FCA attack credit cards for being 'plastic payday loans'
The FCA said that they're going to be paying special attention to the ways providers do their business with customers who are borrowing money to survive and will investigate cards issued with low credit limits of a couple of hundred pounds and high interest rates.
Speaking at a credit summit the FCA chief executive Martin Wheatley said: "The key priority here 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."
"Is there sufficient debate at the margins of the industry, particularly where we see cards issued with low credit limits of a couple of hundred pounds and high APRs - payday loans with plastic, if you will?"
Apparently, the investigation won't follow a specific agenda, but said a vital question to ask the industry is: 'Why are card issuers providing the means, in some cases, for the most indebted consumers to escalate their way into further debt?'
With research showing that nearly a third of Britons having unsecured borrowing, and many of those paying for day-to-day costs with their cards, there needs to be some conversations in a bid to break people's habits and ensure that finance companies aren't exploiting the situation.
Richard Koch, head of policy at the UK Cards Association, said: 'We have been working with the FCA as the new regulator comes into existence, and it's no surprise that officials want to explore how a market as important to consumers as this one is working. 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."
"That said, we are not complacent about the small number of customers who find that changed circumstances, such as illness or redundancy, mean they need more support with managing their debts, and we welcome all conversations about how we can ensure we are doing everything possible to support these cardholders."