The city regulator has published the findings of its study into the credit card market and has outlined proposals to help people budget more efficiently and, where appropriate, to repay debt faster.

For those consumers in problem credit card debt, the FCA is proposing further action, such as lenders actively contacting customers before they get into financial difficulties.

It comes after the FCA published an interim report last year which found that while competition in the credit card market is working fairly well, there was a concern about the scale of potentially problematic debt.

As a result, it carried out further analysis on consumers in problem credit card debt.

Going back to 2014, it found 28% of credit card users fully repaid outstanding balances, 25% made repayments at the contractual minimum, 15% did not meet the contractual minimum while 32% paid above the contractual minimum but less than the full outstanding balance.

Based on these findings, the FCA said it remained concerned that groups of consumers may not be making active choices of repayment amounts and instead are defaulting to choose the minimum repayment option.

It has proposed the following actions to be taken by the industry:

• Timely prompts before promotional periods end;
• Timely information to prompt consumers to take into account how much they are borrowing and avoid over limit charges; and
• Giving consumers the ability to choose the payment due date.

The FCA said it will publish further information on the proposed rules later in the year.

More needs to be done to help those in persistent debt

Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said it welcomes the measures.

“Credit cards can be a good way to borrow for short periods, if you can repay in full each month – but they can be very expensive over the long run if you cannot.

“The problem of persistent minimum payments is a particular concern, with 750,000 people regularly paying only the minimum for three consecutive years. We need to do more to help this group of people, who are just about keeping their head above water, but without making a serious dent in repaying what they owe.

“Most credit card companies intervene effectively when people miss their payments, including signposting customers to free debt advice from National Debtline and other charities. We need to get help to people earlier, so that those who are regularly making just their minimum repayments receive the free advice they need.”

Elson added that more control over credit limits, the ability to request a ‘later than’ payment date and a smarter approach to repayments will further ensure that the credit card market works for all consumers.