The FCA has published its interim findings in respect of the credit card market study. This is a major study of one of the largest areas of unsecured lending which the FCA regulates. There are around 30 million credit card holders in the UK. For further information on the FCA’s research, see the infographic produced by the FCA.
The FCA found that competition is working well for many consumers. Consumers valued the flexibility that credit cards provided and there was clear evidence of consumer switching between credit cards and using their credit cards for a range of purposes. However, the FCA is concerned about the scale of potentially problematic debt for consumers who are just above default levels and the incentives for firms to manage this. The FCA also want to see better information to assist those shopping around.
In its review the FCA has outlined potential remedies to address its concerns. These remedies focus on two main areas.
1. Shopping around and switching
The FCA considers that the complexity of products impacts consumers shopping around effectively and identifying the best deal. Proposals include:
- Promoting and facilitating the use of quotation searches.
- Providing more timely information to prompt customers to repay their credit card debts or shop around at the expiry of promotional periods or offers.
- Clearer standards for price comparison websites in a similar vein to those proposed for high-cost short-term comparison sites.
- Enabling third parties, such as other credit card providers and price comparison sites, to access credit card usage/transaction information with consumer consent to provide bespoke quotations or better align search results.
2. Affordability and problem debt
The FCA considers there is more that the market can do for consumers struggling with credit card repayments or paying significant sums to service large debts. It stresses that its work in relation to credit cards will feed into its wider work on creditworthiness and affordability. It also considers that firms can do more in respect of over-borrowing. Proposals include:
- Doing more to encourage customers to repay credit card balances faster.
- Giving consumers greater control during the lifetime of an agreement, such as opting into a credit limit increase.
- Whether firms can do more to identify those at risk of potential financial difficulty and intervene earlier.
- Whether there is scope to provide more timely information to consumers to prompt those consumers to take account of how much they are borrowing.
- That firms should provide a wider range of pre-set payment options to make it easier for consumers to select a set amount that would reduce the balance more quickly.
The next phase of the study is to discuss the interim findings and potential remedies with stakeholders, with the final report expected to be published in Spring 2016. Feedback on the initial findings is requested by 8 January 2016.