The FCA’s new rules on persistent credit card debt come into force today (1 March 2018). Firms have until 1 September 2018 to comply.

The new rules require firms to take a series of steps to try and encourage customers in “persistent debt” to change their credit card repayment habits. Subject to some limited exceptions, customers are considered to be in persistent debt if they have paid more in interest and charges than principal over the previous 18 months.

Firms must communicate with a customer who falls into persistent debt and, amongst other things: explain that increasing the level of repayments would reduce the cost of borrowing and the amount of time it would take to repay the balance; encourage the customer to contact the firm to discuss the customer’s circumstances; and warn the customer of the potential implications or remaining in persistent debt for two consecutive 18 month periods.

If the customer’s behaviour does not indicate that they will be moving out of persistent debt, a further communication in similar terms must be sent between 9 and 10 months after the initial communication.

If a customer remains in persistent debt for two consecutive 18 month periods, the firm must take steps to help the customer repay their balance more quickly. These steps can include increasing the amount of the minimum monthly repayments, transferring the balance to a new fixed-sum unsecured loan and suspending or cancelling the use of the credit card.

The new rules are set out in CONC 6.7.27 – 6.7.40.

The policy statement can be read here: PS18/4