Our report finds that subprime credit cards lead many financially vulnerable people to pay an excessive cost for credit and experience serious debt problems.
The government and the FCA should protect financially vulnerable borrowers against products that exploit behavioural bias and lead to unreasonable and harmful costs:
Policy makers should take a preventative approach and increase statutory minimum credit card payments for new cards to the level required to clear debt without excessive cost.
Our evidence also shows there's a role for 'backstop' measures to address excessive costs by suspending interest charges for consumers in persistent debt, and limiting the cost of credit to 100% of the amount borrowed.
The FCA should take action to prevent irresponsible lending and make subprime credit cards safe for people at risk of financial difficulty by:
Strengthening creditworthiness and affordability rules to prevent harmful subprime lending to those in, or at significant risk of, financial difficulty.
Reviewing persistent credit card debt rules to provide subprime borrowers in financial difficulty with a safe way out of persistent debt.
Testing and implementing repayment models and tools that help people repay credit card debt promptly.
Investigating problems linked to the promotion and structure of 'credit builder' products through the credit information market study.