Are You at Risk of Having Your Credit Card Suspended?
18 months ago the FCA/Financial Conduct Authority, who regulate all things credit, put forth a new regulation stating that banks and lenders need to “identify at-risk customers” who are maintaining balances on their credit cards, using them, and only paying the minimum monthly payments.
Which keeps them in constant debt.
Those whose accounts fall into this category, were given 18 months to begin paying down the balances on the cards; paying more than the monthly minimum payment.
The next step of this new regulation which is to begin in February this year, is that those account holders who are not paying off their balances, will have their accounts frozen or suspended; this to allow them to pay the balances off.
Trying to pay off a credit card while you are still using the card, is like trying to shoot a moving target. It is much more difficult.
This new regulation is putting more responsibility on both lenders and card users, however there are those that are concerned how this could “backfire” on both parties.
The Citizens Advice Scotland’s financial health spokesmen, Myles Fitt stated, “Persistent credit card debt is being tackled by the FCA and some people who have not been paying off their credit cards may be in for reality shock in the new year if they have been ignoring persistent debt letters coming through their letterboxes.”
“These changes will help some people to pay off their debts quicker but we’re concerned about people who are forced to live in persistent debt because of insecure incomes in the first place.”
“These changes could be a real problem for people who are unable to come to an arrangement with their credit card lender and this may trigger an increased demand for help with debts.”
It is estimated by the FCA that there are over 5.5 million card holders who fit the profile of just paying the minimum payments, and maintaining a balance on the card.
Naturally this change will cost the credit card companies a lot of money, which is estimated to be over £1 billion, as they will lose out on the additional interest, fees, and charges they would normally receive.
A spokeswoman for UK Finance stated, “In some circumstances, where a suitable repayment option is not agreed, and in accordance with the new rules, cards might be suspended, so it is really important that customers do not ignore letters received – they should read them carefully to understand their options and contact their credit card provider at the earliest opportunity.”