Pestel Factors Affecting Credit Card Industry
The political and legal environment
In the aftermath of the credit crisis, governments and regulators are strengthening consumer protections and promoting the concept of responsible lending; new developments are being made with the customer’s interests in mind, ensuring that the customer is in control of their own finances,.
The Consumer Credit Act section 75 provides added protection to consumers, offered for transactions over £100. It is notable that higher earners, are among the financially savvy, are among the most likely to be aware of this cover. In an uncertain economic environment, using a credit card provides a sensible solution should something go wrong.
The sector has faced further regulatory pressure with the introduction of more stringent rules from the Credit and Store Card Review and the implementation of the EC’s Consumer Credit Directive.
From 1 January 2011, consumers now have five new rights regarding their credit and store cards, following an agreement between the U.K’s Department of Business, Innovation and Skills (BIS and the U.K Cards Association, this will mean major changes in the practices and business models of the credit card business. These changes are summarised in the table below.
Benefit to consumer | What this means | Considerations | 1. Allocation of payments | Ensures highest debt on a credit card is paid off first, enabling consumers to pay off their debt faster when they need to | Lower income from interest. This legislation may impact cardholders’ payment and spend patterns, resulting in assessing scoring models accurately | 2. Unsolicited credit line increases | Issuers will be prevented from offering an unsolicited credit line increase to any customer facing financial difficulty, while other customers will be given a 30-day notice period and a simple means of opting out. | Need to develop clear and consistent processes for helping customers decline limit increases. Procedures for handling complaints and requests
In the aftermath of the credit crisis, governments and regulators are strengthening consumer protections and promoting the concept of responsible lending; new developments are being made with the customer’s interests in mind, ensuring that the customer is in control of their own finances,.
The Consumer Credit Act section 75 provides added protection to consumers, offered for transactions over £100. It is notable that higher earners, are among the financially savvy, are among the most likely to be aware of this cover. In an uncertain economic environment, using a credit card provides a sensible solution should something go wrong.
The sector has faced further regulatory pressure with the introduction of more stringent rules from the Credit and Store Card Review and the implementation of the EC’s Consumer Credit Directive.
From 1 January 2011, consumers now have five new rights regarding their credit and store cards, following an agreement between the U.K’s Department of Business, Innovation and Skills (BIS and the U.K Cards Association, this will mean major changes in the practices and business models of the credit card business. These changes are summarised in the table below.
Benefit to consumer | What this means | Considerations | 1. Allocation of payments | Ensures highest debt on a credit card is paid off first, enabling consumers to pay off their debt faster when they need to | Lower income from interest. This legislation may impact cardholders’ payment and spend patterns, resulting in assessing scoring models accurately | 2. Unsolicited credit line increases | Issuers will be prevented from offering an unsolicited credit line increase to any customer facing financial difficulty, while other customers will be given a 30-day notice period and a simple means of opting out. | Need to develop clear and consistent processes for helping customers decline limit increases. Procedures for handling complaints and requests