A review by the Financial Conduct Authority (FCA) has found 3.3 million British consumers to be in persistent debt with credit card companies.
As a result of this review, the FCA is proposing that credit card issuers will have to do more to help struggling customers repay their debts, including the suspension of cards under the proposals published by the FCA on Monday.
FCA Chief Executive Andrew Bailey said: ‘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.’
Industry body, the UK Cards Association, agreed with the FCA that the proposals were robust and would address the watchdog?s concerns.
In the past, credit card firms have typically not stepped in because such customers are profitable, with costs to customers on average 2.5 pounds for every pound repaid.
The new FCA proposals will mean that when a customer has been in persistent debt for 18 months, credit card issuers will have to prompt them to make faster repayments if they can afford to do so.
If a customer remains in persistent debt for another 18 months, the credit card firms must propose a repayment plan.
The FCA confirmed that any consumers who confirm that they cannot afford any of the options proposed to repay balances more quickly could see their interest or charges on the debt cut, waived or cancelled. Use of their card would normally be suspended during this period.
The FCA has estimated that by 2030 savings to credit card customers could reach between ?3 billion to ?13 billion.
The proposals also mean say that all customers should be made aware of their right to decline offers of a credit limit increase, and credit card issuers will also have to do more to identify struggling customers much earlier.
Debt relief charity, StepChange, while welcoming the move, said the proposals do not go far enough in stopping credit cards from becoming a form of long-term and expensive debt.
The UK has over 30 million credit card customers, representing around 60 per cent of the adult population.