In UK, the credit card industry is worth £150 billion. This voluminous industry is going to be closely monitored by financial watchdog as there are approximately 9 million Britons, who are credit card holders and being pushed by the credit card companies to fall into debt.
The announcement came from the Financial Conduct Authority. The FCA took responsibility on 1st April. Right after that FCA made the claim that credit card holders taking loan will be safer than before. The lenders were also warned by the agency.
Martin Wheatley, an executive at FCA explained the situation. He said a number of survival borrowers are compelled to use their credit cards to pay bills. Sometimes, they are opting for payday loans. This way, these hapless people are getting into the spiral of debt.
In his own words, “Why are card issuers providing the means for the most indebted consumers to escalate their way into further debt?” He feared that it is because of insisting them to take loans so that they end up paying high interest.
The regulatory agency has identified the most vulnerable segment which is 3.7% of 30 million British credit card holders. They make minimum payments for a year. Mr. Wheatley said, “The key priority has to be those in the most vulnerable circumstances, many of whom are struggling to manage their credit card commitments, as well as other bills…”
Credit card companies are curious to know how the review process will be done by the FCA. David Black, the PR Manager at Consumer Intelligence believes the review process would involve clarity in terms and conditions, forbearance for arrears and careful observation of affordability. This way, lender might see their profit margin going down and might have to look for other ways to generate profit.
Credit card companies made it clear by a statement that they welcome the FCA’s review. Richard Koch of UK Cards Association said, “the industry has a long-standing commitment to responsible lending and transparency, with a number of recent changes on credit limits and repricing of debt, improved transparency, and forbearance for those who find themselves missing repayments.”
Interestingly, the survivalist group and the lifestyle group used similar services. They had different reasons however; the lifestyle group took loan for purchasing expensive stuff while the survivalist group took loan for day to day purpose.
Mr. Wheatley put it unequivocally, “We have a big task ahead; it’s our job to make sure firms put their customers at the heart of their business and don’t just see them as an easy target or a profit line.”
It’s clear from his statement that the survivalist group is the prime concern for the FCA.