Cardeo: Urgent reform needed for the UK credit market
Cardeo, a fintech designed to help customers pay less interest on credit cards, says the average UK credit user pays almost £1,000 in interest per year, more than any other European country.
The report notes that this average annual interest rate is only likely to increase as the cost of living crisis has forced people to shelve debt repayments to pay everyday bills.
Cardeo is also calling on the government to further legalize the availability of customer data, and appoint a single regulator to moderate credit card issuing policies.
UK credit card market ‘broken’
According to the report, up to 14 million customers are paying £1,000 in interest each year, which Cardeo says “demonstrates that the UK credit market is broken and in urgent need of reform”.
This need for reform is made all the more urgent – according to Cardeo – by the fact that 60 million credit cards are currently in circulation in the UK, meaning there is a greater risk of more credit card users facing high interest rates.
Cardeo made five key recommendations to the UK government and regulators in its report:
- Reform the Consumer Credit Act to give customers proper control over their own credit card data
- Ensure that banks and credit card companies fully comply with all the requirements of the payment regulations
- Make the Open Banking Implementation Entity properly accountable to Parliament and ensure that the benefits of open banking are made fully available to consumers
- More proactive regulatory oversight of new open banking rules and compliance
- Force banks and credit card companies to provide certain key data electronically (already a requirement for paper statements)
The FCA must ‘push’ lenders to make it easier for customers to switch
Cardeo’s co-founder and chief executive, Gavin Shuker, adds that unless the Financial Conduct Authority (FCA) pressures major lenders to make it easier for customers to switch providers, credit card users will continue to suffer by paying unnecessary interest.
He notes, “The credit card poverty trap is catching more people as they struggle with the rising cost of living. It’s no surprise that customers fail to pay off high-interest credit cards, especially when the system doesn’t encourage them, but as their disposable income is squeezed, the reality is that paying off credit card debt more efficiently is becoming even more important.
“It is becoming increasingly clear that the UK credit card market as we know it is broken and needs to be fixed. If we don’t, consumers will continue to pay the price.”
