My last two posts in this update on UK cards discussed the growth in unused credit and the rising delinquencies in New cards. Both of these posts discussed credit line increases, but there’s one more factor that could weigh heavily on issuers’ plans.
The FCA is preparing to introduce new guidelines for credit cards that will impact line increases. It is anticipated that all new accounts will have to opt in for any offered increases, and this is expected to reduce the number of increases that take place.
The approach for existing customers should remain as per today, where customers have to reject the offer. However, customers who display a sustained propensity to pay the minimum payment (on non-promotional balances) will either have to opt in or be excluded from increases. Customers showing signs of persistent debt (based on how much they have paid in fees and interest versus reducing their balance) will be excluded.
These definitions are still out for consultation; however, if any changes are made, it is anticipated they will be minimal. Issuers will need to introduce new data, and store trend data over a longer period. Technology changes may be required to support these guidelines. It is expected new terms and conditions will have to be introduced too.
One good tool for managing your card portfolio is the FICO® Benchmark Reporting Service for users of the FICO® TRIAD® Customer Manager solution. The service provides not only strategic council but valuable benchmarking data, so you can see how your portfolios compare with industry benchmarks in the UK. For more information, contact me at staceywest@fico.com.
