The Financial Conduct Authority is set to launch a competition review into the UK’s £150bn credit card market at the end of this year to evaluate whether this market is working effectively for consumers.
Speaking at the Credit Today Credit Summit in London, FCA chief executive Martin Wheatley said that given 30m people hold at least one credit card it was “right that the regulator explores whether competition in this market was working effectively for consumers”.
With the FCA taking responsibility for Consumer Credit on 1 April, Mr Wheatley said he was keen for the study to ask how the industry worked with those people who were in difficult financial situations already.
According to the FCA, recent research showed 9m Britons were considered to be in “serious debt” and that a considerable number of people - which it terms “survival borrowers” - often feel they have no option but to borrow money through a payday loan or credit card to help pay bills.
Mr Wheatley said: “The key priority here has to be those in the most vulnerable circumstances. Many of whom are struggling to manage their credit card commitments, as well as other bills.
“Among the UK’s 30m plus cardholders, something like 3.7 per cent make minimum payments for 12 months which is the equivalent to more than 1m borrowers making 12 or more consecutive minimum payments.
“There are some obvious questions and challenges here for regulators and industry: why are card issuers providing the means, in some cases, for the most indebted consumers to escalate their way into further debt?
“As part of this review, or market study as we call it, we will be engaging with the industry ahead of time and it’s important to say there’s no pre-determined terms of reference, outcome or agenda here.
“There is however, a duty of care to consumers, and I think it’s important for there to be clarification of whether competition is working in their interests.”
