0 £0.00
This item was added to your basket

Dear visitor,
You are viewing 1 of your 2 free articles

We’ve made wider, important changes to our print and online content to enhance the value of exclusive, insightful, discerning content we create every day. Support valuable editorial content by becoming a member of our Credit Club - register for free or choose a paid plan.

Register now or Login

FCA publishes high-cost credit update

The Financial Conduct Authority (FCA) has published an update on its work in the high-cost credit sector, including detailed reasons for its areas of concerns.

Amber-Ainsley   Pritchard

Share on LinkedInShare on Twitter
Amber-Ainsley   Pritchard
Share on LinkedInShare on Twitter

The update follows a feedback statement the regulator published in July 2017 which identified key areas of concern with the sector.


The FCA said that the work undertaken since July 2017 has demonstrated an emerging picture of the case for intervention in several markets but also some limitation on what can be achieved purely through traditional regulatory interventions.


As well as being prepared to propose new rules where it has the evidence that markets are not working well for consumers, the FCA is prepared to look at solutions designed to increase the choice and availability of alternatives to high-cost credit.


The FCA considers that it is important to avoid negative unintended consequences from taking steps that might restrict the availability of credit to those consumers who are able to repay it affordably.


Christopher Woolard, Executive Director of Strategy and Competition said: “High-cost credit products remain a key focus for us. We have already taken significant steps to address the risk they pose to potentially vulnerable consumers by putting in place new rules for high-cost short-term credit firms and taking supervisory and enforcement action against non-compliance across all credit markets.


“This review and the analysis we have conducted so far give an emerging picture of the need to intervene in some parts of the market. At the same time, we can also see the social utility of these credit products. We need to address both the choice and range available and how this market can work better for consumers.”


Areas of concern

Overdrafts: The FCA remains concerned about the high fees and charges for unarranged overdrafts, especially when compared to the relatively small amounts lent.


The regulator will be carrying out further research into this area alongside its strategic review of retail banking business models.


Rent-to-own: FCA supervision and authorisation work on rent-to-own has already driven significant improvement in the sector and reduced the risk of consumer harm.


However, the regulator’s concerns remain about the cost of using such services particularly when add-on products are included, and the FCA continues to gather evidence in this area as part of its review of the market.


Home-collected credit: The FCA is focusing on this sector’s consumers’ repeat borrowing and refinancing, particularly where people take out additional borrowing with the amount outstanding from the previous loan incorporated into the new loan. There are concerns that when consumers refinance their loans in this way, it may result in them paying significantly more interest on the amounts originally borrowed than they would had they maintained separate loans.


The FCA has requested further data from firms on their lending patterns and the nature and extent of refinancing to examine ways in which other borrowing options could work better for consumers.


Catalogue credit: This area remains a concern for the FCA, particularly the complexity of charging structures and how people are offered choices to make repayments. These mean many consumers may not understand key features or may not be making informed choices.


The FCA is gathering evidence on firms’ policies including information they provide to customers and doing consumer research to better understand consumer use of these products.


In most areas the FCA intends to publish conclusions and proposals for consultation in the May 2018.

Share on LinkedInShare on Twitter
Add New Comment



Half of Brits feel they cannot ask credit card provider for help

More than half of people feel there is a stigma attached to asking their credit card provider for help if they fall into debt, according to research

What role for humans in the future of collections?

As artificial intelligence (AI) matures and becomes more commonplace, panellists at Digital Banking Club for Collections Live Debate considered how roles in collections will change

Axa to be reunited with lost Credit Award

Amid the festivities of this year’s Credit Awards, sponsored by Lowell, Axa Insurance believed it had had the misfortune to lose its award for Consumer Credit and Customer Service Team of the Year

84 MPs back calls for FCA to tackle overdraft costs

A cross-party group of 84 MPs is calling on the Financial Conduct Authority (FCA) to restrict unarranged overdraft fees to the same level as arranged overdrafts

The CS Interview

Anne Boden on Starling Bank's growth plans and gender diversity

Anne Boden on Starling Bank's growth plans and gender diversity


How much is a modern debt purchaser worth?

How much is a modern debt purchaser worth?


FCA aims on affordable lending nigh on impossible

FCA aims on affordable lending nigh on impossible

Credit 500 - 2018/2019

The new Credit 500 - an index of influence in commercial and consumer credit - has been unveiled
Share on LinkedInShare on Twitter

The new Credit 500 - an index of influence in commercial and consumer credit - has been unveiled

Credit Strategy
LinkedIn page

Did you find our website useful?

Thank you for your input

Thank you for your feedback

creditstrategy.co.uk – an online news and information service for the UK’s commercial and consumer credit industry. creditstrategy.co.uk is published by Shard Financial Media Limited, registered in England & Wales as 5481132, Axe & Bottle Court, 70 Newcomen St, London, SE1 1YT. All rights reserved. Credit Strategy is committed to diversity in the workplace.
@ Copyright Shard Media Group