FCA finds consumers repay credit card debt manually

Written by Oliver Wade
27/07/2018

The Financial Conduct Authority (FCA) recently revealed that the majority of credit card repayments are repaid manually and not by credit card, according to the regulators outcome of a programme of behavioural research.

The authority undertook two online hypothetical experiments, and found that removing the minimum repayment amount from the manual repayment screen (de-anchoring) had a dramatic positive effect, significantly increasing the value of repayments made.

Furthermore, the FCA conducted a field trial to find out whether removing the option to pay the minimum repayment amount from the direct debit set up screen. However, whilst this measure caused many more people to repay higher amounts, as intended, it did not increase overall payment amounts.

The regulator claimed that this is due to two counteracting effects; consumers offset their higher direct debit payments with lower subsequent manual payments, with come consumers not setting up a direct debit at all.

As a result of the observations, the FCA is considering consulting on changing its rules and guidance to mandate the removal of the minimum repayment anchor, with the ambition of increasing credit card holders’ repayments and preserving the flexibility of credit cards.

Furthermore, the authority has stated that it is not proposing to increase the level of minimum repayments at this time, as it is keen to preserve flexibility for those who cannot afford higher repayments.

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