Credit card debt relief plans still pose risks

PROPOSALS to help people break free of long-term credit card debts could still leave some borrowers vulnerable, according to Citizens Advice.

The Financial Conduct Authority (FCA) has published an update on proposed changes to help credit card customers in persistent debt and is seeking further views ahead of new rules it expects to make as early as possible next year.

Plans include firms prompting customers to make faster repayments or proposing repayment plans, as well as stepping in earlier if customers are struggling to repay.

Where a customer cannot afford any options proposed to repay their balance more quickly, firms would take further steps to help them to repay the balance in a reasonable period, for example by reducing, waiving or cancelling interest or charges.

In an update, the FCA said it has received “widespread support” in principle for its proposals.

The regulator said it also wants to ensure that customers are not given unaffordable increases to their credit limits.

It said it has agreed voluntary measures with the industry to address this – including customers in persistent debt for 12 months not receiving offers of credit limit increases which would result in around 1.4 million accounts per year not receiving such offers.

But Gillian Guy, chief executive of Citizens Advice said: “The FCA’s voluntary agreement with credit card companies still leaves people vulnerable to building up problem debt.”

She said: “There isn’t a single good reason to allow unsolicited increases to continue. If we are to stop people getting trapped into debt spirals, the FCA should use the extended consultation period to reconsider the voluntary agreement and end the damaging practice of raising people’s limits without their consent.”

Andrew Bailey, FCA chief executive, said: “The proposals we are introducing will save consumers billions of pounds by reducing longer-term borrowing on credit cards, which can be very expensive and can hide real financial hardship.

“We remain committed to action to protect consumers in the credit card market as soon as possible.”