FCA credit card rule change shakes up market
(2 January 2020 – United Kingdom) Thousands of credit card customers could see their accounts suspended in 2020 due to the Financial Conduct Authority’s (FCA) new affordability rules.
Major credit card providers including Barclays, Lloyds and Royal Bank of Scotland (RBS) were implemented in 2019 to identify customers who had been in persistent debt for at least 18 months and have had a further 18 months to convince customers to increase their payments.
The regulations are targeted at customers in persistent debt for at least 36 months, who end up paying more in interest fees and charges than the original amount they borrowed. Most have made a long-term habit of only making minimum payments each month, which often masks underlying financial troubles. 60 percent of the UK’s population own a credit card, equating to about 30 million people.
The FCA has estimated that about 5.6 million credit accounts may be held by customers who are struggling financially, and that nearly 2 million may fail to raise their payments before the 36-month period is up. The rules are expected to cut into revenues for credit card companies.
The FCA declared it will save customers up to £1.3 billion per annum. “Consumer stress and related financial difficulties would be reduced by resolving debt problems sooner. The total cost savings were expected to have reached between £3 billion and £13 billion by 2030” the FCA stated in its original policy paper.