City regulator raised concerns about vulnerable consumers being offered what are akin to “payday loans with plastic”.

The Financial Conduct Authority (FCA) has revealed that it is undertaking a competition review at the end of 2014 into the UK's £150 billion credit card market – just days after the watchdog took over responsibility for the consumer credit market.

Speaking at the Credit Today Credit Summit in London, Chief Executive of the FCA, Martin Wheatley, said that, given 30 million people hold at least 1 credit card, it is right that the regulator explores whether competition in the market is working effectively for consumers, especially those in difficult financial situations.

Wheatley is keen to stress that the review will look at why card issuers are providing the means for the most indebted consumers to get into further debt. He said:

“The key priority here has to be those in the most vulnerable circumstances, many of whom are struggling to manage their credit card commitments, as well as other bills.

“Among the UK's 30 million-plus cardholders, 3.7% make minimum payments for 12 months, which is the equivalent of more than a million borrowers making 12 or more consecutive minimum payments.

“So, we know it's not uncommon for the most 'at risk' households to hold multiple cards and revolve multiple balances month-by-month. There are some obvious questions and challenges here for regulators and industry, such as why are card issuers providing the means, in some cases, for the most indebted consumers to escalate their way into further debt?”

Richard Koch, Head of Policy at the UK Cards Association, responded by saying: “The industry has a long-standing commitment to responsible lending and transparency, with a number of recent changes on credit limits and repricing of debt, improved transparency, and forbearance for those who find themselves missing repayments.

“We are not complacent about the small number of customers who find that changed circumstances, such as illness or redundancy, mean they need more support with managing their debts, and we welcome all conversations about how we can ensure we are doing everything possible to support these cardholders.”

The debt charity Step Change has said that many of those who visit them for advice have 5 or more credit cards. On average, such people have debts of £27,000.