StepChange Debt Charity is the largest specialist debt advice charity helping people across the UK. Demand for our services has increased to its highest level in the first half of 2017 when 326,639 people contacted StepChange Debt Charity for help and support with their problem debt.
We welcome the opportunity to respond to this consultation as credit cards are the most common type of debt held by our clients. In the first half of 2017, around two thirds of clients (67.2%) had one or more, with an average total credit card debt of £8,134.
Q1: Do you have any further comments on our amended proposals and the draft Handbook text in Appendix 1? Communications at 18/27 months on CRA reporting
We welcome that the FCA recognises the concerns about the impact of references to CRA reporting in communications at the 18 and 27 month stages including that this could be perceived as a threat and cause undue alarm to consumers.
However, there does not seem to be a major difference between the previous proposal of a warning and the change of making customers aware of the risk that card suspension could potentially be reported to a CRA. We are concerned that making customers aware of this potential impact could still be perceived as a threat to customers. It could still lead to the possibility of them making unaffordable repayments or borrowing from other sources to increase repayments and getting further into financial difficulty.
It is important that communications at the 18 and 27 month stages encourage customers to engage with firms. This must be done by ensuring customers get the right messages about the help available to them including signposting to free debt advice and forbearance if they are struggling with repayments. We would support the firms coming together to develop an agreed standard and form of words that is encouraging customers to seek help from them where appropriate. Customers should not feel that their only option is to increase repayments that may be unaffordable, in order to avoid reporting to a CRA.
Moreover, in cases where forbearance is granted, including a reduction in the interest rate, the customer may still be making higher than the contractual minimum payment. Therefore it would not be appropriate to report this to CRAs as a negative event as the customer would be paying more with forbearance than they did when they were paying the minimum payment.
The consultation paper states that it is for firms and CRAs to determine the circumstances that would lead to reporting to the CRAs and the content of that reporting. It is essential, nonetheless, that the industry and CRAs take a consistent approach to reporting in cases where the card is suspended and/or when forbearance is implemented. An inconsistent approach to this will be unfair and confusing to customers as they will be treated differently by different firms. We would urge the FCA to ensure that the industry and CRAs bring in consistent approach to reporting the CRAs when cards are suspended and to ensure this approach is fair, transparent and understandable for customers.