New service to help people in “persistent debt” on credit cards

Over a million people are expected to receive communications from their credit card providers by the end of March asking them to increase their payments. StepChange Debt Charity has today launched a dedicated new online information and guidance hub and an interactive credit card repayment calculator for people receiving these “persistent debt” letters.

People who have paid more in interest and charges over a 36-month are receiving letters from their lenders explaining that they now need to enter into repayment plans to pay down their debt, in line with the rules that the Financial Conduct Authority has introduced to try to help get people out of expensive long-term credit card debt. If they don’t respond to their lender’s communication, and don’t increase their payment, lenders are likely to stop them using their card.

The new guidance hub is backed up by a dedicated telephone advice team, supported financially by the Money and Pensions Service.

The charity is encouraging credit card providers to refer their customers to the new service when sending their communications to customers, recognising that some people may find it difficult to know where to start and may need independent support to start addressing their persistent debt. A number of lenders are already signposting the new service in their letters to customers.

Some people will be able to afford higher repayments and will be able to pay down “persistent debt” card balances over a three to four period. Others may struggle to increase their payments to this level. Where this is the case the credit card lender must offer forbearance – the nature of which may vary.

It’s important that people respond to their lender’s communications. If they don’t, lenders may stop them using their card. However, it’s also vital that any arrangement people enter into with their card provider is affordable.

StepChange says it’s crucial to consider affordability in the round. If people have multiple cards with multiple lenders all asking them to increase their repayments, there is a risk that people agree to repayment schedules that could turn out to be unrealistic. This is where independent guidance is particularly valuable.

What people should do will depend on their circumstances and what they can afford. If they are meeting at least the contractual minimum payments on their card they should not see their credit record damaged, but their lender may stop them using their card.

Phil Andrew, CEO of StepChange Debt Charity, said: “Getting this sort of guidance will help people work out a realistic budget from which to decide whether proposed repayment plans are affordable or not. If they are, all well and good. If not, we can then help by offering more detailed advice and solutions depending on people’s individual circumstances.

“Reaching people earlier is the future of debt advice. If we can shift the dial so that more people get the help they need at the first sign of any possible trouble rather than later when problems have become entrenched, we stand a real chance of turning the tide on what currently feels like a never-ending rise in the number of people reaching a crisis point.”