Credit card firms urged to axe fees for customers drowning in debt

CREDIT card giants have been told they should cancel ruinous interest charges and fees on desperate customers drowning in debt.

Banks and finance companies stand accused of giving out credit cards to millions who have no real chance of clearing their bill. As a result they are hit with high interest rates and penalty charges that are linked to financial meltdown, family break- up and suicide. The Financial Conduct Authority is taking action amid concerns that millions have been dragged into persistent debt and ripped off by up to £ 1.3billion a year. One market analysis found more than three million credit card holders, with a total of four million accounts, were mired in long- standing debt. These customers typically pay around £ 2.50 on average in interest and charges for every £ 1 repaid off their debt. The FCA said credit card providers should consider cutting or waiving fees for those classed as being in persistent debt. As a result, card companies are to send out letters to struggling customers setting out options to clear the outstanding debt over several years. In some cases banks have cancelled credit cards, which could create its own problems for those with money troubles. The regulator suggested this should not objectively happen justifiable without having reason. an The FCA’s Jonathan Davidson said: ‘ Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly.

‘ If a customer cannot afford the firm’s proposals, the firm must offer forbearance, potentially including reducing, waiving or cancelling any interest, fees or charges.

‘ My advice to consumers is don’t bury your head in the sand. If you can’t afford to meet the repayment schedule that the credit card firm is suggesting, don’t be afraid to tell them. If we find firms are not offering their customers the appropriate level of help, we will not hesitate to take action.

‘ If the firms do this right, we estimate this could save customers up to £ 1.3billion a year in lower interest charges.’

If people are concerned about persistent credit card debt or are dealing with multiple credit cards, free help is available from the government- backed Money Advice Service. Which? Money expert Gareth Shaw, said: ‘ Millions of people are trapped in persistent debt, so it’s right the regulator is taking steps to encourage banks to help their customers break this cycle.’

The banking and card industry trade body UK Finance said: ‘ The FCA’s new persistent debt rules are designed to help customers to reduce the cost of their borrowing by encouraging them to pay back their credit card balance quicker, where they can afford to do so. Where customers have been in this position for 36 months, card providers will set out options to help them to repay.’

‘ Rip- off charges of £ 1.3bn a year’