Precious Plastic 2006 - Consumer credit in the UK

Credit card annual fees set to return as issuers face shrinking margins

November 2005

Annual fees on credit cards are set to make a comeback as issuers face shrinking margins from regulation, rate tarts and rising credit losses, according to PricewaterhouseCoopers' latest study of the UK consumer credit market, Precious Plastic 2006.

Profit margins have been hit by an increase in bad debts and the study contains new research showing that individuals who enter into Individual Voluntary Arrangements (IVAs) owe an average of £60,000 to 11 creditors (credit cards and other unsecured borrowing).

Rate tarts (those who move from issuer to issuer to finance their debts at no cost) are estimated to have cost the industry a further £600 million in lost revenue on balance transfers, despite the introduction by many card issuers of a 2% fee for such transfers. The provision of consumer credit is also in the regulatory spotlight with a number of separate inquiries focusing on most sources of revenue.

Key highlights:

• What's happening in the consumer credit card market?
  
• Complex drivers are behind the increase in charge-offs
  
• Retailer partnerships remain attractive
  
• Innovations in the consumer finance market
  
• Consumer credit under the regulatory spotlight

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