| PwC says credit card annual fees could make a comeback |
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LONDON - U.K. credit card issuers could be forced to bring back the annual fees on the cards that they issue as the industry was being badly hit by higher bad debts, which are causing huge revenue losses, according to an annual study by PricewaterhouseCoopers LLP released on Monday.
The issuers were also hit by the so-called rare tarts, people who move around their borrowings among several creditors. PricewaterhouseCoopers estimates that credit card issuers lost out at least £600 million last year because of the combined effect of “rate tarts" and bad debtors. This loss has come to light despite the fact that many card issuers have introduced 2 percent balance transfer fees.
The study also found that people who had entered into Individual Voluntary Arrangements owed £60,000 to 11 different creditors. People who fill out an IVA agree to have their debts frozen in return for paying a set amount each month.
"Credit card providers are coming under increasing pressure from fierce competition and mounting regulatory scrutiny. The industry is being subject to a number of separate inquiries by different regulatory bodies, looking at virtually every source of income," said Richard Thompson, partner at PricewaterhouseCoopers. "Some aspects of these inquiries appear to be based on the assumption of excess profitability but there is a danger that different inquiries are targeting the same profit pool."
The group also estimated that the amount of unsecured debt had hit £189 billion, a rise of 8.4 percent in the year ending June. PwC said that it expects this amount to cross the £200 billion barrier by June 2006. Britons currently owe £1.1 trillion, out of which £940 billion is in secured loans like mortgages.
PwC says that consequently there has been little movement in the card balances. "The impact may therefore be a waterbed effect whereby costs are simply reallocated between different groups of consumers. It remains to be seen whether a more equitable position will be achieved," said Thompson.
Posted
on : Tue, 15 Nov 2005 06:45 GMT | Credit Cards News
By : Rob Davis
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