Credit card firms must do more to help millions of customers unable to clear debt, the financial regulator has said.
The Financial Conduct Authority (FCA) has published proposals that could mean credit card companies cancelling any interest or charges in extreme cases.
Firms would have to work more closely with people in debt, such as drawing up a faster repayment plan.
One debt charity said the plans failed to deal with credit cards becoming dangerous, long-term debt.
The UK Cards Association, which represents credit card companies, said the plans required "careful consideration".
The regulator defines someone as being in credit card debt if they have paid more in interest and charges than they have repaid of their borrowing over an 18-month period.
The FCA says that "customers in persistent debt are profitable for credit card firms, who do not routinely intervene to help them". It estimates that 3.3 million people are in persistent debt.
The plan is designed to prevent spiralling debt as experienced by computer engineer Jon Pearson, who built up debts of £35,000.
The 34-year-old, who got his first credit card at the age of 18, said it was his "own stupidity" that gave him confidence to transfer his growing debts between different cards.
"I was getting tens of thousands of pounds of [credit limit] increases without any real investigation into what I was doing and how my repayments were working out," he said.
"I never paid off any more than the interest every month and I was still able to get increases in credit on any card that I had."
The proposals mean:
- After 18 months: Firms should prompt customers to make faster repayments, if they can afford it
- After three years: Providers must propose a repayment plan to help clear debt more quickly
- If a customer still cannot afford to repay the main debt more quickly, firms should consider reducing, waiving or cancelling any interest or charges
Mr Bailey, of the FCA, said: "Persistent debt can be very expensive - costing customers on average around £2.50 [in interest and charges] for every £1 repaid - and can obscure underlying financial problems. Because these customers remain profitable, firms have few incentives to intervene.
"We want to change this situation so that firms and customers will deal with outstanding debt more quickly, and avoid persistent debt in the first place."
The FCA said it expected the measures to lead to savings for customers from lower interest payments as a result of faster repayment.
"By 2030 we expect that the savings to customers would reach a total of between £3bn and £13bn, depending on how firms and customers respond," it said.
Credit card firms and other interested parties have until July to respond.
Speeding up credit card debt?
- A customer who borrows £3,000 on a credit card with an APR of 19%, and only makes minimum repayments - starting at £74 per month and reducing over time - would typically take 27 years and seven months to pay it off (assuming there is no further spending on the card). The interest paid would be £4,192
- If the customer fixed their repayments at £74 per month rather than only making minimum repayments, they would pay it off in five years and two months. The interest paid would be £1,576
- If they set their monthly repayment at £108 per month, they would pay their balance off in three years. The interest paid would be £879
Not far enough?
Richard Koch, head of policy at the UK Cards Association, said it welcomed the FCA proposals.
"While the FCA's original report found that the credit card market works well for most people, we are not complacent and the industry remains committed to helping the minority of cardholders who do not use a credit card in a way which is in their best interest," he said.
There have been concerns expressed over the personal debt levels in the UK. The latest figures from the Bank of England suggest that the annual pace of growth in credit card debt is at its fastest since February 2006.
Mike O'Connor, chief executive of the debt charity StepChange said it feared the proposals did not go far enough.
"Credit card debts remain the biggest single category of problem debt for our clients, with average debts of over £8,000," he said.
"We welcome moves to tackle persistent debt, but we are concerned that these proposals will not fix the central issue that credit cards, which are supposed to be a short-term form of borrowing, often become long-term and expensive debt."