?While competition in the credit card market is working "fairly well for most …
?While competition in the credit card market is working "fairly well for most consumers", the Financial Conduct Authority has expressed concerns about problems linked to the sector such as long-term debt.
The industry regulator highlighted a number of ongoing issues related to credit card borrowing in an interim report published this month.
Among the FCA's concerns is the potential scale of problematic debt for consumers who are "just above default levels".
People with persistent debts who regularly make minimum repayments are profitable customers, meaning credit card companies have little incentive to help them manage their borrowing.
Individuals in default, however, are unprofitable and receive regular contact from lenders when they miss payments.
Nearly seven per cent of cardholders – approximately two million people – are in arrears or have defaulted on credit card repayments, the regulator found.
It was also estimated that a further two million consumers have long-term debt they are struggling to repay and another 1.6 million are repeatedly making minimum repayments.
One of the positive features of the credit card market at present is healthy competition, with the FCA noting that there have been new entrants to the sector in recent years and that customers are fairly active in shopping around and switching products.
Christopher Woolard, director of strategy and competition at the industry watchdog, said: "This is a really important market in the UK. Around 60 per cent of adults have at least one credit card and there is an estimated £61 billion in outstanding balances.
"Our study suggests that the market is working reasonably well for most consumers, with a range of cards on offer. However, for a significant minority who are in persistent levels of debt, the market could potentially work better."
The FCA recommended some possible remedies to the problem of persistent credit card debt, including measures to give consumers more control over credit limits and firms taking earlier, stronger action to help people who are struggling to repay.
Posted by Joe White