FCA announces competition review into credit cards - particular focus on how industry works with those in difficult financial situations

Published: 03/04/2014   Last Modified : 03/04/2014

The Financial Conduct Authority (FCA) today confirmed its intention to undertake a competition review into the UK’s £150bn credit card market at the end of this year.

Speaking at the Credit Today Credit Summit in London, FCA chief executive Martin Wheatley said that given 30 million 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 April 1st, Martin Wheatley said he was keen for the study to ask how the industry worked with those people who were in difficult financial situations already.

Recent research showed nine million Britons were considered to be in serious debt and that a considerable number of people, “survival borrowers”, often feel they have no option but to borrow money, through a payday loan or using a credit card, to help pay their bills.

Martin 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% make minimum payments for 12 months which is the equivalent to more than a million borrowers making 12 or more consecutive minimum payments.

“So, we know it’s not uncommon for the most ‘at risk’ households to hold multiple cards and revolve multiple balances month-by-month.

“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.”

Credit card market facts

  • The Charity StepChange say around 10pc of the people who visit for advice, with an average £27,000 of total debt, arrive with five or more credit cards.
  • The UK market has 56million credit cards in issue.
  • 30 million Britons have a credit card. 70pc of all European credit cards, according to a UK card association are held by Britons.
  • Gross spending on those cards was £150bn last year. And there was around £57bn in outstanding balances.
  • The FCA’s research into low income consumers.

Notes for editors

  1. The full text of Martin Wheatley’s Credit Today speech.
  2. This week, the FCA took over regulation of consumer credit and published low income consumer research.
  3. In March the FCA announced a thematic review into payday lenders.
  4. On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  6. Find out more information about the FCA.

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