FCA to carry out review of credit card industry

The Financial Conduct Authority (FCA) has announced a review into the UK's £150 billion credit card market.

Chief executive Martin Wheatley stated the regulator will carry out the study to see if consumers were benefitting from adequate levels of competition in the industry. This comes on the back of the news that some 30 million people now own at least one credit card .

The UK market currently accounts for 70 per cent of the total number of cards in Europe, with some 56 million in circulation. Gross spending on plastic was £150 billion last year, while consumers had run up £57 billion in outstanding balances. 

When it came into force on April 1st, the FCA stated it would look in detail into how the market worked with those individuals who had found themselves in financial difficulty. Research carried out by the regulator showed nine million Britons were considered to be in serious debt, with a large proportion of people believing they had no option but to borrow money so they could pay their bills.

The regulator claimed some 3.7 per cent of credit card holders only make minimum payments for 12 months, equating to one million borrowers. Because of this, it is not uncommon for many households to have multiple balances running at the same time. 

Following the FCA announcement, Citizens Advice revealed it helped nearly 200,000 people with their credit card debts last year. It echoed the regulator's sentiment that a thorough review of the industry was necessary to make sure it was competitive and called for better information to be made available on how borrowers can repay what they owe and the risks involved in getting into difficulty. 

Mr Wheatley commented: "There are some obvious questions and challengers 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?"

The FCA review is expected to be conducted at the end of the year. 

By Amy White