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.

• 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 835 7453
• Get free, independent and confidential advice from any of the following:
   
  •   StepChange Debt Charity
  www.stepchange.org
  0800 138 1111
  •   Money and Pensions Advice Service
  www.moneyandpensionsservice.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.moneyandpensionsadviceservice.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.

Since 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

• If they can afford it, encourage them to increase their payments so that they pay off their balance more quickly and pay less interest overall

• If they can’t afford it, encourage them to get in touch if they need our help

• Let them know where there they can get free, independent and confidential advice

• Explain the potential consequences of remaining in persistent debt

From June 2019, we started writing to the customers that we wrote to nine months previously and whose accounts are still in persistent debt – and so have been for 27 months in total. This was to encourage these customers to increase their payments if they can afford it or to ask for help if they need it. We will also send a follow up SMS, where we hold a valid mobile number. If we do not hold a valid mobile number then we will send an email instead, where we hold an email address.

* We have chosen Adobe to support us with our digital processes by using their ‘Adobe Sign Software’. Please be aware that Adobe are a separate data controller from TSB, and any personal data you provide will be sent to Adobe and processed in accordance with their terms and conditions of service. You may wish to read their Adobe Terms of Use and Consumer Disclosure before using the link to the online form below. *

If your account remains in persistent debt at month 36, you will have received a letter setting out your options.

Even if you pay off your persistent debt balance straight away, you will still need to contact us to select one of the options, because we need to make sure your account can't fall into persistent debt in the future.

Option 1

If you are able to pay off your debt in 4 years or less, and to make sure your account cannot fall into persistent debt again, we will make the following changes to your Terms and Conditions:

• We will change minimum payment requirements to introduce a new monthly payment. This will allow you to repay your persistent debt balance over four years 

• We will also make changes to make sure that any future spend cannot fall into persistent debt by increasing the minimum payment required on any new transactions. 

• If your current interest rate for cash withdrawals is different from the interest rate that applies to purchases, we will decrease your cash withdrawal rate so that it is the same as your purchase rate

If you are happy to accept these changes to your account then please complete the online form to tell us – link here*.

Option 2

If you would like us to make the changes in Option 1, but are concerned that you will be unable to afford the higher minimum monthly payment please call us on 0345 835 7453, selecting option 1, then option 2. We will discuss the help we can give you to make your monthly payments affordable.

Option 3                             

If you don’t want these changes to apply to your account, you can close your account by calling us on 0345 835 3846. You’ll no longer be able to use your card and will need to pay off your balance at the current interest rate(s) applying to your account. However, this is likely to mean you’ll pay it off less quickly and pay more interest overall, so we would encourage you to consider this carefully

If you do not respond, we will suspend your card from the point detailed in the letter, normally 30 days. We will not change your Terms and Conditions until you contact us. Again, this means that you will pay off the balance less quickly and pay more interest overall, so we would encourage you to speak to us.

However, if you are currently in a repayment holiday, we will give more time to respond before we suspend the use of your card. This means you will have 60 days from the end of your repayment holiday to get in touch with us, before we suspend the use of your card.