On Thursday, the City watchdog delivered good news for people that have a credit card bill that is as long as their arm, as the agency confirmed that it would continue with plans to cut charges on plastic.
The proposals of the Financial Conduct Authority (FCA), which were first drafted in a consultation paper in April, are directed at helping millions of consumers get out of expensive long-term debt on their credit cards.
In an updated consultation on Thursday, the FCA explained the details of those plans, which propose that firms should advise customers to pay back their debt more quickly. If they cannot, credit card companies must take extra steps such as reducing – and even cancelling – charges interest.
The move may cost businesses more than what was originally estimated, warned the FCA. The agency published revised projections on one-off costs amounting to up to £101m, dropping afterwards to £18m per year.
However, the watchdog said that the benefits to consumers were “significantly” higher compared to the costs, with credit card users collectively saving around £310m to £1.3bn during the first few years of the suggested rules. This would then theoretically decrease as customers manage to draw themselves out of persistent debt.
Andrew Bailey, the FCA’s chief executive, stated: “The proposals we are introducing will save consumers billions of pounds by reducing longer-term borrowing on credit cards, which can be very expensive and can hide real financial hardship.
“We remain committed to action to protect consumers in the credit card market as soon as possible.”
The FCA is requesting responses to its consultation by the 25th of January, after which it plans to execute the changes as soon as possible.