CP17/10: Consultation on persistent debt and earlier intervention remedies

© Financial Conduct Authority 2017 Helping customers in persistent debt Our proposals We estimate that more than 3 million credit cardholders – with a total of 4 million accounts – are in persistent debt. This means that the customer has paid more in interest and charges than they have repaid of their borrowing over an 18 month period, under our denition. These customers pay on average around £2.50 in interest and charges for every £1 repaid. Firms have few incentives to address customers with persistent debt as these customers are protable. Our proposals are intended to rebalance incentives so that both rms and customers are encouraged to avoid credit card debt becoming persistent, and customers who cannot afford to repay more quickly are given help. The real cost of making minimum repayments Interest paid: £4,192 Interest paid: £1,576 Interest paid: £879 A customer who borrows £3,000 on a credit card with an APR of 19%, and only makes minimum repayments – starting at £74 per month and reducing over time – would typically take 27 years and 7 months to pay it of (assuming no further spending on the card). If the customer xed their repayments at £74 per month rather than only making minimum repayments, they would pay it off in 5 years and 2 months. If they set their monthly repayment at £108 per month, they would their balance off in 3 years. Example 1: Example 2: Example 3: Find out more at www.fca.org.uk/ credit-card-market-study