Credit Card Debt - New Rules

D_M_E

Have also posted this in Credit Cards forum

Following on from this article

https://www.moneysavingexpert.com/news/cards/2018/02/new-credit-card-rules-to-help-those-in-persistent-debt

the new rules on persistent debt are now fully in force as from today.

https://www.fca.org.uk/news/press-releases/new-credit-card-rules-introduced-fca

This probably explains all the begging letters poeple have been receiving about increase in minimum payments recently.

Also, banks should now look at whether the cardholder is racking up interest and paying off little capital and possibly - I say possibly because I think they will take the view why should they lose profits - close the card facilities and offer cardholder a loan at a lower interest rate than the card.

This begs the questions:

1. If the cardholder cannot afford the current minimum card payments, how will they be able to afford the higher loan payments?

2. Will such loans, if offered, simply be an excuse to push the cardholder deeper into debt by consolidating existing debt, thus allowing the cardholder to continue racking up debt?

3. If cardholder has multiple cards carrying balances on which minimum payments are being made and a loan is made to clear each one, will we be seeing a vast increase in bankruptcy as a result of debtors being unable to meet the payment schedules set out?

4. If banks and other lenders face having their profits curtailed by such measures, will we see the end of free bank accounts and the like as banks etc try to appease their shareholders by making up thier lost profits from other sources?

TriggerHappy

There was something on the BBC news about this today.

1. Apparently the loan repayments will be lower as in most cases customers will get a sizeable %age refund on interest fees and charges. The loan repayment cannot be higher than what the customer is already paying.

2. The loan will replace the card, the cardholder won't have both the card and the loan.

3. I don't really understand your point as they've not been driven to bankruptcy while making minimum payments against their cards so far?

4. Possibly, they didn't mention this on the news today but IMO - I think that the days of free banking are numbered.

sourcrates

Each action has an opposite, and equal, re-action, so you may be right, once charges were the mainstay of a companies profits, outstripping even the interest charged, charges have now been capped, and we may see tighter regulation on OD charges soon.

Profits have to come from somewhere, it will either be the wealthy 10 per cent that pays, or we may see the end of free banking, its anyone's guess at present.


The problem is though, too many things are been done ad hoc, there is no one specific course of action a person can take, except the old tried and tested methods currently available.

If you combined Government approved and regulated free debt management plans, along with more breathing space for clients, compulsory freezing of interest and all charges, add to that legal protection from your creditors, like in insolvency, and advertised the product more openly, surly that would be a better way to go about things.

worriedDan

I wonder if this will negatively affect the customers credit file? Seems unfair if it would, especially if they have always kept up with minimum payments

lulabelle01

I’m in the position where I can currently afford my minimum payments and I usually pay a little above them. Now that my payments are changing I can’t afford what they’re asking and I’m now looking at a DMP. I imagine there will be a lot of other people in the same boat as me.

worriedDan

lulabelle01 wrote: »

I’m in the position where I can currently afford my minimum payments and I usually pay a little above them. Now that my payments are changing I can’t afford what they’re asking and I’m now looking at a DMP. I imagine there will be a lot of other people in the same boat as me.

How much more are they asking for?

TriggerHappy

worriedDan wrote: »

I wonder if this will negatively affect the customers credit file? Seems unfair if it would, especially if they have always kept up with minimum payments

That's a good point... Just paying the minimum is sometimes a choice rather than being a lack of options. My guess is that it wouldn't, but might vary from bank to bank...

lulabelle01

Mbna is my biggest debt and they were the only card to explain in money terms exactly how much more they wanted. I currently pay around £215 a month and my new payment would mean I would be paying an extra £115. The other two cards just stated it was going from 1% to 2% which I figured was probably nothing but after the mbna shock I think if I work it out it’ll not be good

worriedDan

lulabelle01 wrote: »

Mbna is my biggest debt and they were the only card to explain in money terms exactly how much more they wanted. I currently pay around £215 a month and my new payment would mean I would be paying an extra £115. The other two cards just stated it was going from 1% to 2% which I figured was probably nothing but after the mbna shock I think if I work it out it’ll not be good

That is quite a hike in your payments.

I am all for the CC companies supporting customers in dealing with their persistent debts, however it seems unfair if customers who always pay on time are being forced into debt management as a result.

DId they present this to you as a choice, or do you just have to go with it?

lulabelle01

The choice was I pay it or I notify them by the 27th to close my account which will hold the interest at the current rate until they decide I’m not clearing it fast enough when they might try to put the interest up again. I know it’s my debt but I’m not a bad payer I even throw an extra £10-20 a month at it if I can. I feel like it’s shooting themselves and me in the foot because I have no choice but to go the DMP route now