FCA reports on charge card market
FCA has printed the interim findings from the market study the charge card sector. FCA finds that, in the majority of the market, levels of competition are working fairly well for consumers but is worried concerning the proportions of potentially problematic debt for consumers who’re just above default levels, and also the incentives for firms to handle this. Interim findings show:
- firms compete strongly for custom on some features, offer a variety of products to satisfy consumers’ needs and there has been new entrants on the market recently, but there’s less choice than there was once for top risk consumers
- consumers look around, switch and cost the versatility provided by charge cards. But competition concentrates on a couple of factors only, including attractive marketing offers, and consumers don’t always take account of other important features when getting an item or switching
- firms weren’t targeting particular categories of customers to mix-subsidise other groups
- consumers in arrears are very unprofitable and corporations are involved in contacting consumers who miss payments, triggering forbearance at this time. However, consumers with persistent amounts of debt or who make minimum payments are lucrative. Firms therefore have less incentives to assist these customers. A couple of firms also charge default charges several occasions per default
- % balance transfer choices are a substantial feature from the market. FCA is anxious about whether consumers really comprehend the product and also the charges they’ll incur, and whether utilization of these items store up future debt problems and
- cost comparison websites are popular but you will find limitations in evaluating the complexness of merchandise, and usually there’s little information about how they’re funded and whether or not they compare the entire market.
FCA has suggested potential remedies to help make the market are more effective for consumers. Key remedies include:
- measures to assist consumers get the best deal include enabling better access by customers to their transaction data and clearer standards to compare sites
- making certain consumers can search the marketplace with no damage to their credit rating, and prompting customers to consider their position when they’re nearing the finish of the marketing period
- measures to provide consumers additional control over credit limits and utilisation
- measures to inspire consumers to repay debt faster whenever they can manage to, for example disclosures about how much it’ll cost you to repay debt along with a wider selection of pre-set repayment options and
- requiring firms do more to recognize earlier individuals consumers who might be over-borrowing or battling to pay back and do something to assist them to manage the car loan payments.
FCA needs feedback on these proposals until 8 The month of january 2016. (Source: FCA Interim Set of Charge Card Market Study)