The FCA has published its final report on its Credit Card Market Study, one of the largest market studies undertaken by the FCA to date. Five years’ worth of accounts from 34 million customers were analysed, as well as in-depth surveys with around 40,000 customers.
The FCA published the Interim Report in November 2015, concluding that competition in the credit card market was working fairly well for most customers but the FCA had significant concerns about the scale of problematic debt for others. The FCA has undertaken further work and analysis since and as a result, it has refined but not fundamentally altered its views. The final findings are:
- Competition is working fairly well for most consumers.
- Competition is working less well for higher-risk consumers.
- Concern about scale, extent and nature of problem credit card debt and firms’ incentives to manage this.
The FCA intends to implement effective and proportionate measures to address its concerns without having a negative impact on the market. The remedies proposed by the FCA are as follows:
- Shopping around and switching. The FCA does not intend to undertake additional work in this area to that already being undertaken, such as the Government’s MiData project for personal current accounts and the development of Application Programming Interfaces (APIs), which will make the process of sharing account usage data simpler.
- Clearer standards for price comparison websites (PCWs). Whilst the FCA does not intend to implement similar rules for PCWs as those that apply to High Cost Short Term Credit, currently being implemented, the FCA will instead feed into the CMA’s market investigation of PCWs, which will begin later in 2016/17.
- Prompts before the end of promotional periods. This is intended to encourage customers to (a) be aware of the interest rate they may incur and (b) to consider if the card still meets their needs and, if not, to shop around and switch.
- Promoting and facilitating the use of quotation searches. The FCA wants to see consumers being able to get an indication of their eligibility for specific products and the price they are likely to be offered if they apply.
- Over-borrowing and selected payment dates. The proposed approach would involve a digital communication being sent to consumers who go over 80% and 95% of their available credit limit, informing them that they are close to their credit limit. This will include a reminder that they could be charged for exceeding their credit limit.
- Credit Limit Increases. The FCA will consult on proposed rules for an ‘opt-in’ system later in 2016.
- Under-payment. The FCA will carry out further behavioural trials to look at how customers might be encouraged to make better decisions on how much to repay each month.
- Increasing minimum repayments. Before implementing this, the FCA will consider how effective ‘nudging’ might be in encouraging consumers to repay at a faster rate when they can afford to.
- Earlier forbearance and persistent debt. Later in 2016, the FCA will consult on rules requiring firms to identify early signs of debt problems and to intervene accordingly with these rules expected to be implemented via CONC or industry voluntary agreements.
New FCA rules and guidance, together with any further industry remedies will be consulted on later in 2016, with behavioural trials on repayment options to be undertaken in 2017, after which further new rules may be considered.