The Financial Conduct Authority (“the FCA”) has published MS14/6.2, its ‘Credit Card Market Study’ interim report. According to the FCA’s interim findings, competition is working “fairly well” for consumers in most of the market.
Card issuers compete strongly for custom on some features – not only for new consumers but also for ‘back book’ consumers (existing borrowers with balances). However, competition is focused primarily on introductory promotional offers and rewards, with less competitive pressure on interest rates outside promotional offers and other fees and charges. The FCA wants to ensure industry is clear about fees and charges, so consumers can focus on the overall cost of using credit cards.
The market is moderately concentrated but there has been new entry in recent years. However, higher credit risk consumers have a more limited choice of products and providers than lower risk consumers. The main barriers to serving this segment, other than commercial viability, appear to be the reputational and regulatory risks associated with higher risk and higher cost lending.
Interim proposals on remedies include enabling better access by consumers to their transaction data, boosting the role of comparison sites, ensuring consumers can search the market without damaging their credit score, prompting consumers when they are nearing the end of a promotional period, giving consumers more control over credit limits, encouraging consumers to pay off debt more quickly when they can afford to, and identifying earlier those consumers who may be struggling to repay and taking action to help them.
Interim report available here.