Five MILLION have credit card debts they can’t repay as City watchdog warns lender must do more to help
FCA boss Andrew Bailey slams card providers for not doing enough to help the most hard-up customers
FIVE million consumers are struggling to pay their credit card debts, the chief of the City watchdog has warned.
Financial Conduct Authority (FCA) boss Andrew Bailey slammed lenders for not doing enough to help those customers "with persistent credit debt."
Speaking at the annual Mansion House Dinner, Mr Bailey said some customers were paying as much as £2.50 in interest and charges for every pound they borrow.
He said: "Five million people experience real difficulties in paying off their balance, and credit cards have become a source of long-term expensive debt, something for which they were not designed.
"Firms can lack incentives to tackle this as these customers are profitable.";
The credit card market is hugely competitive, with many lenders offering attractive and lengthy introductory 0 per cent deals on balance transfers and purchases.
But Mr Bailey said these offers can tempt the "less well-off" who will end up paying just the minimum payment each month and see their debt spiral.
He said: "We are concerned about the cost and terms of such credit and the propensity for over-indebtedness.
"Some of the terms encourage over-indebtedness with little or no incentive to pay down debts."
CREDIT CRISIS More than 3 million Brits have credit card debt they cannot pay
There are increasing concerns that unsecured personal debts are causing a strain on millions of households.
Earlier this year Citizens Advice accused credit card companies of pushing its most vulnerable customers into further debt by raising credit limits without asking.
Mr Bailey added while credit has a role to play in the economy, the FCA wants people to get "assistance much earlier"; from lenders if they are struggling to pay.
5 steps to get out of debt
- WORK out how much you owe. If your debt repayments excluding your mortgage take more than 20 per cent of your net monthly income you are entering a danger zone and must take steps to cut back.
- Budget. Taking the time to come up with an accurate budget to help keep track of your spending makes it easier to come up with a schedule for repaying your debts.
- Be disciplined. Don’t borrow more money or take on any debts until you have repaid what you already owe.
- Switch energy supplier and bank accounts. Shopping around for cheaper gas and electricity can save you hundreds of pounds.
- Move your debt onto a 0 per cent balance transfer credit card, which will give borrowers more time to pay off their debt and are interest-free for a set period of time.
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