New FCA rules could see thousands of people have their credit cards suspended.

New rules from the Financial Conduct Authority, FCA, are due to come into force next month.  The new rules mean that thousands of people struggling to pay back their credit card debt could see their accounts suspended.

FCA told banks to identify at-risk customers in September 2018.

Back in September of 2018 the FCA told banks that should identify customers who were at risk of falling into more debt.  Those consumers who were only making minimum interest payment should be given 18 months to start to bring down the capital sum.

For those who have been unable to do this, they could find the banks taking further action.  This may include suspending or even closing accounts.

Customers who have failed to respond to the banks or credit card companies could see their accounts affected as early as next month.

FCA says new rules designed to help people.

The FCA said the regulations are designed to help people in ­persistent debt by forcing them to agree a repayment plan.

However, for the millions of households struggling to pay essential bills, it could mean more people falling into debt. Many households use their credit cards to get through to the next payday.

Citizens Advice Scotland has warned the scheme could backfire on people living constantly on borrowed money.

The charity’s financial health spokesman, Myles Fitt, said:-

“Persistent credit card debt is being tackled by the FCA and some people who have not been paying off their credit cards may be in for reality shock in the new year if they have been ignoring persistent debt letters coming through their letterboxes.

“These changes will help some people to pay off their debts quicker but we’re ­concerned about people who are forced to live in persistent debt because of insecure incomes in the first place.

“These changes could be a real problem for people who are ­unable to come to an ­arrangement with their credit card lender and this may trigger an increased demand for help with debts.”

5.6million credit card accounts are held by customers who are struggling financially across the UK.

The banks and credit card providers, including Barclays, RBS and Lloyds were told to identify customers who had been in debt for at least 18 months. 

They were then given a further 18 months to convince them to increase their payments in order to begin paying off the debt.

The FCA regulations were designed for customers who ended up paying more in interest fees and charges than the original amount they ­borrowed.

Many would have been making minimum payments each month in order to keep open their line of credit.

Bank of England figures show borrowers repaid £120million in total card debt in November.

The Banks were told they had to send at least 3 letters to customers telling them they had to raise their payments.  They must then offer ­alternative ways of repaying more quickly. This was usually over a period of three to four years. These could include transferring a credit card balance to a ­personal loan with lower interest.

The new rules are expected to cut into revenues for credit card firms by up to £1.3billion a year.

Households are estimated to have paid back more than they spent on credit cards in the ­run-up to Christmas for the first time in six years.

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