The FCA published its final policy statement on the new rules for the credit card market. It is estimated by the FCA that lower interest charges will save consumers between £310 million and £1.3 billion a year.
The changes are being introduced following a study of the credit card market. The study analysed the accounts of 34 million credit card customers over a period of five years and surveyed almost 40,000 consumers. The new rules will be implemented as of the 1st of March 2018 however, credit card firms will have until the 1st of September to comply.
The new rules will reduce the number of customers who overspend and get into debt. Credit cards allow people to manage their finances however there is always the risk of getting into financial trouble, the new regulations will prevent this from happening.
Firms who do not comply with the new rules could be subject to action by the FCA.
According to information from the FCA website under these new rules firms will be required to take a series of escalating steps to help customers who are making low repayments over a long period, beginning when the customer has been in persistent debt over 18 months. After this time firms need to contact customers prompting them to change their repayment and informing them their card may ultimately be suspended if they do not change their repayment pattern.
Once a consumer has been in persistent debt for 36 months, their provider will have to offer them a way to repay their balance in a reasonable period. If they are unable to repay the firm must show the customer forbearance. This may include reducing, waiving or cancelling any interest, fees or charges.
Credit card firms have also agreed to voluntary measures, which will give customers control over increases to their credit limit. Under the measures agreed by credit card firms customers can opt-out from receiving automatic credit limit increases. Customers in persistent debt for 12 months will not be offered credit limit increases, this should result in around 1.4m accounts per year not receiving such offers.