Persistent Debt new Credit Card Rules

Ergates

Anthorn wrote: »

You edited the quote of my post: I didn't say "blah". Your reply is not even related to my post nor this thread topic.

Let's consider the problem further: Most people will be aware that if they pay more they can pay off the debt quicker and save on interest and that especially applies to anyone with credit card debt who is accessing M.S.E. So telling them about paying more is rather stating the obvious. So those who are only paying the minimum do so because they cannot afford to pay more. Therefore they are forced to pay more and are therefore placed into financial difficulty and hardship which wouldn't happen if they could still pay only the minimum.

The only light at the end of the tunnel is that lenders will be forced to help those who cannot afford to pay more even to the point of writing off the debt. But we do not yet know the effect on our credit history of that happening or the pressure upon borrowers that will be applied by lenders before they reach that point. I should think at the very least that "final solution" will involve a personal financial statement of income and expenditure.

I know you didn't say "blah". Everyone knows you didn't say "blah". Your post is immediately above mine and is plainly visible, I just didn't see the point in quoting your whole post when I was responding to your blatantly incorrect initial point. My reply very clearly *does* relate to your post and the the topic of the thread.

Whilst most people will know that paying above minimum will clear their debt faster, many people won't realise *how much* faster. (In Martin's example - more than 20 years faster). It also isn't true that the all people paying the minimum do so because they can't afford to pay more.

The people who came up with the rules are likely aware that these changes will cause some financial pain in the short term. Clearly however, they believe that the long-term benefits (to the many and to these people) outweigh the short term pain. Whether this is true or not is up for debate - you're not along in thinking otherwise.

Anthorn

Ergates wrote: »

It also isn't true that the all people paying the minimum do so because they can't afford to pay more.

Doesn't make sense. What you are in fact saying is that some people are so dumb that they don't realise that they can save money if they pay more than the minimum. I stand by my previous statement that people only pay the minimum because they cannot pay more.

Ergates wrote: »

The people who came up with the rules are likely aware that these changes will cause some financial pain in the short term. Clearly however, they believe that the long-term benefits (to the many and to these people) outweigh the short term pain. Whether this is true or not is up for debate - you're not along in thinking otherwise.

In that case where is the "Persistent Debt" rule on unauthorised overdrafts? We can identify credit card debt as purposeful whereas unauthorised overdrafts are often accidental. Similar to credit card debt there are also those who are in a perpetual unauthorised overdraft because they cannot afford to pay off the overdraft. Why are credit cards a special case? Why can't we apply those "benefits" to unauthorised overdrafts?

According to Stepchange 2 million people are stuck in overdraft persistent debt!
https://www.stepchange.org/Mediacentre/Pressreleases/TwoMillionInOverdraft.aspx

What the FCA says is that they will not take any action right now but the will continue to investigate it. Translate that as,"Oh no we can't do that because the banks wouldn't like it".
https://hoganlovells.com/en/blogs/fision/fca-counts-the-cost-of-high-cost-credit-a-possible-ban-on-unarranged-overdrafts

Overall the Persistent Debt rule as applied to credit cards stinks and it stinks a lot!

Ergates

Anthorn wrote: »

Doesn't make sense. What you are in fact saying is that some people are so dumb that they don't realise that they can save money if they pay more than the minimum. I stand by my previous statement that people only pay the minimum because they cannot pay more.

No, people aren't dumb. They don't always act in their own best interests, but that doesn't make them stupid, it makes them human. Acting in your short-term benefit to your long-term detriment is *very* common - I doubt there is a person on earth who doesn't to it in one way or another.

Also, "save money" is nebulous unless you give people the specific details. Save how much? People know it costs more to just pay off the minimum but most don't realise the huge difference paying just a little bit more can make.

Many people pay off the minimum because its the most they *think* they can pay or it's the most they *want* to pay. i.e they could afford to pay more if they sacrificed in some other area, or prioritized their spending. Necessity is the mother of invention.

Anthorn wrote: »

In that case where is the "Persistent Debt" rule on unauthorised overdrafts?

There have been many rules put in place by the FCA (or it's predecessors) around overdrafts and charges.

Anthorn wrote: »

We can identify credit card debt as purposeful whereas unauthorised overdrafts are often accidental. Similar to credit card debt there are also those who are in a perpetual unauthorised overdraft because they cannot afford to pay off the overdraft. Why are credit cards a special case? Why can't we apply those "benefits" to unauthorised overdrafts?

It almost sounds like you're saying that when people are struggling with credit card debt it's their own fault? So we should just leave them to it? I'm going to assume you just worded that badly and you don't really think that.

Anthorn wrote: »

According to Stepchange 2 million people are stuck in overdraft persistent debt!
https://www.stepchange.org/Mediacentre/Pressreleases/TwoMillionInOverdraft.aspx

What the FCA says is that they will not take any action right now but the will continue to investigate it. Translate that as,"Oh no we can't do that because the banks wouldn't like it".
https://hoganlovells.com/en/blogs/fision/fca-counts-the-cost-of-high-cost-credit-a-possible-ban-on-unarranged-overdrafts

Overall the Persistent Debt rule as applied to credit cards stinks and it stinks a lot!

No, that translates to "We have a finite budget. We can only look into so many things at once". Clearly the FCA don't care about the banks not liking it - the banks don't like Persistent Debt, or any of the other FCA rules that cost them money to implement and cut into their profits. It is estimated the PD rules will save borrowers between £310 million and £1.3 billion a year in interest charges.

If you want numbers. From the FCA:
We estimate that 6.9% of cardholders (2.1 million) are in arrears or have been charged-off
We estimate that a further 6.6% of cardholders (2.1 million) have persistent high levels of credit card debt which they may be struggling to repay.
We estimate that a further 5.2% of cardholders (1.6 million) make systematic minimum repayments.

So, that's an estimated 5.8 million people with problematic credit card debt - seems a reasonable thing for the FCA to be focusing on right now.

Given the FCA has limit resources, it's a matter of prioritisation - where they can give the greatest amount of benefit to the largest number of people. This time the FCA prioritised problem credit card debt over problem overdraft debt.

If, as it seems, you don't agree with that decision and believe that problem overdraft debt should be (or should have been) prioritised over problem credit card debt, then I invite you to state your case - why do you think that?

Anthorn

Ergates wrote: »

It almost sounds like you're saying that when people are struggling with credit card debt it's their own fault? So we should just leave them to it? I'm going to assume you just worded that badly and you don't really think that.

I've already replied to most of your post in my previous post. I haven't changed my position in the light of your latest post.

The difference between credit card debt and unauthorised overdraft debt is that in using a credit card people make a conscious decision to use the card and incur debt whereas an unauthorised overdraft debt is almost always incurred accidentally as a result of an oversight. However people find themselves in persistent overdraft debt because of the fees which are heaped on by the banks which they cannot afford to repay. There are 2 million people suffering persistent unauthorised overdraft debt as a direct result of those fees. Did you actually read the links I posted? It is therefore highly surprising that the FCA should target persistent debt in credit cards but not in unauthorised overdrafts! That's why targeting credit cards for persistent debt stinks!