The United Kingdom Financial Conduct Authority has sounded the alarm about millions of people falling into problematic levels of credit card debt, sending a warning to lenders over affordability checks.
The Financial Conduct Authority said competition in the credit card market is “working well” for customers but it is concerned about the number of people just above default level and the lack of incentives for providers to respond.
Consumer demand for credit cards rocketed after payday lenders retrenched following a clampdown on the sector, which came under fire for charging extortionate interest rates.
Concern is mounting that looser lending criteria could lead to another credit bubble. Demand for credit cards shot up in the last quarter of 2014 to reach the highest level since the financial crisis began in 2007, according to the Bank of England. Some experts believe the credit card market could be in line for more stringent affordability checks akin to the mortgage market, after rules were implemented last year designed to ensure homeowners could repay their mortgages.
Source: Financial Times