A COMPETITION probe into the £150 billion credit card market is to be launched as the head of the City regulator raised concerns about vulnerable consumers being offered what are akin to "payday loans with plastic".
The Financial Conduct Authority (FCA), which took over supervision of the consumer credit market on Tuesday, confirmed that it will undertake the review at the end of this year.
Martin Wheatley, chief executive of the FCA, told a credit summit in London that 30 million people, or around two-thirds of UK adults, hold at least one credit card, meaning it is right that the regulator explores whether the market is working effectively for consumers.
Loading article content
The review will put focus on how the industry works with people who are struggling financially.
Mr Wheatley said that around 3.7% of credit card holders only make minimum payments over a 12-month period, equating to more than one million borrowers.
He said an obvious question for 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?"
Questions to be considered include whether con-sumers who leave their balances every month are subsidising those who pay them off.
He also asked: "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?"
Mr Wheatley said it is "not uncommon" for the most vulnerable households to hold multiple cards and revolve multiple balances month-by-month.