British credit card debt reaches shocking level as City watchdog FCA issues consumer warning

More than two million credit cardholders have defaulted or are in arrears according to Britain's financial watchdog, the Financial Conduct Authority (FCA), who have warned about the scale of credit card debt.

An FCA study estimates that two million people are in persistent levels of debt that some may be struggling to repay. FCA thinks a further 1.6 million people only make the minimum payments on their debt each month.

FCA said more should be done to help struggling borrowers, noting that those with persistent levels of debt or who make minimum payments are profitable. Firms "therefore have fewer incentives to help these customers", although consumers who default are "extremely unprofitable."

"For a significant minority who are in persistent levels of debt, the market could potentially work better," said Christopher Woolard, director of strategy and competition at the FCA, although he added that their study suggested "the market is working reasonably well for most consumers."

The watchdog also called for the market to provide better information for those shopping around, and ensure borrowers can search the market without damaging their credit score. Money Advice Trust chief executive Joanna Elson claimed the FCA was "absolutely right" to be concerned about borrowers repaying only the minimum amount.

"With borrowing on credit cards rising by around £300m (€421m, $461m) a month and household budgets likely to come under further pressure from rising rents and interest rate rises, now is the time to address this problem," said Elson.