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| Credit card market faces probe into aggresive marketing | |
| (35 minutes later) | |
| The City regulator is to investigate whether credit cards are being marketed too aggressively, amid concerns that plastic payment is allowing consumers to run up debts they cannot afford. | The City regulator is to investigate whether credit cards are being marketed too aggressively, amid concerns that plastic payment is allowing consumers to run up debts they cannot afford. |
| At £150bn a year, the UK credit card market is the largest in Europe, with 30 million people holding cards with total debts of £60bn. | At £150bn a year, the UK credit card market is the largest in Europe, with 30 million people holding cards with total debts of £60bn. |
| The Financial Conduct Authority (FCA) said it would launch an investigation into the market when it took over regulation of the sector in April. | The Financial Conduct Authority (FCA) said it would launch an investigation into the market when it took over regulation of the sector in April. |
| On Tuesday it revealed the full scope of its inquiry. It will look at the complexity of credit cards, the fairness and transparency of their terms and conditions, and whether consumers can easily switch between different credit card providers. | On Tuesday it revealed the full scope of its inquiry. It will look at the complexity of credit cards, the fairness and transparency of their terms and conditions, and whether consumers can easily switch between different credit card providers. |
| The regulator will also inquire into whether the cards are marketed “in a way that works against the best interests of consumers”. | The regulator will also inquire into whether the cards are marketed “in a way that works against the best interests of consumers”. |
| In April, its research showed that many consumers tried to resist the lure of credit cards “but were eventually worn down by continual marketing”, especially when companies sent them targeted mailing shots pre-approving them for cards. | In April, its research showed that many consumers tried to resist the lure of credit cards “but were eventually worn down by continual marketing”, especially when companies sent them targeted mailing shots pre-approving them for cards. |
| The market study will look at all issues around unaffordable lending and whether consumers are borrowing too much on their cards and making repayments too slowly. | The market study will look at all issues around unaffordable lending and whether consumers are borrowing too much on their cards and making repayments too slowly. |
| The FCA has previously flagged up its concern that consumers may be getting “payday loans with plastic” in the form of cards with low credit limits and high interest rates. | The FCA has previously flagged up its concern that consumers may be getting “payday loans with plastic” in the form of cards with low credit limits and high interest rates. |
| “The credit card market is well-established and hugely important for UK consumers, who hold around 70% of all credit cards in Europe,” said Christopher Woolard, FCA director of policy, risk and research. “We want to make sure that the market works well for all consumers and that card-holders get a fair deal.” | “The credit card market is well-established and hugely important for UK consumers, who hold around 70% of all credit cards in Europe,” said Christopher Woolard, FCA director of policy, risk and research. “We want to make sure that the market works well for all consumers and that card-holders get a fair deal.” |
| The FCA will officially begin the in-depth market study in January with the results expected to be published at the end of 2015. | The FCA will officially begin the in-depth market study in January with the results expected to be published at the end of 2015. |
| Mike O’Connor, chief executive of the Step Change debt charity, welcomed the announcement. “Too many people are using credit as a safety net when all too often it is a trap which leads to problem debt. Credit card debt is one of the most common debt problems we see. Many people are struggling with multiple debts, high balances and interest rates.” | Mike O’Connor, chief executive of the Step Change debt charity, welcomed the announcement. “Too many people are using credit as a safety net when all too often it is a trap which leads to problem debt. Credit card debt is one of the most common debt problems we see. Many people are struggling with multiple debts, high balances and interest rates.” |
| Around half a million people contact Step Change each year for advice about their debts. On average, they have £9,047 of credit card debt and 10% have five or more credit cards. “People will always need to borrow to cope with the up and downs of income and the costs they face, but we need to ensure that the credit market is operating in the best interests of consumers and with good levels of protection, especially for vulnerable people,” said O’Connor. | Around half a million people contact Step Change each year for advice about their debts. On average, they have £9,047 of credit card debt and 10% have five or more credit cards. “People will always need to borrow to cope with the up and downs of income and the costs they face, but we need to ensure that the credit market is operating in the best interests of consumers and with good levels of protection, especially for vulnerable people,” said O’Connor. |
| The UK Cards Association, which represents the industry, said it would study the FCA’s observations carefully. “The industry has a long-standing commitment to responsible lending and transparency and over the last five years has introduced many changes including on credit limits and re-pricing of debt, improved transparency, and forbearance for those who find themselves missing repayments,” said Richard Koch, head of policy at the trade body. | The UK Cards Association, which represents the industry, said it would study the FCA’s observations carefully. “The industry has a long-standing commitment to responsible lending and transparency and over the last five years has introduced many changes including on credit limits and re-pricing of debt, improved transparency, and forbearance for those who find themselves missing repayments,” said Richard Koch, head of policy at the trade body. |