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  • FIRST POST
    • D_M_E
    • By D_M_E 1st Sep 18, 12:59 PM
    • 2,340Posts
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    D_M_E
    Persistent Debt new Credit Card Rules
    • #1
    • 1st Sep 18, 12:59 PM
    Persistent Debt new Credit Card Rules 1st Sep 18 at 12:59 PM
    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?
Page 1
    • jonesMUFCforever
    • By jonesMUFCforever 1st Sep 18, 1:11 PM
    • 25,667 Posts
    • 12,895 Thanks
    jonesMUFCforever
    • #2
    • 1st Sep 18, 1:11 PM
    • #2
    • 1st Sep 18, 1:11 PM
    Lenders will always make profits on cards as some people will never clear their cards monthly.
    All the new regulations do is make it easier for you to get out of debt by repaying slightly more (after 18 months of minimum payments) per month.

    Regarding your last point - I would be more worried about banks getting rid of free bank accounts to increase profits rather than replace what you said.
    What goes around - comes around
    give lots and you will always receive lots
    • Dandytf
    • By Dandytf 1st Sep 18, 1:21 PM
    • 1,934 Posts
    • 478 Thanks
    Dandytf
    • #3
    • 1st Sep 18, 1:21 PM
    • #3
    • 1st Sep 18, 1:21 PM
    OP- These new rules could provide motivational.

    18 mths-not every card balance will be cleared by myself.
    Though certainly encouraging to raise dd payments+reduce spending.
    I wish cc providers would themselves start by offering higher initial minimum payments-like Tesco-starting from 25 i.e. not 1-5% or 5 per month
    sc dmp 2012 13k Jan 2019 9880paid. 75%approx.
    Mid 2018 Help2save 50 uk pounds per month
    Mid 2018-Virgin Money E-saver V11 -250
    • Hopeless Case
    • By Hopeless Case 1st Sep 18, 1:37 PM
    • 942 Posts
    • 5,806 Thanks
    Hopeless Case
    • #4
    • 1st Sep 18, 1:37 PM
    • #4
    • 1st Sep 18, 1:37 PM
    The minimum payment used to be 5% didn't it?

    MBNA sent us a letter saying it would go up to 2.5% (it won't apply as we've taken control and transferred to a 0% card and are working on paying it off), so still not back to where it was
    Feb GC 54.80/200
    NSD target: Jan 15/20
    Bring Your Lunch to Work Target Jan 13/18
    1 a day: Jan 22.7/35
    Tesco CC Aug 18 10,151.56 9753.37 0% 30mnths, First Direct CC Aug 18 4321.80 3627.85 0% til Feb 20
    • Dandytf
    • By Dandytf 1st Sep 18, 2:25 PM
    • 1,934 Posts
    • 478 Thanks
    Dandytf
    • #5
    • 1st Sep 18, 2:25 PM
    • #5
    • 1st Sep 18, 2:25 PM
    The minimum payment used to be 5% didn't it?

    MBNA sent us a letter saying it would go up to 2.5% (it won't apply as we've taken control and transferred to a 0% card and are working on paying it off), so still not back to where it was
    Originally posted by Hopeless Case
    I suggested 1-5% from various cc providers.
    Haven't quoted any named cards-just my own experience.
    sc dmp 2012 13k Jan 2019 9880paid. 75%approx.
    Mid 2018 Help2save 50 uk pounds per month
    Mid 2018-Virgin Money E-saver V11 -250
    • SnowTiger
    • By SnowTiger 1st Sep 18, 4:26 PM
    • 3,588 Posts
    • 2,581 Thanks
    SnowTiger
    • #6
    • 1st Sep 18, 4:26 PM
    • #6
    • 1st Sep 18, 4:26 PM
    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?
    Originally posted by D_M_E
    I think lenders have learned lessons. They've already been raked over the coals for money laundering, irresponsible lending, excessive charges, PPI and other things.

    What lender in its right mind would set the wheels in motion today on another expensive scandal that will have a big negative affect them in five or ten years?

    As for your first point: if a punter can't afford minimum payments now, they're also in financial crisis. Those who can just about afford them are probably just putting the inevitable off.
    • T-G-C
    • By T-G-C 1st Sep 18, 5:09 PM
    • 477 Posts
    • 231 Thanks
    T-G-C
    • #7
    • 1st Sep 18, 5:09 PM
    • #7
    • 1st Sep 18, 5:09 PM
    1. If the account holder cannot afford the minimum payment after an increase, the normal routine of speaking to the lender and pleading financial difficulties will apply. It will then be at the discretion of the lender as to what happens next.

    2. Assuming you are talking about credit cards, no lender will issue a loan to the customer to clear the balance, even more so at a lower interest rate. Whilst a mainstream lender who offers loans, like Santander, might encourage someone to apply or pre-approve them, they cannot necessarily enforce it on them by transferring the credit card balance to another credit product, as this would require a separate credit agreement which the consumer is required to sign.

