Persistent debt

‘Persistent debt’ means that, over an 18-month period, the amount that a customer is paying in interest, fees and charges on their credit card is more than they are repaying towards the amount they have borrowed.

This is a term that the FCA has developed to identify customers who are at risk of paying more in interest and who may struggle to repay the credit card debt if they don’t take steps to change how they use and manage their credit card.

Typically, this will be where a customer is making just the minimum payment each month on their credit card. So, most of the payment covers the interest, plus any fees and charges, with a smaller amount going towards repaying the balance.

www.cardcosts.org.uk has a calculator which shows how much interest a customer could potentially save, or how much quicker they could clear their balance by increasing payments.

From September 2018, credit card providers, including TSB, have been writing to customers whose accounts meet the FCA’s definition of persistent debt over the previous 18 months to:

• Make them aware
• Encourage them to increase their payments so that they pay off their balance more quickly and pay less interest overall
• Encourage them to get in touch if they need our help
• Let them know where they can get free, independent and confidential advice
• Explain the potential consequences of remaining in persistent debt

From June 2019, we’ll start writing to the customers that we wrote to 9 months previously and whose accounts are still in persistent debt - and so have been for 27 months in total – again, encouraging them to increase their payments if they can afford it or to ask for help if they need it.

If, after a further nine months (so, 36 months in total) a customer is still continuing to pay more in interest, fees and charges than on reducing their balance, we are required to take further steps to support them. This may include:

• stopping them from being able to use their credit card, either temporarily or permanently, in order to prevent them from getting into further debt;
• increasing their contractual monthly minimum payment. Taking into account our understanding of their ability to make repayments, we can change their minimum payment if we reasonably believe they are in persistent debt based on their payment history to date, and it is reasonable for us to do so. We will tell customers before we do this.

• Increase their monthly payments if they can afford to:
  • To avoid being in persistent debt, a customer’s monthly payment needs to be high enough to pay off more of their outstanding balance than they are paying in fees and interest
  • The more a customer pays each month, the quicker they will clear their balance and the less they will pay in interest
  • www.cardcosts.org.uk has a calculator which shows how much interest a customer could potentially save, or how much quicker they could clear their balance
• Get in touch with us if they’re worried about paying more or if they feel that their borrowing is getting difficult to manage by calling us on 0345 609 9283
• Get free, independent and confidential advice from any of the following:
   
  StepChange Debt Charity
  www.stepchange.org
  0800 138 1111
  Money Advice Service
  www.moneyadviceservice.org.uk
  0800 138 7777
  Citizens Advice Bureau (CAB)
  www.citizensadvice.org.uk
   
  National Debtline
  www.nationaldebtline.org
  0808 808 4000
   

  StepChange and the Money Advice Service also have some specific persistent debt advice pages which can be found here:

  https://www.stepchange.org/debt-info/persistent-credit-card-debt.aspx
  https://www.moneyadviceservice.org.uk/en/articles/persistent-debt

If customers can afford to pay more to help reduce their balance, there are several different payment methods. These can be found on the back of statements and include:

• Online through a current account – for a TSB current account, customers can register for internet banking at tsb.co.uk
• In branch
• Over the phone

The easiest way to make monthly payments is by Direct Debit. To set up a Direct Debit, or to increase the amount of an existing one, customers can call us on 0345 835 3846.