1.4m 'only making minimum repayments on credit cards'
Around 1.4 million people have only been making minimum repayments on their credit cards for at least three years in a row, the City regulator has found.
The Financial Conduct Authority (FCA) said competition in the credit card market is focused on certain product features such as introductory offers like zero per cent rates and rewards - while there is less competitive pressure on interest rates outside of promotional offers and on other fees and charges.
The regulator has previously found that although competition has worked fairly well for most consumers, there was concern about the scale of potentially problematic debt.
It said: "As credit card firms note, credit cards are suited to short term borrowing and can be an expensive way to borrow large amounts over a long period."
The FCA's analysis suggested firms do not have strong incentives to help customers out of persistent credit card debt.
Its report said: "Firms have fewer incentives to address consumers with persistent levels of debt or who repeatedly make minimum payments as these consumers are profitable, and we found that most firms do not routinely intervene to address this behaviour.
"We consider that firms could do more to help those with persistently high credit card debt to reduce debt burdens before they become problematic, and to prompt those repeatedly making minimum payments to repay quicker when they can."
The regulator had found that 8.9% of credit cards active in January 2015, equating to 5.1 million accounts, would - on current repayment patterns and assuming no further borrowing - take more than 10 years to pay off their balance.
It found most consumers with multiple credit cards were not struggling with problematic debt, although 11%, or around 1.6 million consumers, were in potentially problematic debt on more than one credit card.
The regulator has now proposed a package of remedies to help consumers to shop around more effectively, budget more efficiently and where appropriate repay debt faster, which could see customers alerted with texts or emails to prompt them into action when a promotional period is about to come to an end.
The FCA said industry-led actions to tackle the problems it found will include timely prompts before promotional periods end, timely information to prompt consumers to take into account how much they are borrowing and giving consumers the ability to choose the payment due date.
The FCA will also publish further information on proposed rules and voluntary remedies later in the year.
Christopher Woolard, director of strategy and competition at the FCA, said: "C ompetition is working fairly well for most consumers, with firms competing strongly for custom, and the market offering a range of products to meet consumers' needs.
"However, we remain concerned about persistent and potentially problematic credit card debt. We will continue to work closely with consumer groups and industry to deliver changes to help consumers gain more control over their finances."