October 22, 2018

October 22, 2018

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FCA Updates On Persistent Debt

FCA has updated its consultation paper on its proposals for rules to help customers in persistent credit card debt. The revised proposals follow feedback on its April consultation.

Respondents were in favour of FCA’s proposals in principle and it has now done a new analysis of the costs to business of its remedies – the costs are higher than initially indicated, but FCA still thinks the benefits to consumers will outweigh the costs. The changes will be in a new part of CONC 6.7 and will require firms:

  • to monitor a credit card customer’s repayment record and take appropriate action where there are signs of actual or possible financial difficulties – actions might include suspending interest, accepting a few token payments and telling customers of the risks of escalating debt;

  • to establish, implement and maintain an adequate policy for identifying and dealing with customers who show signs of actual or possible financial difficulties even though they may not have missed a payment;

  • to assess, at least once a month (with some exceptions), whether the amount a customer has paid on a credit card balance in the preceding 18 months is less than the total interest, fees and charges they have paid, and to contact the customer to explain the implications of this where they find this to be the case;

  • to help the customer repay more quickly and offer other assistance and guidance – and treat the customer with forbearance and due consideration if the customer advises the options the firm provides are unsustainable; and

  • suspend or cancel the use of a card where the customer has not responded to the firm’s requests.

FCA proposes to give firms 6 months from the date the rules come into force to put the necessary procedures in place. FCA asks for comment on the new proposals by 25 January 2018.

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About this Author

Andrew Barber, Partner, Womble

Andrew is a partner that leads the financial services team in Womble Bond Dickinson's banking and financial services team. He specialises in financial services regulation with a the largest portion of his practice focusing on retail banking and consumer finance matters.

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