Credit cards and store cards can feel like a flexible alternative to a short-term loan, but a balance that is only ever paid down slowly can keep growing in cost. Since 2018 the Financial Conduct Authority (FCA) has required card lenders to step in when a customer’s payments barely touch the borrowing. This guide explains the “persistent debt” rules in the FCA Handbook’s consumer credit sourcebook (CONC 6.7) and what they mean for a borrower. They apply to credit cards and retail revolving credit such as store cards, not to short-term loans, which are covered by separate rules in our guide to payday loan rollovers.
What counts as persistent debt
Under CONC 6.7.27R the trigger is a lender’s assessment that, over the immediately preceding 18 months, the customer has paid a lower amount in principal than in interest, fees and charges. The lender must run this check at least once a month. In the FCA’s 2018 announcement, credit card customers in persistent debt were reported to pay on average about £2.50 in interest and charges for every £1 repaid, and about 4 million accounts were in that position. For these rules “principal” means only the credit the customer has drawn down, not interest, fees or charges added to the account (CONC 6.7.28G).
First stage: the 18-month message
When the test is met, the lender must send a plain-language communication saying that payments over the past 18 months covered less principal than interest, fees and charges. It has to explain that paying more would cut the cost and the time to repay, encourage the customer to get in touch to discuss whether they can pay more, warn about the consequences if the pattern continues over a second consecutive 18-month period, and give contact details for not-for-profit debt advice bodies. The guidance says the warning should include the possibility that the account may be suspended and the possible effect on the credit file. The rule does not apply where the balance was below £200 at any point in the 18 months, or where the lender has already sent the message in the previous 18 months or is already giving forbearance.
Second stage: a check after about nine months
Between nine and ten months after the first message, CONC 6.7.29R requires the lender to review the payment pattern since then and assume it is representative of the whole following 18 months. If that suggests the customer is likely to still be in persistent debt, the message must be repeated.
Third stage: help to repay faster
If payments over the 18 months after the first message again amount to less principal than interest, fees and charges, CONC 6.7.30R requires the lender to take reasonable steps to help the customer repay the balance more quickly, in a way that does not adversely affect their financial situation. Under CONC 6.7.31R the lender must explain the benefit of paying more, give debt advice contact details, set out options to increase payments and ask the customer to respond within a reasonable time, and warn that failure to respond will lead to suspension or cancellation of card use. The FCA’s guidance gives examples of options, such as raising monthly payments under a repayment plan or moving the balance to a fixed-sum unsecured personal loan, and says a “reasonable period” to repay is usually between three and four years.
Suspension and forbearance
CONC 6.7.35R says that if a customer does not respond, or accepts that an option is sustainable but will not pay the increased amount, the lender must suspend or cancel the customer’s use of the card. Where a customer cannot afford the options offered, the FCA’s announcement says the lender must show forbearance, which may include reducing, waiving or cancelling interest, fees or charges.
Signs of difficulty before any missed payment
Separately, CONC 6.7.3AR requires lenders to take appropriate action when there are signs of actual or possible financial difficulty. The guidance says appropriate action can include considering suspending or reducing further interest and charges, accepting token payments for a reasonable time where paying would otherwise mean missing priority debts, and giving details of not-for-profit debt advice. Paying only the minimum is not, by itself, a sign of difficulty, though it can be where a customer who usually paid more drops to the minimum without changing spending.
How repayments are allocated
CONC 6.7.4R says lenders must first apply repayments beyond the minimum to the balance with the highest rate of interest. The guidance on fixed instalment plans notes that cash transactions, including cash withdrawals, can carry a higher interest rate than other card spending, which is a reason to check the rate that applies to cash withdrawals on a card. For lender duties once arrears begin, see our guide to the FCA’s arrears rules, and for free help see free debt advice.
FAQs
Does this apply to payday loans?
No. CONC 6.7.27R applies to credit cards and retail revolving credit.
What if my balance is small?
The rules do not apply where the balance was below £200 at any point in the 18-month period.
Can my card be suspended?
Yes. If a customer does not respond to a repayment request, or refuses a sustainable option, the lender must suspend or cancel use of the card under CONC 6.7.35R.
Is paying the minimum a sign of financial difficulty?
Not by itself, according to the FCA’s guidance in CONC 6.7.3BG.
The bottom line
The FCA’s persistent debt rules require card and store card lenders to warn, review and then actively help customers whose payments cover less principal than interest and charges over 18 months, with suspension of the card as the consequence of ignoring the process. They do not cover short-term loans, but they show the regulator’s view that long, slow repayment can itself be harmful. This is general information, not financial advice; anyone struggling with card debt can speak to a free adviser.