2016年-FCA英国金融行为监管局_ms14_6_3_credit_card_market_study_final_findings_report_annex_2_52页_768kb

Credit Card Market Study - Annex 2 Summary

Core Content

This annex provides further analysis of potential problem credit card debt based on data from 2010 to 2015. It examines how consumers move into and out of problem debt states over time, using four key indicators: severe arrears, serious arrears, persistent debt, and systematic minimum repayment. The analysis is based on a dataset of 26 million consumers and 47 million active accounts, which includes monthly data on balances, repayments, and product information.

Main Findings

• Long-running debt issues: A significant proportion of consumers in problem debt states in 2014 had been in those states for multiple years. Around 650,000 cardholders had been in persistent debt for at least three consecutive years, and an additional 750,000 had been making systematic minimum repayments for the same period.

• Rapid descent into debt: A notable minority of consumers who ended up in severe arrears in 2014 had no active credit card in 2012 or 2013, indicating a quick progression into arrears after opening a credit card. Over 20% of those in severe arrears in 2014 had no active card in 2012, and 7% had none in 2013.

• Multiple credit cards: Consumers holding multiple cards are not uniformly in problem debt. Three-quarters of them are not in potentially problematic debt, but those who are tend to have higher credit limits and balances. Approximately 13% of consumers with multiple cards were in potentially problematic debt on one card, and 11% on more than one.

• Sensitivity of indicators: The analysis found that the indicators of potential problem credit card debt are not overly sensitive to threshold changes. The overall number of consumers identified as being in problem debt remains relatively stable, even as the thresholds for the indicators vary.

Key Indicators of Potential Problem Credit Card Debt

1. Severe arrears: Consumers who have been charged-off or have been at least six months in arrears.
2. Serious arrears: Consumers who missed three or more repayments and are in arrears.
3. Persistent debt: Consumers with an average credit limit utilisation of 90% or more while incurring interest.
4. Systematic minimum repayments: Consumers who made nine or more minimum repayments while incurring interest.

These indicators are used to classify consumers into problem debt states, with severe arrears being the most severe and systematic minimum repayments the least.

Backward-Looking Analysis

• The analysis looks at how consumers in problem debt states in 2014 were classified in previous years.

• Severe arrears (600,000 consumers):

  • Two-thirds were in some form of problem debt in 2013.
  • Almost 35% were in serious arrears in 2013.
  • Over 20% had no active credit card in 2012, and 7% had none in 2013.
  • Around 40% had been in some problem debt state for the previous two years, and 26% for the previous three years.

• Serious arrears (1.5 million consumers):

  • Over 60% were in some form of problem debt in 2013.
  • Almost 37% were in serious arrears in 2013.
  • Around 20% had no active credit card in 2012.
  • About a third were not in problem debt in 2013.

• Persistent debt (2.1 million consumers):

  • Around 650,000 had been in persistent debt for at least three consecutive years.
  • Almost half were in some form of problem debt in 2012 and 2013.

• Systematic minimum repayments (1.6 million consumers):

  • Around 750,000 had been making systematic minimum repayments for at least three consecutive years.
  • Almost half were in some form of problem debt in 2012 and 2013.

Forward-Looking Analysis

• The forward-looking analysis examines the trajectory of consumers in problem debt states in 2010 over subsequent years.

• In 2010, approximately:

  • 3.2% were in severe arrears.
  • 7.6% were in serious arrears.
  • 6.9% were in persistent debt.
  • 4.3% made systematic minimum repayments.
  • 78.1% were not in problem debt.

• The analysis shows that a greater proportion of consumers were in some form of problem debt in 2010 compared to 2014, consistent with a decline in delinquencies and write-offs over the period.

• Consumers in problem debt in 2010 were more likely to have moved out of those states by 2014, indicating some recovery or improvement in financial situations.

Conclusion

The analysis reinforces the importance of understanding the long-term patterns of credit card debt. It highlights that while some consumers experience long-standing debt issues, others rapidly descend into arrears. The indicators used are deemed appropriate for identifying potentially problematic debt, and the findings are not significantly affected by threshold adjustments. The dataset and methodology are consistent with those used in the interim report, ensuring continuity and reliability in the analysis.