The Financial Conduct Authority (FCA) has recently set out proposals that could lead to credit card companies cancelling any interest or charges in a bid to assist customers clearing debt.
Firms would be encouraged to work more closely with people in debt and set out a faster repayment plan which could be assisted by the waiving of interest charges on that debt.
The FCA states that “customers in persistent debt are profitable for credit card firms who do not routinely intervene to help them.” It estimates that 3.3 million people are in persistent, long standing debt.
The nuts and bolts of the proposals are that after 18 months firms should prompt debtors to make faster repayments. After 3 years providers must propose a repayment plan to help clear the debt more quickly. Finally, if a debtor can still not afford to repay the main debt more quickly credit card companies should consider reducing or waiving any interest charges.
Certainly persistent ongoing debt can be very expensive in terms of interest payments. Debtors can end up paying more in interest charges than actually paying off the debt itself. They’re then caught in a downward spiral of simply paying interest on their credit cards each month and not reducing the original debt.
Of course there are more formal long standing insolvency procedures to enable people to deal with their underlying debt problems or insolvency. These include a debtor applying for their own bankruptcy (debtors petition), an Individual Voluntary Arrangement (IVA), debt settlement where an amount of money is offered to a creditor to settle their debt in full and final settlement, a Debt Management Plan (DMP) or refinancing the debt (such as remortgaging).
All of the above options are possible in addition to the proposals made by the FCA. Of course, each option needs careful consideration and depends on the financial debt position of the person in question.
A debtor should always seek free, independent impartial debt advice before taking any of the above options.
To speak to an experienced debt solicitor for comprehensive legal advice, please call 0845 287 0939 or contact us online today.