    3. It will be at the discretion of the customer on whether to accept a debt consolidation loan and should the repayment schedule not be affordable, it should not be taken out. If ignored, the usual consequences are applicable as have always been.

    4. Whilst some losses are expected due to less interest being charged in total than before the regulations were introduced, due to the time frame required before these measures are taken against the borrower, the figures may not be enough to cause the end of free banking or other large-scale impacts.
    Advice provided from this account does not consist of any professional knowledge. For professional debt advice, please contact either National Debtline or StepChange. Advice may consist of personal experience, opinion and/or informational sources.
    • Hopeless Case
    • By Hopeless Case 2nd Sep 18, 7:15 AM
    • 942 Posts
    • 5,806 Thanks
    Hopeless Case
    • #8
    • 2nd Sep 18, 7:15 AM
    • #8
    • 2nd Sep 18, 7:15 AM
    I suggested 1-5% from various cc providers.
    Haven't quoted any named cards-just my own experience.
    Originally posted by Dandytf
    Sorry, I wasn't answering your post, I was just thinking that I can remember the minimum payment being reduced at some point (probably quite a while ago ) and i don't think they've put it back to where it was before, which may have been a more realistic level - I hadn't really appreciated minimum payments varied from card to card though
    Feb GC 54.80/200
    NSD target: Jan 15/20
    Bring Your Lunch to Work Target Jan 13/18
    1 a day: Jan 22.7/35
    Tesco CC Aug 18 10,151.56 9753.37 0% 30mnths, First Direct CC Aug 18 4321.80 3627.85 0% til Feb 20
    • Rosemary7391
    • By Rosemary7391 2nd Sep 18, 8:14 AM
    • 2,727 Posts
    • 4,725 Thanks
    Rosemary7391
    • #9
    • 2nd Sep 18, 8:14 AM
    • #9
    • 2nd Sep 18, 8:14 AM
    I think lenders have learned lessons. They've already been raked over the coals for money laundering, irresponsible lending, excessive charges, PPI and other things.

    What lender in its right mind would set the wheels in motion today on another expensive scandal that will have a big negative affect them in five or ten years?

    As for your first point: if a punter can't afford minimum payments now, they're also in financial crisis. Those who can just about afford them are probably just putting the inevitable off.
    Originally posted by SnowTiger

    Or they're in a temporarily reduced financial situation and appreciate the flexibility that having a credit card brings. I had two strategies for covering the gap between my funding finishing and actually finishing my PhD - one was saving, the other was getting to a decent limit on my credit card. Admittedly I hope this won't last anything like 18 months, but it is something that bothers me - the more regulation like this we have, the fewer options there are for people in unusual circumstances.
    Slinkies 2018 Challenge - 0/80lb lost
    • chattychappy
    • By chattychappy 2nd Sep 18, 10:39 AM
    • 7,069 Posts
    • 3,910 Thanks
    chattychappy
    but it is something that bothers me - the more regulation like this we have, the fewer options there are for people in unusual circumstances.
    Originally posted by Rosemary7391
    Yep, all this well meaning regulation has unintended consequences for certain categories of responsible people. I rather resent the attitude that people "like us" and our freedom to contract are the collateral damage of protecting the !!!!less* against themselves.

    (*edit MSE thinks f-e-c-k-l-e-s-s is a dirty word... ironic really!)
    Last edited by chattychappy; 02-09-2018 at 10:42 AM.
    • Anthorn
    • By Anthorn 2nd Sep 18, 11:14 AM
    • 4,292 Posts
    • 1,192 Thanks
    Anthorn
    1. If the cardholder cannot afford the current minimum card payments, how will they be able to afford the higher loan payments?
    Originally posted by D_M_E
    Credit card lenders will not force a loan to repay the credit card debt since this will increase the persistent debt which the new rules are intended to reduce.

    If a cardholder cannot afford the higher credit card payments credit card lenders will have to help them to reduce the debt by reducing "interest, fees and charges".

    http://www.thisismoney.co.uk/money/cardsloans/article-5440179/New-FCA-rules-force-lenders-help-credit-card-customers.html

    Therefore credit card lenders will lose profits as a result of providing credit to people who cannot afford to repay it.

