10/08/2017

Unarranged overdrafts, rent-to-own, home-collected credit and catalogue credit have been identified as four areas of high cost credit that raise significant concerns by a Financial Conduct Authority review that will lead to a consultation on proposed tailored solutions in Spring 2018.

In addition to identifying the FCA’s next priorities, ‘FS17/2: High-cost credit and review of the high-cost short-term credit price cap’ also found that the regulatory cap, which FCA imposed on ‘high cost, short term’ (or ‘payday’) lending had substantially benefited consumers and could be left in place until the next review in 2020.

The review found that 760,000 ‘payday’ borrowers are now saving a total of £150m per year, firms are much less likely to lend to customers who cannot afford to repay and debt charities are seeing far fewer clients with debt problems linked to high-cost short-term credit.

Unfortunately, the FCA considers that the nature and extent of the problems identified with unarranged overdrafts rules out the option of simply maintaining the status quo. It is currently working to resolve the unacceptable issues while preserving the parts of the market that consumers find most useful.

Tailored solutions will also be developed to tackle specific concerns relating to how the rent-to-own, home-collected credit and catalogue credit markets and products work and how they are used by people.

FS17/2 also links to an Infographic covering FCA’s research into the impact of the cap on payday loans.

In addition to the review, the FCA has also published ‘CP17/27: Assessing creditworthiness in consumer credit’, which seeks views on proposed changes to its rules and guidance on assessing creditworthiness and affordability in the consumer credit market.