homes in on 'survival borrowing' in credit card probe
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[November 25, 2014]
By Huw Jones
LONDON (Reuters) - Britain's credit card
market is not working well for struggling customers who over-borrow and
pay unexpectedly high rates, the country's financial regulator said on
Tuesday, as it launched a study that could change the way cards are
The Financial Conduct Authority (FCA) said it would study how easy
it is for customers in Europe's biggest credit card market to shop
around, how card providers recover costs, and the extent of
Britons hold 70 percent of all Europe's credit cards, with around 30
million consumers sitting on a combined 56.9 billion pounds of debt.
The FCA said that its study, which will include 200 cards offered by
banks and standalone businesses, would focus primarily on the use of
the cards as "a means of revolving credit" -- or a way of keeping
sometimes heavy debts at bay, often at high cost.
"We want to understand in more depth what drives consumers to make
the choices they do and how firms develop the services they offer,"
FCA director of policy Christopher Woolard said.
Some customers, the FCA warned, could be over-borrowing and taking
on too much debt, and "there are signs that some issuers may profit
more from higher risk borrowers".
The FCA can force credit card providers to make changes, and is
already cracking down on other types of credit such as payday loans
as the watchdog flexes its consumer protection muscles.
Tuesday's announcement follows an initial review published in April
that raised concerns about "survival borrowers", or those barely
able to make card repayments.
The UK Cards Association, an industry body, said it has a
long-standing commitment to responsible lending and transparency,
and over the last five years has introduced many changes including
on credit limits and re-pricing of debt.
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The FCA said the interchange fees, paid between banks for accepting
card based transactions, would not be a major focus as they come
under the new Payments Systems Regulator.
"We will, however, consider, the possible implications of the
proposed interchange fee cap on the evolution of the credit card
market," the FCA said.
The European Union is capping interchange fees charged by MasterCard
and Visa to ensure they are fair and transparent.
(Editing by David Clarke and Clara Ferreira Marques)
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