Financial Conduct Authority (FCA) rules on persistent credit card debt - 36 months actions - Frequently Asked Questions

This ?FAQ? has been developed by UK Finance, on behalf of its members, in consultation with an external stakeholder group which includes broad representation from the debt advice sector.

The objective is to provide some background to the FCA's ?persistent debt? rules, with a particular focus on the 36 months stage of the process, and what the rules mean for customers.

The FAQs have subsequently been updated to reflect changes announced by the FCA on 17 March and 9 April in relation to the coronavirus outbreak.

  • Your credit card provider may be in touch to encourage you to make higher repayments on your credit card account. This is about something called ?persistent debt?. New rules have been introduced by the FCA to help you pay off your debts more quickly and save you money by reducing the cost of your borrowing.
  • Persistent debt is where, over a period of 18 months, you?ve paid more in interest and charges than you?ve repaid of the amount borrowed. Your credit card provider will let you know this and make clear the benefits of repaying more quickly. The purpose of the letter is to encourage you to increase your payments, where you can afford to do so.
  • If you remain in persistent debt for a further 18 months, so for a total of 36 months, your credit card provider will get in touch again to set out ways that would enable you to repay your outstanding balance within a reasonable period, which the FCA sees as normally being between three and four years. They will also provide you with details of sources of free debt advice.
  • In response to the emerging impact of coronavirus, the FCA made two announcements to provide temporary financial relief for customers who are impacted:

    • ? 17 March 2020 - customers who had received a 36 months persistent debt communication should be given more time (up to 1 October) to respond; and
    ? 9 April 2020 - to temporarily suspend the requirement for credit card providers to send persistent debt letters to customers who have been granted a ?payment holiday?.

  • Credit card providers implemented the rules in Aug/Sep 2018, some customers have now been in this situation for a total of 36 months. This is a key stage for the FCA's rules.

  • Initial estimates[1] were that around 2 million accounts could reach this 36 months stage. However, we can now see from industry data[2] that this has reduced to around 950 thousand customers (who have 1.1 million accounts), or just over 2 per cent of all credit card accounts. This provides encouraging evidence of customers increasing their payments in response to the earlier communications within the persistent debt process.

    • [1] https://www.fca.org.uk/publications/policy-statements/ps18-04-credit-card-market-study
    [2] Source: projections from Verisk Financial / Argus

  • If they have not already done so, your credit card provider will contact you to set out options for you to pay off the balance more quickly, usually within three to four years.
  • Different card providers may have different solutions, which may for example include a ?paydown plan?, or perhaps transferring the credit card balance onto a cheaper personal loan.
  • There are some circumstances where your credit card provider may decide to suspend your credit card. They will let you know if they need to do this. See also Question 7.
  • Some credit card providers may also decide to set the minimum payment at a higher level to help you to repay more quickly and so save you money in interest. If they plan to do this, they will write to you to explain, including what you need to do if you can't afford the higher amount.

  • No - keeping up with your minimum monthly payments is the most important thing, but consistently making low payments for a long time is an expensive way to carry longer-term borrowing and these rules have been created to keep your overall costs down.


  • First of all, don't ignore the letter. Read it carefully to understand the options your credit card provider has set out and what they want you to do next. If you need to get in touch with them, do so asap, so you can have a good discussion and agree a way forward that works for you.
  • Following the FCA's announcements linked to coronavirus, you will now have until 1 October 2020 to respond to the letter.
  • The letter will explain what you need to do if you can afford to go ahead with what your credit card provider has suggested, or where you conclude that none of the options are in fact suitable for you. In these circumstances, your credit card provider will need to consider your situation, such as through a review of your income and expenditure, so they can propose any measures to assist you to repay the balance in three to four years. Your card provider will explain what information they need from you.
  • These new rules are about helping you save money over the long term, but if you are worried that you are finding it difficult to meet your current minimum payments, you should talk to your credit card provider, or you can seek free debt advice, especially if you are also worried about managing other debts. Free debt advice is available here.

  • There are circumstances where the FCA's persistent debt rules require a credit card to be suspended at the 36 months stage:

    • (a) If you do not respond to discuss the repayment options proposed within the time specified by your credit card provider. However, following the FCA's announcements linked to coronavirus, you will now have until 1 October 2020 to respond to the letter.
    (b) If you confirm that one or more of the proposed options are affordable, but you indicate that you will not make increased payments.

  • The FCA also expects that it would generally be necessary for your credit card provider to suspend your card where they agree some form of forbearance, such as a reduction in your interest rate, in order to enable you to repay your balance within the required four years.

  • Your credit card provider may also decide to suspend your card where they have an objective reason for doing so, for example where they are concerned about your ability to repay your current level of borrowing. If this happens, they?ll explain why.


  • If having the use of your credit card suspended will cause you significant difficulties with your wider financial situation, it's vital that you engage with your card provider to explain this, so that they can take this into account and consider whether this action remains necessary based on your updated circumstances
  • If you are worried about meeting your everyday bills, you may want to consider seeking free debt advice, which is available here.


  • It may be quite daunting to receive a number of letters of this type, all of which are likely to be asking you to consider different options and referring to possible card suspension - you should read each letter carefully and make sure you understand what you?re being asked to do. Get in touch with the card providers to discuss your options and what is affordable - bear in mind that it's important that you don't commit to payment arrangements which you simply can't afford.
  • Following the FCA's announcements linked to coronavirus, you will now have until 1 October 2020 to respond to the letter.
  • As you have a number of credit cards in persistent debt, your card provider may advise that you should seek free debt advice, particularly if you have a number of other debt commitments, including household bills - free debt advice is available here.


  • No, these specific circumstances will not be shown. Your credit report will continue to reflect whether you have met your contractual minimum monthly payments, but it's important to consider that only making minimum or low payments over a long period can have an affect on your credit rating.

Area of expertise:
Cards
Tags:
Cards Consumer credit

03.03.20

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