FCA Promotion Expiry and Borrowing Prompt alerts
FCA Concerns in the Credit Card market.
UK Credit card firms need to implement Promotional Expiry alerts by Jan 2018, and Close to Credit limit prompts by July 2018.
The FCA launched a market study into credit cards November 2014. The final finds report – MS14/6.3 published July 2016, after receiving 35 formal responses to the interim report, set out the FCA’s concerns. Amongst others, two key concerns were;
- a significant number of consumers who were struggling under a debt burden that had become problematic or were paying more in debt service cost and taking longer to pay off debt than they needed to.
- the rapid descent into debt difficulties for some new consumers
In parallel to the study into credit cards, The FCA has studied the impact of annual summaries, text alerts and mobile apps on consumer banking behaviour. After examining 500,000 customers over 30 months, the FCA drew the lesson that there is “… a strong impact of text alerts and mobile banking apps together show the benefit of receiving timely information through automatic triggers, without having to actively acquire it, as well as the facility to act quickly upon receiving the information”.
The UKCA’s response to Promotion expiry and Borrowing prompt alerts
The UKCA agreed with the FCA new rules to enhance industry self-regulation. The UK Card Association;
- Promotion Expiry Alerts – have committed to send a notification by text or email to all consumers two to three weeks before the expiry of their promotional offer, or one month before expiry for customers contacted by letter only.
- Close to credit limit prompt– have committed to sending a digital communication to all consumers that cross a threshold between 80% and 95% of their available credit limit, informing them that they are close to their credit limit.
The industry agreement date for implementation (see 1.16 of CP17/10) for Promotion Expiry is April 2018, and Close to Credit limit prompt is July 2018. However for Promotional Rate expiry the FCA expects an interim implementation rate of 95% by January 2018.
In respect of Credit Limit Increases Alerts and offering customers explicit opt-in and opt-out options, the UKCA has agreed with the FCA, see Consultation on persistent debt and earlier intervention remedies that more straight forward means will be provided.