FCA publishes terms of reference for credit card market study

The Financial Conduct Authority (FCA) has today published the terms of reference for a credit card market study. The FCA announced the market study in April 2014 after its own research showed that the credit card market was not working well for some consumers.

The credit card market is one of the largest consumer credit markets that the FCA regulates. 30 million consumers have a credit card, accounting for £56.9 billion of outstanding debt.

Christopher Woolard, director of policy, risk and research at the FCA said:

'The credit card market is well-established and hugely important for UK consumers, who hold around 70 per cent of all credit cards in Europe. We want to understand in more depth what drives consumers to make the choices they do and how firms develop the services they offer.

'We want to make sure that the market works well for all consumers and that card-holders get a fair deal.'

The market study will enable the FCA to build a detailed picture of the retail credit card market, covering credit card services offered to consumers by banks, mono-line issuers, and their affinity and co-brand partners. It will be focused on, but not limited to, the following issues.

First, how easy it is for consumers to shop around, compare cards and find one that best meets their needs. This includes:

  • the extent to which consumers drive competition by shopping around and switching
  • product complexity
  • transparency and fairness of terms and conditions
  • behavioural drivers

Second, how firms recover their costs across different cardholder groups and the impact this has on the market, for example whether certain customer groups are disadvantaged, the impact on innovation or whether it prevents new products coming to market.

Third, issues around unaffordable lending and whether particular groups of consumers are over-borrowing or under-repaying their credit card balances and the possible reasons for this, including whether credit cards are marketed in a way that works against the best interests of consumers.

The FCA is seeking feedback on the scope of the market study by 5 January 2015.

Notes to editors

  1. Credit card market study terms of reference.
  2. Market studies enable the FCA to take a holistic look at competition in a market, assessing how consumers and firms behave and interact.
  3. The UK Card Association estimates that UK consumers hold 70 per cent of all credit cards in Europe.
  4. On 7 April 2014, the FCA published research on the credit card market.
  5. On the 1 April 2013 the Financial Conduct Authority (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).
  6. 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.
  7. Find out more information about the FCA.