UK to probe credit card market

UK to probe credit card market

2014-04-03 13:41

London - Britain's financial watchdog will investigate the £150bn credit card market to assess if people in financial trouble are being treated fairly, it said on Thursday.

The decision by the Financial Conduct Authority (FCA) comes just two days after it took over supervision of Britain's consumer credit market.

The watchdog said 30 million Britons hold at least one credit card and it would explore whether competition in this market was working effectively for consumers, especially those in difficult financial situations.

It said it would launch the review at the end of this year.

The UK Cards Association, a trade body for the sector, had no immediate comment.

'Survival borrowers'

The FCA said recent research showed 9 million Britons were considered to be in serious debt and that a considerable number of people dubbed "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.

The watchdog is already probing payday lenders with a view to imposing a cap on interest rates from 2015.

FCA chief executive Martin Wheatley said the review would look at why card issuers are providing the means, in some cases, for the most indebted consumers to get into further debt.

StepChange, a charity, has told the FCA that about 10% of people who seek its advice have an average of £27 000 of debt and five or more credit cards.

Wheatley said there was no pre-determined outcome for the review. "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," he said.

British lawmakers have been putting pressure on regulators to find ways to increase competition in banking and other financial services in a sector dominated by a few big players.

On Thursday the European parliament is due to approve a cap on cross-border card fees.