Persistent debt, minimum payments & warning letters

persistent debt changes and rules from the FCA

This week many people have been sent letters about their borrowing, specifically related to what’s known as persistent debt, and there are more on the way. If you’ve had a letter like this from your credit card company or other lenders it’s important not to ignore it or panic – and ideally you should also try to take action on their suggestions.

The Financial Conduct Authority’s regulations around persistent debt with catalogues and store cards are changing, and they’re continuing to try to reduce persistent credit card debt. Letters are being sent by creditors warning their customers that they’re in persistent debt and telling them that actions may be taken from March 2020 if they don’t increase their monthly payments, including:

  • A forced increase of the contractual payment that a customer makes each month (i.e. repayment plans you don’t have any control over)
  • Suspending the account altogether to stop the debt increasing

This can cause all sorts of problems, such as being unexpectedly short of money at the end of the month, or damage to your credit score.

The specifics of persistent debt in the UK

Persistent debt on credit cards is defined as having paid more in interest and charges over an 18 month period than you have paid off the balance, according to the FCA. It triggers a communication from the card provider to take action to pay more on a voluntary basis, and tells people what will happen later if they don’t do this. At 27 months, a further reminder is sent to people who are still in persistent debt. If people remain in persistent debt at 36 months (18 months after the first communication from their card provider about it) their card may be withdrawn and the card provider will put in place a repayment plan designed to pay down the balance over a 3-4 year period.

Minimum Payments Awareness Month

StepChange Debt Charity has just launched an awareness campaign to help anyone who’s in persistent debt. According to StepChange, communication from card providers varies significantly, and the call to action is not always clear. People may not yet realise that if they don’t take action, their cards may be withdrawn and a repayment plan will be imposed by their card providers. The charity warns that many people seem set to reach a cliff edge moment further down the line when they are formally required from next March to make higher payments to pay down their debt.

Have a look at their consumer information and factsheets for loads of advice and information. If you’re worried that you aren’t in control of your repayments there’s also a ‘quick calculator’ on the StepChange page which takes 60 seconds to use. Alternatively you can call 0300 303 2517 to reach the dedicated persistent debt team.

Why increase your repayments now?

If you can increase your repayments, even if it’s only a few pounds extra each month, it makes sense to try to do so.

  • It’s going to be much less hassle in the long run if you get ahead of these new changes – having a repayment schedule imposed upon you could be extremely stressful.
  • It can potentially shave YEARS off your repayments if you repay more than the monthly minimum amount.
  • Paying back more money on a shorter schedule can significantly decrease the total interest you pay on a debt.

Obviously some people will be having more repayment difficulties than others, and if you’re only able to meet the minimum or you can’t manage the minimum then please reach out to a registered non-profit such as StepChange Debt Charity for some help and support. They can help prevent the situation from getting worse, and support you while you find solutions to your money issues.


Are you aware of these new changes around persistent debt?


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