Following the Financial Conduct Authority’s (FCA) study of the credit card market, service improvements have been introduced across the industry to help customers better manage their credit cards. This support includes letting customers know when they are reaching their credit limit, providing them with the option to change their payment date, giving them greater control over increases in their credit limit, and raising awareness of 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 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.
For customers who have received a 36 month Persistent Debt letter
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.
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*.
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.
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.
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