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Fears that those in credit card debt could have their credit cards cancelled without warning were put at ease with this week’s announcement from the Financial Conduct Authority (FCA) that lenders needed to review their approach to persistent debt customers.
The FCA, a finance industry regulator, has instructed lenders to help those in a cycle of debt for at least three years by agreeing plans with customers to pay off their debts. As part of this requirement, lenders have been contacting customers to urge them to discuss repayment plans with their lender. However, it was feared that those in persistent debt could find that their credit card had been cancelled without warning, even if they had made repayment plans with their lender.
This week’s announcement from the FCA has stated that lenders would not be allowed to suspend a credit card without having an objectively justifiable reason, with the regulator highlighting concerns that lenders may cancel or suspend credit cards for everyone in persistent debt. In addition to this, the FCA has revealed concerns that customers may not respond to letters from their credit card provider, in which case it urged lenders to encourage customers to speak with them to discuss potential repayment plans and help find solutions if customers cannot afford the proposed repayments.
Commenting on this week’s announcement, Jonathan Davidson, executive director of Supervision for Retail and Authorisations at the FCA, said: “Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly. If a customer cannot afford the firm’s proposals for how to do this, the firm must offer forbearance, potentially including reducing, waiving or cancelling any interest, fees or charges.
“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.”
Rachel Springall, finance expert at Moneyfacts.co.uk, added: “The FCA may well have thrown struggling credit card borrowers a lifeline today, as its warning could stop lenders from cancelling a credit card without a justifiable reason.
“There may well be borrowers out there who are keeping up with the minimum repayments but are unable to pay more each month, and these borrowers need support.
“Since the persistent debt proposals were announced, credit card providers have cut down the length of interest-free balance transfer offers, of which there is a record low amount of deals available now. Once the longest offer was for a 43-month interest-free balance term, while the longest today is just 29 months, a significant difference.
“Hopefully this interjection from the FCA will protect vulnerable consumers who need more guidance on ways to reduce their debts. However, if card providers are forced to reduce or abandon interest charges on debts, then this could impact the range of credit card deals that they are prepared to offer overall. It will be interesting to see what credit card providers will do in the months to come."
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Just over one in five Brits are planning on taking a holiday during the upcoming Queen’s Jubilee weekend, according to Barclaycard’s latest Consumer Spending Index. Of this number, 84% of respondents are planning a trip abroad. “While concerns around rising household bills may continue to hamper spending on non-essential items, the upcoming Platinum Jubilee Weekend and summer months should provide opportunities for Brits to spend on celebrations and make the most of warmer weather,” said José Carvalho, Head of Consumer Products at Barclaycard.
Just over one in five Brits are planning on taking a holiday during the upcoming Queen’s Jubilee weekend, according to Barclaycard’s latest report.
From 1 June, Buy Now Pay Later (BNPL) provider Klarna will start sharing its customers payments made on time, late payments, and unpaid purchases with credit reference agencies. This means that if a consumer falls behind on any repayments, their credit score will worsen. Equally, if a consumer repays their debts on time their credit rating will improve.
The UK’s biggest Buy Now Pay Later provider will share its customer debt and payments with Experian and TransUnion from 1 June.
There are 20.2 million UK adults who may have difficulty accessing credit from mainstream lenders according to fintech company TotallyMoney and accounting firm PWC. This is likely due to minor adverse credit history, volatile incomes which can impact affordability assessments, or minimal credit history. People who fall into this category are often referred to as “under-served.”
There are 20.2 million UK adults who may have difficulty accessing credit from mainstream lenders.
Just over one in five Brits are planning on taking a holiday during the upcoming Queen’s Jubilee weekend, according to Barclaycard’s latest Consumer Spending Index. Of this number, 84% of respondents are planning a trip abroad. “While concerns around rising household bills may continue to hamper spending on non-essential items, the upcoming Platinum Jubilee Weekend and summer months should provide opportunities for Brits to spend on celebrations and make the most of warmer weather,” said José Carvalho, Head of Consumer Products at Barclaycard.
Just over one in five Brits are planning on taking a holiday during the upcoming Queen’s Jubilee weekend, according to Barclaycard’s latest report.
From 1 June, Buy Now Pay Later (BNPL) provider Klarna will start sharing its customers payments made on time, late payments, and unpaid purchases with credit reference agencies. This means that if a consumer falls behind on any repayments, their credit score will worsen. Equally, if a consumer repays their debts on time their credit rating will improve.
The UK’s biggest Buy Now Pay Later provider will share its customer debt and payments with Experian and TransUnion from 1 June.
There are 20.2 million UK adults who may have difficulty accessing credit from mainstream lenders according to fintech company TotallyMoney and accounting firm PWC. This is likely due to minor adverse credit history, volatile incomes which can impact affordability assessments, or minimal credit history. People who fall into this category are often referred to as “under-served.”
There are 20.2 million UK adults who may have difficulty accessing credit from mainstream lenders.
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