StepChange Debt Charity responds to the FCA’s Credit Card Market Study – Interim Report

3 November, 2015

Following today’s release of the Credit Card Market Study – Interim Report by the Financial Conduct Authority, Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

“We welcome the FCA’s comprehensive and much-needed review of the credit card market. We see too many credit users falling into financial difficulty and more is needed to ensure that what should be a short term product does not push people into unaffordable long term debt.

“Credit card debt is the single biggest type of problem debt we see; two thirds of our clients have at least one card and their average debt is more than £8,000. Last year, 14 million people suffered a shock to their income or a change in circumstances and 4.5m of them used credit to cope. People who use credit to cope are 20 times more likely to fall into problem debt than those who don’t.

“The FCA’s focus on credit limits and minimum repayments is vital as they are both a significant part of the problem. We will work with the FCA to develop measures to support people in making sustainable payments. Continually paying the minimum can take more than 10 years to clear the balance and is often a sign of financial difficulty.

“We also want to see action on the issue of multiple credit cards, which is not addressed in the report. A quarter of our clients have three or more cards and their average credit card debt is nearly £20,000. Action is required on how credit card companies share data and carry out affordability checks to ensure people do not take on credit that looks cheap but will ultimately become unmanageable.

“We welcome industry progress on forbearance and look forward to working with them on raising standards further. Ultimately, we want to see the Government introduce an extended ‘breathing space’ guarantee, where interest, charges and enforcement are frozen to allow people to get back on their feet quickly before their debt becomes unmanageable.

“Whilst it is important that the market works hard for consumers and offers competitive deals, it is vital that it works just as hard to protect them from financial difficulty. The FCA, the credit card industry and consumer groups now need to work together so people in difficulty can get the help they need. As providers begin to lend more freely, we must avoid returning to the high levels of unsustainable credit we saw in the run-up to the recession.”