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Lloyds Banking Group credit card customers could have cards cancelled in February

Halifax and Lloyds Bank customers could find their credit cards cancelled in February under new debt rules

  • Since September 2018, banks have had to write to customers in persistent debt
  • These are people who have paid more in interest than off their balance
  • Those who have been in persistent debt for 36 months could be told to up their repayments or even have their cards suspended if it led them into more debt

Credit card customers of Lloyds, Halifax and Bank of Scotland who are heavily in debt could see their cards cancelled from the end of next month.

The risk comes as the banks implement Financial Conduct Authority rules designed to better help those in the red.

In a letter sent out last week, Britain’s largest banking group outlined changes aimed at helping those in ‘persistent debt.’

This includes detaching interest rates from the Bank of England base rate, advising customers to up repayments and even cancelling or suspending cards.

Halifax sent out a letter to customers last week in which it outlined steps it would take to comply with new regulatory rules designed to help those who’ve been in persistent debt 

Those in persistent debt are credit card holders who have paid more in interest, fees and charges than they have taken out of their balance, and are usually those who pay only the minimum amount each month.

Under rules introduced by the FCA in September 2018, banks have had to identify customers who have been in persistent debt for at least 18 months.

After 36 months, banks must write to customers in a bid to encourage them to clear their debt.

The FCA estimates the changes could save consumers up to £1.3billion a year.

The changes came following concern from regulators about the amount of debt consumers had outstanding on credit cards. 

While consumers paid back £120million more than they borrowed last November, Britain’s credit card debt pile still sits at £72.1billion.

In a letter sent to one customer outlining changes to its terms and conditions, Halifax said customers in persistent debt would no longer see their interest rate linked to the Bank of England base rate.

It added those who had been in persistent debt for 36 months would be asked to make ‘a recommended payment amount each month’ to try and clear their balance, and that the bank could ‘apply payments to your account in a different order to help reduce your balance’.

Finally, in what could be considered the nuclear option for lenders, the bank said it ‘may cancel or suspend use of the card if we believe you have held debt on your account beyond a reasonable period, taking account of what has been repaid and the likely time it would take you to repay your balance’.

Customers must be sent at least three letters advising them to raise their payments or risk having their credit cards suspended.

Lloyds has been contacting customers of all three banks who could be impacted by the changes since September 2018, while Barclaycard, NatWest and Royal Bank of Scotland have also done so.

Customers of NatWest and RBS in persistent debt could also have their cards cancelled at the end of next month.

Trade body UK Finance told The Guardian last month: ‘In some circumstances, where a suitable repayment option is not agreed, and in accordance with the new rules, cards might be suspended, so it is really important that customers do not ignore letters received.

‘They should read them carefully to understand their options and contact their credit card provider at the earliest opportunity.’




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