    However personally I should think that those who cannot afford to pay their credit card debts would consider such things as a DMP, DRO or IVA to be preferable.
    • Dandytf
    • By Dandytf 2nd Sep 18, 3:35 PM
    • 1,934 Posts
    • 478 Thanks
    Dandytf
    Is there any format yet to understand from which % or cost CC providers will be using.
    It would be helpful to provide this type of info to exiting card holders to allow some budget adjusting to be made in time
    sc dmp 2012 13k Jan 2019 9880paid. 75%approx.
    Mid 2018 Help2save 50 uk pounds per month
    Mid 2018-Virgin Money E-saver V11 -250
    • SnowTiger
    • By SnowTiger 2nd Sep 18, 4:16 PM
    • 3,588 Posts
    • 2,581 Thanks
    SnowTiger
    Is there any format yet to understand from which % or cost CC providers will be using.
    It would be helpful to provide this type of info to exiting card holders to allow some budget adjusting to be made in time
    Originally posted by Dandytf
    There's a handy graphical guide here, showing how customers in persistent debt are identified.

    https://www.fca.org.uk/media/ps18-4-helping-customers-persistent-debt-our-new-rules

    Savvy customers who take advantage of 0% transfer offers shouldn't be affected by the new rules.
    • A4445
    • By A4445 2nd Sep 18, 5:18 PM
    • 967 Posts
    • 481 Thanks
    A4445
    There's a handy graphical guide here, showing how customers in persistent debt are identified.

    https://www.fca.org.uk/media/ps18-4-helping-customers-persistent-debt-our-new-rules

    Savvy customers who take advantage of 0% transfer offers shouldn't be affected by the new rules.
    Originally posted by SnowTiger

    I wonder if credit card companies have to reduce interest to help customers. Will these be reported to Credit Reference Agencys as an arrangement. It could ruin peoples credit report.
    • Anthorn
    • By Anthorn 2nd Sep 18, 8:35 PM
    • 4,292 Posts
    • 1,192 Thanks
    Anthorn
    I wonder if credit card companies have to reduce interest to help customers. Will these be reported to Credit Reference Agencys as an arrangement. It could ruin peoples credit report.
    Originally posted by A4445
    Doubtful because it's the lender acting in accordance with the Persistent Debt rules and not the card holder defaulting. Anyway it will be 36 months until lenders are forced to reduce or eliminate interest and charges.

    There could however be additional fields added to credit reports.

    Probably the worst that will happen is that credit cards will be suspended and that's not a bad thing.
    • worriedDan
    • By worriedDan 2nd Sep 18, 10:08 PM
    • 246 Posts
    • 736 Thanks
    worriedDan
    I wonder if credit card companies have to reduce interest to help customers. Will these be reported to Credit Reference Agencys as an arrangement. It could ruin peoples credit report.
    Originally posted by A4445

    I think that there would be uproar if this was the case.

    I expect that they won't be able to do this as the CC companies will still need to act in accordance with what is specified in the T&C's of the credit agreement that the customer signed up.

    Perhaps new credit agreements will include a clause regarding these new rules.

    I would be pretty annoyed if my credit file was tainted If I had always managed my account in line with the T&C's that I signed up for
    • jonesMUFCforever
    • By jonesMUFCforever 2nd Sep 18, 10:22 PM
    • 25,667 Posts
    • 12,895 Thanks
    jonesMUFCforever
    I think that there would be uproar if this was the case.

    I expect that they won't be able to do this as the CC companies will still need to act in accordance with what is specified in the T&C's of the credit agreement that the customer signed up.

    Perhaps new credit agreements will include a clause regarding these new rules.

    I would be pretty annoyed if my credit file was tainted If I had always managed my account in line with the T&C's that I signed up for
    Originally posted by worriedDan
    ...But T&C 's can be amended - by giving you the appropriate notice.
    What goes around - comes around
    give lots and you will always receive lots
    • worriedDan
    • By worriedDan 2nd Sep 18, 10:36 PM
    • 246 Posts
    • 736 Thanks
    worriedDan
    ...But T&C 's can be amended - by giving you the appropriate notice.
    Originally posted by jonesMUFCforever
    I guess that the customer would be able to opt out though and close the account??
    • Dandytf
    • By Dandytf 3rd Sep 18, 8:07 AM
    • 1,934 Posts
    • 478 Thanks
    Dandytf
    Thanks mser's

    I'm already@18 mth 'please consider raising your payments' examples at least with Cap1
    I hope to raise that in advance of the 27 mth reminder.

    Small balances cleared 1st for me, not Tesco @5xx which I had mentioned recently-that's after Cap1

    My only slight concern is if CC providers start enforcing their choice of re payment amounts though the new rules doesn't seem to point to this happening.
    Last edited by Dandytf; 03-09-2018 at 8:12 AM.
    sc dmp 2012 13k Jan 2019 9880paid. 75%approx.
    Mid 2018 Help2save 50 uk pounds per month
    Mid 2018-Virgin Money E-saver V11 -250
    • Anthorn
    • By Anthorn 3rd Sep 18, 8:25 AM
    • 4,292 Posts
    • 1,192 Thanks
    Anthorn
    My only slight concern is if CC providers start enforcing their choice of re payment amounts though the new rules doesn't seem to point to this happening.
    Originally posted by Dandytf
    Aqua already has done this. There has been a change to their Ts&Cs and the account summary has new fields, "Payment Requested" "Made Up of Contractual minimum payment ..." while the minimum payment field has gone.
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