From 1 September 2018, all firms offering credit cards to consumers will be required to comply with the new rules and guidance on persistent credit card debt and earlier intervention. The new rules have been published in the Consumer Credit sourcebook (CONC) and came into force on 1 March 2018.


Having taken over regulation of consumer credit in April 2014, the FCA launched a market study into credit cards. The FCA published its final findings report in July 2016, highlighting concerns about the scale, extent and nature of problem credit card debt and firms’ limited incentives to reduce this.

The FCA announced a package of remedies to address the issues identified in its Credit Card Market Study, designed to put consumers in greater control of their borrowing while maintaining the flexibility of credit cards. This package is now largely in place, and is depicted in the below infographic, produced by the FCA.

As part of the package of remedies, the FCA proposed new rules and guidance on the treatment of customers whose credit card debt persists over 18 to 36 months, along with proposed rules and guidance on earlier intervention for customers at risk of potential financial difficulties. The FCA consulted on the proposals in April 2017 (CP17/10) and December 2017 (CP17/43).

On 27 February 2018, the FCA published Policy Statement PS18/4, setting out the feedback to its consultation and the resultant changes to the proposals. PS18/4 also contains the finalised rules and guidance on persistent credit card debt and earlier intervention.

Scope of the new rules

The new persistent debt rules apply to personal credit card customers only. The rules are not applicable to business credit cards and, for this purpose, the FCA defines a business credit card as one which is promoted solely for the purposes of the customer’s business.

Where a customer uses their personal credit card for business purposes, this account will still be caught by the persistent debt rules if the agreement is a regulated credit agreement.

Closed and pay down customers, meaning customers whose agreement has been terminated but who may choose to continue to pay the minimum payment, who meet the definition of persistent debt, should still receive the persistent debt communications encouraging them to repay faster.

The requirement for earlier intervention

Under the new rules, firms are required to monitor customers’ repayment records, as well as other relevant information held by the firm, taking appropriate action where there are signs of actual or possible financial difficulties.

Examples of appropriate action set out in the guidance include: considering suspending, reducing, waiving or cancelling any further interest, fees or charges; notifying the customer of the risk of escalating debt; and providing contact details for not-for-profit debt advice bodies and encouraging the customer to contact them.

It is a requirement that firms establish, implement and maintain an adequate policy for identifying and dealing with customers showing signs of actual or potential financial difficulties, even though they may not have missed a payment. A customer paying the minimum amount under the agreement is not in itself a sign of possible or actual difficulties.

Customers in persistent debt

A credit card customer is defined as being in persistent debt where the amount they have repaid towards the credit card balance over the immediately preceding 18 month period comprises a lower amount in principal than in interest, fees and charges (Persistent Debt).

Firms are required to assess whether a credit card customer meets this definition on at least a monthly basis.

Where a customer is in Persistent Debt, the new rules require firms to take a series of escalating steps to help customers. The initial intervention by the firm takes place at the 18 month mark, this being the time at which the customer first meets the Persistent Debt definition. Subsequent interventions by the firm are required after 27 and 36 months. The intervention at 36 months marks the time at which the customer has met the definition of Persistent Debt for a second consecutive 18 month period.

Intervention at 18 months

Where a customer is in Persistent Debt, the firm must, in an appropriate medium and in plain language:

  1. notify the customer that, in the preceding 18 months, the amount the customer paid comprised a lower amount in principal than in interest, fees and charges;
  2. that increasing this level of payment would reduce the cost of borrowing and the amount of time it would take to repay the balance;
  3. the customer to contact the firm to discuss the customer’s financial circumstances and whether the customer can increase the amount of payments without an adverse effect on the customer’s financial situation;
  4. warn the customer of the potential implications if the customer remains in persistent debt in two consecutive 18 month periods; and
  5. contact details for not-for-profit debt advice bodies and encourage the customer to contact one of them.

There is no specified form of words to be used for this communication and firms have discretion to tailor the language and tone of the communication to the circumstances of the individual customer.

Intervention at 27 months

At the 27 month mark (no earlier than 9 months and no later than 10 months after the 18 month communication), the firm must consider the pattern of payments made by the customer since the 18 month communication and assess whether the customer will remain in Persistent Debt at the 36 month mark, assuming that these repayments will be representative of the customer’s repayments over the entirety of the second 18 month period (starting on the date of the customer meeting the definition of Persistent Debt).

If this analysis indicates that it is likely the customer will be in Persistent Debt after the end of the second consecutive 18 month period, the firm must repeat the 18 month communication.

Intervention at 36 months

Where, over the 18 month period immediately following the date on which the customer first met the definition of Persistent Debt, the amount that the customer has paid to the firm towards the credit card balance comprises a lower amount in principal than in interest fees and charges, the firm is required to take reasonable steps to assist the customer to repay the balance more quickly and in a way that does not adversely affect the customer’s financial situation.

In these circumstances, the firm must contact the customer to:

  1. explain that increasing this level of payment would reduce the cost of borrowing and the amount of time it would take to repay the balance;
  2. provide contact details for not-for-profit debt advice bodies and encourage the customer to contact one of them;
  3. set out options for the customer to increase payments and request that the customer, within a specified reasonable period, respond to either:
    • confirm that the customer will increase payments in accordance with one of the options; or
    • where applicable, confirm that the options proposed are not sustainable for the customer; and
  4. inform the customer that if the firm does not receive a response in the time specified, the firm will suspend or cancel use of the card.

Examples of repayment options set out in the guidance include transferring the balance on the credit card to a fixed-sum unsecured personal loan or an increase in the amount of monthly payments on the credit card under a repayment plan. The aim of the options is for a customer to repay the balance in a reasonable period. The FCA expects a “reasonable period” to usually be between three and four years, other than in exceptional circumstances.

Where the customer does not respond to the firm’s communication, or where the customer confirms that one or more of the repayment options proposed is sustainable but states that they will not make the increased payments, the firm must suspend or cancel the customer’s use of the credit card.

Where a customer confirms that the repayment options are unsustainable, or where the patterns of payments actually made under the repayment plan show that the customer is unlikely to repay the balance in a reasonable period, the firm must treat the customer with forbearance and due consideration. The steps taken to treat a customer with forbearance should have the aim of assisting the customer to make sustainable repayments to repay the outstanding balance in a reasonable period and may include reducing, waiving or cancelling any interest, fees or charges.

Next steps for the FCA

In PS18/4, the FCA set out that the next steps for the implementation of its CCMS remedies are to:

  1. assess the effectiveness of the industry voluntary remedies (the option for customers to opt out of automatic credit limit increases / preventing credit limit increases from being given to customers that have been in Persistent Debt for 12 months or more) and consider further action if any of these measures prove to be ineffective;
  2. monitor the persistent debt and earlier intervention remedies by looking at, for example, the number of customers contacted at the 18 month intervention stage, the proportion of those that reach the 36 month stage and the actions firms take at 36 months; and
  3. review how effective the remedies are after they have been fully implemented by firms and in operation for long enough to assess customer outcomes. The FCA expects this to be in 2022 or 2023.

The FCA has now completed its behavioural trials work with credit card firms, testing different ways of presenting repayment options to encourage customers making low repayments to pay more where they can afford it. The FCA outlined in PS18/4 that it is currently considering the results and expects to complete its analysis and announce further details in 2018.