U.K’s FCA Not Happy With Credit Card Companies
The credit card industry in the United Kingdom is a multi-billion pound industry that continues to grow as a rapid pace based on recently stats published by the city watchdog. The report states that over 60 percent of Brits have a minimum of one credit card and the total outstanding amount on these cards are estimated to be around £61 billion pounds.
The Financial Conduct Authority (FCA) also conducted a study which revealed that the large majority of these card holders accumulate a lot of credit card debt and follow the credit system laid out by the companies of making minimum payments.
Due to growing credit card interest rates, these loan amounts rise extremely quickly and leave the card holders with a huge amount of debt.
The FCA came down hard on credit card companies all across the U.K by stating that these companies basically encourage customers to get into debt and fall into a debt repayment cycle that becomes very hard to come out of. The FCA wants credit card companies to take more initiative to educate their customers about the risk of the debit cycle and finding the best possible solution in paying back their loans in quick time.
The city watchdog also confirmed that over 2 million card users have already defaulted on their payment plan or are not in a position to make debt payments anymore. These customers become a liability for credit card companies, prompting them to take legal action against them. The FCA wants to avoid this vicious cycle and has urged credit card companies to implement policies that will help educate and protect the customer.
Martin Lewis from MoneySavingExpert stated that one of the steps credit card companies can take is to roll out a flexible repayment plan for customers and educate them on the benefits of this plan. In a statement, Lewis said
Minimum repayments are dangerous – as they are based on a percentage of what is owed – and only just service the interest each month. This locks people into repaying interest for years; and many who do this can’t shift to cheaper deals, meaning costs snowball.
The FCA also encouraged credit card companies to keep a closer watch on their customers and quickly identify customers who are having initial problems with their loan repayment plans and work with them to prepare a new repayment plan that will help them come out of their debt cycle instead of falling in deeper. The FCA plans to release its final report on credit card debt before the spring of 2016. For information on the best banking institutions for Binary Option Trading read here.
