Credit card debt rules suspended until October due to coronavirus crisis
STRUGGLING credit card users who only make minimum repayments are being given more time to get out of persistent debt.
It comes following concerns over the financial impact the coronavirus outbreak could have on people’s money.
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Responding to the health crisis, the Financial Conduct Authority (FCA) said it is suspending its persistent debt rules until October at the earliest.
Previously, credit card holders who regularly struggle to make repayments were told they faced having their cards cut off starting last month if they failed to respond to warnings from their lender.
Credit card providers were first told by the FCA to start notifying customers of the changes in September 2018.
Customers targeted by the changes include those who’d spent the previous 18 months only repaying the minimum amount of their debt.
How to cut the cost of your debt
BEING in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups and services like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
Lenders were then given another 18 months to contact these customers, including sending at least three letters and urging them to increase their repayments.
This 36-month period came to an end in February 2020.
Banks were also told to offer customers help in repaying their debts over a reasonable period, as decided on a case-by-case basis.
The FCA said the suspended rules apply to customers who have already received updates from their credit card provider.
In an update today, the FCA said: "Given the challenges facing many customers at present we think they should be given more time, until 1 October 2020, to respond to firms’ communications.
"This means that firms would not be obliged by our rules to suspend the cards of non-responders before then.
"This applies both to those who have already received communications from their provider and those that are yet to receive them.
"We will be in touch with firms shortly to confirm details of this proposal."
Stephen Jones, chief executive of banking industry body UK Finance, said banks and lenders will work to support customers financially impacted by coronavirus over the coming weeks.
He added: “This latest update provides welcome guidance for firms in addition to the swift and continuous actions already taken by the UK public authorities and the industry during these unprecedented times.
"Banks, building societies and other lenders in the UK are actively preparing for the negative impacts of COVID-19 and focused on supporting their customers over what will be a challenging period for all."
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