The Financial Conduct Authority (FCA) is calling on lenders to assist millions of credit card users who are struggling with “persistent debt”.
It believes that more than 3.3 million Britons are paying out more cash in interest and charges than they are able to repay of their actual borrowing, leaving them in perpetual debt.
The FCA feels that the problem is spiralling out of control and is only set to get worse with rising inflation.
In response it is asking lenders to work closely with their struggling customers in order to draw up faster repayment plans.
It comes after The Office for National Statistics (ONS) warned in January that the average UK household owed £12,887 before mortgages were taken into consideration.
The FCA has since published formal proposals which set out measures to put debt-riddled consumers in “greater control” and improve access to feasible credit plans.
The proposals even go so far as to suggest that, in extreme cases, lenders may have to ‘cancel’ their interest charges.
FCA chief executive Andrew Bailey said: “Credit cards can be a very effective product for consumers, but a significant minority of customers experience real difficulties.
“We expect our proposals to reduce the number of customers in problem credit card debt, as well as putting customers in greater control of their borrowing.
“Persistent debt can be very expensive – costing customers on average around £2.50 for every £1 repaid – and can obscure underlying financial problems.
“Because these customers remain profitable, firms have few incentives to intervene. 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”.
