2015年-FCA英国金融行为监管局_ms14_6_2_ccms_interim_report_117页_1mb

Summary of Credit Card Market Study: Interim Report

Core Content

This interim report by the Financial Conduct Authority (FCA) provides an overview of the UK credit card market, focusing on consumer behavior, firm business models, and the extent of unaffordable credit card debt. The FCA is seeking stakeholder feedback to refine its understanding and identify potential remedies to improve consumer outcomes.

Main Findings

Consumer Behavior and Competition

• Competition is generally effective for most consumers, with firms competing for customers through promotional offers and rewards.
• Consumers are active in switching credit cards, with around 14% of existing cardholders taking out a new card annually.
• Shopping around is common, with over half of new cardholders doing so. However, consumers often overlook important features like long-term interest rates and fees.
• Price comparison websites (PCWs) are useful for consumers but have limitations in reflecting individual usage patterns and transparency in funding and market coverage.

Market Concentration and Entry

• The market is moderately concentrated, with some new entrants in recent years.
• Higher risk consumers have limited product and provider choices, due to reputational and regulatory risks associated with higher cost lending.
• Firms do not consider lack of switching as a major barrier to entry or expansion.

Business Models and Cost Recovery

• Firms design products to break even over a five-year period, without targeting specific groups for cross-subsidization.
• Interchange Fee Regulation is expected to reduce firm income by 5% to 10%, but not lead to significant product changes.
• Revolvers (those who use revolving credit) generate higher profits than transactors (those who primarily use cards for purchases).
• Firms are not significantly affected by cross-subsidization practices, and responses to the cap on interchange fees are expected to be communicated clearly to consumers.

Unaffordable Credit Card Debt

• 6.9% of cardholders (around 2 million) are in arrears or have defaulted.
• A further 6.6% (around 2 million) have persistent high debt that may be difficult to repay.
• 5.2% (around 1.6 million) make systematic minimum payments, which may not be problematic but increase total costs.
• Balance transfers are popular, with almost half of accounts repaying the full amount by the end of the promotional period. These do not currently contribute significantly to problem debt.

Key Concerns

• Defaulting consumers are unprofitable, and firms are proactive in contacting them.
• Persistent debt and minimum payment behavior are profitable for firms, so they have fewer incentives to intervene.
• Behavioral biases such as optimism bias and framing effects may lead to over-borrowing and under-repayment.
• Firms have limited forbearance procedures for consumers who are not in default but may be at risk.

Interim Proposals on Remedies

• Improve transparency by enabling better access to transaction data and ensuring PCWs clearly compare the whole market.
• Give consumers more control over credit limits and utilization.
• Prompt consumers to pay off debt faster when they can afford to.
• Encourage early identification of consumers at risk of debt problems and support them before they become problematic.
• Align firm incentives with good consumer outcomes.

Next Steps

• The FCA plans further work on the market, including the final report and stakeholder views.
• The glossary of terms and annexes provide additional detail on the study’s methodology and findings.

Key Principles for Remedies

• Remedies should support consumer choice and reduce the risk of unaffordable debt.
• They should enhance transparency and improve consumer understanding of the total cost of credit.
• The FCA is open to stakeholder input on the proposed remedies and how they can be implemented effectively.

Impact of Economic Conditions

• Balance transfers and other credit products may become more problematic if economic conditions worsen.
• The scale of unaffordable debt is a concern, especially for consumers just above the default threshold.

Conclusion

The FCA concludes that while competition is generally working well for consumers, there are areas where it could be improved, particularly in terms of affordability, transparency, and early intervention. The proposed remedies aim to address these concerns and ensure that the credit card market serves consumers more effectively.