Credit card firms to be subject of review
The City Watchdog said its concerns about nine million Britons who are considered to be in serious debt have forced it to set up a competition review into the UK's £150bn credit card market.
Martin Wheatley, chief executive of the Financial Conduct Authority, warned that "survival-borrowers" are being forced to use credit cards or payday loans to pay bills, and he questioned the role of credit card companies' involvement in pushing vulnerable people into a deadly spiral of debt.
"Why are card issuers providing the means for the most indebted consumers to escalate their way into further debt?" he asked, after announcing the review, which will be undertaken at the end of the year. The Financial Conduct Authority took over responsibility for consumer credit last Tuesday.
"The key priority 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," Mr Wheatley said. He revealed that among the UK's 30m credit card holders, around 3.7 % make minimum payments for 12 months.
That's the equivalent of more than a million borrowers. "So, we know it's not uncommon for the most 'at risk' households to hold multiple cards and revolve multiple balances month by month," the FCA's chief said.
Credit card companies said they welcomed the Watchdog's review. Richard Koch, head of policy at the UK Cards Association, claimed: "The industry has a long-standing commitment to responsible lending and transparency, with a number of recent changes on credit limits and repricing of debt, improved transparency, and forbearance for those who find themselves missing repayments."
There are some 56m credit cards in issue in the UK, which accounts for 70% of all European credit cards.