking steps to alleviate the financial burden by, for example, reducing or waiving interest, fees or charges. No guidance is given as to what is required of a credit card company to establish a customer’s true financial position and it may be that further guidance is offered on this at a later stage.

• Credit card companies are not permitted to simply cancel a credit card of a persistent debtor without an “objectively justifiable reason”. Quite what this means remains to be seen.

The FCA has made it clear that if it considers a credit card company is not offering its customer an appropriate level of help, it will “not hesitate to take action”. The FCA has openly expressed the view that if credit card companies approach these new requirements correctly, then they anticipate savings of up to £1.3bn in lower interest charges. It is estimated by sources external to the FCA that about 1.78 million are stuck in persistent credit card debt and therefore this could benefit significant numbers of customers provided they actively engage with their credit card company.