- Financial Conduct Authority warned 3.3million people were trapped by debts
- ‘Little incentive’ to help those who fork out £2.50 in interest for every £1 repaid
- Comes as Bank of England revealed card debt is rising at fastest rate for 11 years
- Shoppers put another £562million on plastic last month, or £20million each day
Banks were accused last night of exploiting millions of customers unable to pay off their credit cards.
The City watchdog said lenders had ‘little incentive’ to help customers who fork out £2.50 in interest for every £1 repaid.
In a hard-hitting report, it warned that 3.3million people were trapped by debts they might never be able to clear. Outlining tough measures to tackle the crisis, the Financial Conduct Authority said:
- Customers who fail to reduce debts could have interest charges reduced, waived or cancelled;
- Banks should block ‘persistent debtors’ from further spending;
- The measures would cost banks up to £13billion in lost profits;
- More than five million cards could take more than a decade to pay off.
Banks were accused last night of exploiting millions of customers unable to pay off their credit cards
Andrew Bailey, chief executive of the FCA, said yesterday: ‘Credit cards can be a very effective product for consumers, but a significant minority experience real difficulties.
‘We expect our proposals to reduce the number in problem credit card debt, as well as putting customers in greater control of their borrowing.
‘Persistent debt can be very expensive – costing customers on average around £2.50 for every £1 repaid – and can obscure underlying financial problems.
‘Because these customers remain profitable, firms have few incentives to intervene.
‘We want to change this situation so that firms and customers will deal with outstanding debt more quickly, and avoid persistent debt in the first place.’