HALIFAX, Lloyds and Bank of Scotland is warning customers in long-term debt that they face having their credit cards cancelled next month.
The move is part of changes set out by the Financial Conduct Authority (FCA) to help those who regularly find themselves struggling to make repayments.
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The financial regulator first told credit card providers to start notifying customers of the changes back in September 2018.
Lenders were told to contact users who’d spent the previous 18 months only repaying the minimum amount of their debt.
Credit card providers were then given another 18 months to contact these customers, including sending at least three letters and urging them to increase their payments.
This 36-month period is due to come to an end in February 2020, meaning customers who ignored previous warnings from their bank face losing their accounts at the end of next month.
How to cut the cost of your debt
BEING in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money
Work out your budget – by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay.
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups and services like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
Lloyds Banking Group customers, which include Lloyds, Halifax and Bank of Scotland, are understood to have been emailed last week detailing how their accounts could be affected.
According to This is Money, customers were asked to make “a recommended payment amount each month” to try and clear their debt pile.
Credit card holders were reportedly also warned their interest rate would no longer be linked to the Bank of England base rate.
If customers fail to respond, the report goes on to say that the bank has promised to “cancel or suspend use of the card if we believe you have held debt on your account beyond a reasonable period”.
Lloyds Banking Group told The Sun it has been contacting customers about the change since September 2018, but it didn’t confirm at what stage a credit card would be cancelled.
The bank said it would work with customers on an individual basis to determine the best option for them if they’re still in persistent debt after three years.
A Lloyds Banking Group spokesperson said: “We have been in regular contact with customers in persistent debt to offer them help in getting back into a better financial position.
“We will only stop spending on a credit card where it is in the best interests of our customer to stop long term debt levels worsening.”
If you’ve been struggling to shift your debt, your bank must offer a way to repay your balance over a reasonable period – but this is decided on a case-by-case basis.
‘How we repaid £43,000 in four years’
BLOGGER Ricky Willis and his wife Naomi had to reach breaking point before they addressed the £43,000 worth of debt that they’d racked up.
It started when they were young. When one line of credit ran out, they opened another.
Each time the credit card had higher interest and repayments became difficult.
The couple owed up to £43,000 in credit card, loan, catalogue and payday loan debt, as well as council tax and water bills.
Then in 2008, Ricky, 39, who lives in Tunbridge Wells, Kent was made redundant from his machine operator job at a printing firm.
A year later Naomi, now 34, also lost her job working in insurance.
In one week the car, washing machine and fridge freezer all broke down and he said it seemed “obvious” to just get another credit card because all the others were maxed out.
He said: “Being in debt just became normal.
“We felt pressure as we realised we were getting trapped into a cycle of debt, but couldn’t see a way out.”
Eventually the couple reached breaking point.
Ricky said: “We realised we’d run out of all options, and had no food in the cupboard, it was the moment we knew we had to change the way we were living.”
“It was at that point we decided to take control of our lives and stop living a life of high interest debt.”
“It really wasn’t easy. We cut back on all our outgoings, apart from priority bills, we set up individual payment plans with all the creditors and started to look at ways we could increase our income so we could clear our debts off quicker.”
“We started trying to save, even if it was just £10 a month, so we’d have a little something to fall back on.
“We stopped spending money on random things, and instead looked to get stuff for free from Freecycle.”
It took them four years to become debt-free. In 2013, Ricky set up his blog – Skint Dad– to help inspire others to get back on track financially.
For those who can’t afford to up their payments, the lender could reduce, waive or cancel any interest, fees or charges – or have their debts wiped completely.
But customers who don’t work with their credit card firm to repay their debts will have their account suspended.
Barclaycard holders also face losing their credit card next month, with Barclays telling The Sun that it first notified customers about the move in September 2018.
Nationwide told us earlier this month that it’ll start suspending accounts from February, while TSB and Virgin Money said they’ll do the same from March.
Santander confirmed it has been contacting customers regarding the changes since December 2018, while HSBC said it started in August 2018.
The Sun has also contacted Natwest, RBS and American Express.
An FCA spokesperson told us: “Our rules help those in persistent credit card debt get back on an even keel.
“We expect firms, where possible, to help customers pay down the amount they owe more quickly.
“Firms don’t need to cancel or suspend cards if a customer agrees an affordable repayment option.”
A spokesperson for UK Finance added: “The FCA’s new persistent debt rules are designed to reduce the cost of borrowing by encouraging customers to pay back their credit card balance quicker, where they can afford to do so.
“There are some circumstances where the new rules require the credit card provider to suspend the card, for example if a customer does not respond or a suitable repayment option is not agreed.”
In more money news, First Direct is to accept customers with bad credit scores to help them improve their rankings.
While we found credit builder cards designed to help you improve your score are still charging customers interest rates of up to 60 per cent.
Credit holders should also be warned that lenders are slashing interest-free periods, leaving borrowers with less time to repay debts.
