The FCA has written to credit card firms instructing them to review their approach to borrowers who are stuck in persistent debt.

The regulator released a statement indicating that it requires its firms to help borrowers who have been caught in a cycle of persistent debt for three years – by proposing and agreeing plans with customers to resolve any situations.

The FCA has outlined concerns that customers might not be responding to letters from their credit card providers advising about them being in persistent debt, and has now encouraged firms to discuss directly any potential repayment arrangements with their customers.

If customers can’t afford the options proposed by the firm, they must be treated with ‘forbearance and due consideration,’ the FCA said, adding that this could include reducing, waiving or cancelling any interest or charges.

Another of the FCA’s concerns is that firms may cancel or suspend credit cards for everyone in persistent debt, including those willing to engage and come to an agreement. In these circumstances, the FCA has urged that firms are not allowed to suspend a credit card without having an objectively justifiable reason.

FCA executive director of supervision for retail and authorisations, Jonathan Davidson, said: “Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly.

“My advice to consumers is don’t bury your head in the sand. If you can’t afford to meet the repayment schedule that the credit card firm is suggesting, don’t be afraid to tell them. If we find firms are not offering their customers the appropriate level of help, we will not hesitate to take action.

“If the firms do this right, we estimate that this could save customers up to £1.3bn a year in lower interest charges.”

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