Yahoo Finance Britain's indebted credit card customers could save up to £1.3bn under new rules
Britain’s indebted credit card customers could save up to £1.3bn a year under new rules designed to help people who fall into persistent debt.
The Financial Conduct Authority (FCA) has published revised plans that would force lenders to reduce or cancel interest charges for people struggling to repay.
Customers should also be prompted to make faster repayments or be sent recommended repayment plans, the FCA said.
It expects savings would peak in the first few years of being in use at between £310m and £1.3bn.
The FCA also revised up how much it expects the rules to cost lenders to £101m in one-off costs and £18m a year, but it said the benefits would outweigh the business costs.
The FCA estimates that around 3.3m Britons are mired in persistent debt. The watchdog has begun consulting on the changes, which were first outlined in a paper in April.
The proposals we are introducing will save consumers billions of pounds by reducing longer-term borrowing on credit cards
Andrew Bailey, FCA
The updated plans come amid growing concern about UK consumers’ indebtedness. The Bank of England said this summer that it was concerned that unsecured credit was growing faster than wages and warned lenders could face major losses in an economic downturn.
Andrew Bailey, chief executive of the FCA, 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.”
The proposals were drawn up after the FCA conducted a study of 34 million credit card accounts and surveyed nearly 40,000 consumers.
It has also agreed a voluntary scheme with lenders under which customers should not be given unaffordable increases in their credit limits, which it estimates should help 1.4m people a year.
The FCA’s consultation will run until January 25.
“It was never in the industry’s interest that credit card users should be burdened with persistent debt,” commented Bill McCaffrey, a financial services partner at law firm CMS.
“There will be relief that the FCA now seems to have settled on its proposed remedies and extended the implementation period – despite the inevitable and additional industry costs.”
