In April 2017, we blogged that the FCA published Consultation Paper 17/10: Credit card market study: consultation on persistent debt and earlier intervention remedies (CP17/10). CP17/10 proposed measures to tackle persistent credit card debt and encourage earlier intervention. In particular, the FCA set out proposed new rules about the treatment of customers whose debt persists over 18 to 36 months.
The FCA has now published Consultation Paper 17/43: Credit card market study: Persistent debt and earlier intervention remedies – feedback on CP17/10 and further consultation (CP17/43). CP17/43 sets out the responses to the feedback the FCA received to CP17/10 and describes the changes it is making to the final draft rules and guidance on persistent debt. CP17/43 also sets out revisions to the original cost benefit analysis (CBA).
In light of responses received to CP17/10, the FCA has made the following changes to the draft rules and guidance on persistent debt:
- content of communications to customers at 18, 27 and 36 months: the FCA has clarified in its guidance that its rules do not specify the form of words firms must use in their persistent debt communications at 18, 27 and 36 months. Firms can therefore, tailor the language and tone of these communications to the circumstances of the customer;
- warning to customers that card payment suspension may be reported to Credit Rating Agencies (CRAs): the FCA has replaced the requirement for firms to warn customers in their communications that card suspension may be reported to CRAs with a provision that firms make customers aware of the potential implications of continuing with low repayments;
- referrals to not-for-profit debt advice: the FCA has clarified that firms, in their communications may, in addition to referring the customer to not-for-profit debt advice, also provide a customer with the name and contact details of one or more authorised persons with permission for debt counselling. This is provided that doing so is consistent with the firm’s wider regulatory obligations;
- 3 – 4 year repayment period: the FCA has added guidance that, while it expects 3 – 4 years to be a reasonable repayment timeframe for customers reaching the 36 month intervention point, a slightly longer period than 3 – 4 years may be reasonable. But this is only in exceptional circumstances and where this results in no additional cost to the customer; and
- implementation period: the FCA proposes to give firms a total of 6 months for implementation. This is so they can do what is required to amend their contracts to reflect the new persistent debt interventions and provide any necessary advance notice to customers. An additional 3 months over what the FCA proposed in CP17/10 may also give firms an opportunity to phase implementation. The FCA does not consider that it should extend the proposed implementation to 12 or 18 months, as this would significantly delay help to customers already in persistent debt.
CP17/43 notes that the FCA has not made any changes to its earlier intervention proposals.
In relation to its persistent debt proposals, the FCA notes that some of the industry responses to CP17/10 indicate that the need to make changes to credit card arrangements would have more significant implications. In particular, the estimated one-off implementation costs would be significantly higher than was originally set out in CP17/10. Whilst the FCA considers that its proposals are fair, proportionate and appropriate to improve outcomes for consumers in persistent debt or at risk of falling into persistent debt it is conducting a further 6 week consultation. The deadline for further comments on these proposals is therefore 25 January 2018.
View Second FCA consultation on persistent debt and earlier intervention, 14 December 2017