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New Credit Card Rules Introduced by the FCA

7 Mar 2018


The Financial Conduct Authority (FCA) has yesterday published its final policy statement on new rules for the credit card market. The FCA estimates the changes will save consumers between £310 million and £1.3 billion a year in lower interest charges.


The new rules follow a market study by the FCA, which analysed the accounts of 34 million credit card customers over a period of five years, and surveyed almost 40,000 consumers. Firms have until 1st September 2018 to comply with these new rules which came into force on 1st March 2018.


Figures show that customers in persistent debt pay on average around £2.50 in interest and charges for every £1 that they repay of their borrowing. There are a total of 4 million accounts in persistent debt and firms have few incentives to help these customers because they are profitable.


However, from 1 September, firms will be required to take escalating steps to help once they identify someone as having been in persistent debt over 18 months:


  • After someone has been in persistent debt for 18+ months... lenders must contact customers, prompt them to change their repayment and warn their card may be suspended if they follow the same repayment pattern. They must refer to any debt advice available.


  • After someone has been in persistent debt for 27+ months... They will be sent a reminder of the information above.


  • After someone has been in persistent debt for 36+ months... lenders must offer customers a reasonable way to repay their balance. If customers are unable to pay, the FCA says the firm must show 'forbearance' and may have to reduce, waive or cancel any interest, fees or charges.


Firms who do not comply with the new rules could be subject to action by the FCA.


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.


Christopher Woolard, Director of Strategy and Competition said:


'These new rules will significantly reduce the numbers of customers with problem credit card debt. Credit cards offer customers flexibility to manage their finances and repayments, but with this there is a risk customers can build up and hold debt over a long period of time - without making much headway on the outstanding balance’.


If you have any questions regarding the new rules or FCA compliance generally please contact Andrew Swan – Head of Regulation and Financial Crime or Sheila Ramshaw - Specialist in Regulation and Financial Crime on 0191 211 1503 or contact respectively.

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