Precious Plastic 2007 - Consumer credit in the UK

Credit card users could lose out in £1 billion rule changes - annual fees and interest rate rises on the cards

November 2006

The majority of credit card users will be the losers as consumer protection rules could cost lenders £1 billion a year, according to Precious Plastic 2007, the latest study of the UK consumer credit market from PricewaterhouseCoopers LLP.

PwC research reveals credit card margins continued to fall in 2006, as the industry came under unprecedented scrutiny from the Office of Fair Trading (OFT), the Competition Commission and the Financial Services Authority.

Precious Plastic 2007 highlights:

• The combined effect from the rulings and investigations could result in lost revenue to the industry of £1 billion a year.
• PwC predicts a 'waterbed effect', whereby charges pushed down in one area pop up somewhere else, for example, card issuers would have to levy annual fees costing the average credit card user £35 a year to recoup the potential £1 billion loss.
• Precious Plastic 2007 also revealed that UK consumers have overtaken the US in terms of debt penetration.
• Loyalty schemes are the single most important factor when consumers choose a credit card.
• Individual Voluntary Arrangements (IVAs) and bankruptcies are being set up at a rate of one a minute every working day.
• Spending on the high street using debit cards surpassed cash for the first time in 2005, up £7 billion to £89 billion on the year.

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