The City watchdog has ramped up the pressure on banks and credit card firms with a crackdown on card debts that could result in interest being scrapped for struggling borrowers.
The Financial Conduct Authority (FCA) has unveiled a host of proposals that would force firms to help consumers labouring under long-term credit card debts, including cancelling interest or other charges for customers who are unable to clear their balances through a repayment plan.
It comes amid mounting concern about the rise of so-called “persistent” card debts, with the regulator estimating that there are approximately 3.3m people who pay more in interest and charges than they repay of their borrowing over 18 months.
“Because these customers remain profitable, firms have few incentives to intervene,” said Andrew Bailey, the chief executive of the FCA. “We want to change this situation so that firms and customers will deal with outstanding debt more quickly, and avoid persistent debt in the first place.”
Analysts said the watchdog’s plans threatened banks including Barclays, the UK’s leading credit card business with a 26pc market share through its Barclaycard division, as well as Lloyds Banking Group, which is seeking to boost its share to 25pc by acquiring MBNA from Bank of America for £1.9bn. Lloyds struck the deal in December but is waiting for the competition regulator’s approval.
Smaller firm Provident Financial, the doorstep lender that has pushed into credit cards through its Vanquis division, could also be vulnerable to the FCA’s measures because it targets sub-prime borrowers.