Our response to FCA high-cost credit review and creditworthiness proposals

_{31 July, 2017}

In response to the Financial Conduct Authority’s (FCA) review of high-cost credit and proposed changes on creditworthiness assessments, Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

“Last week, the Bank of England warned that lenders may be dicing with a spiral of complacency in relation to the rapid growth of consumer borrowing. The role of the FCA is to police the market and ensure that any complacency doesn’t translate into harm for consumers.

“Today’s announcement marks a slight tightening of some rules. It remains unclear, however, that these measures will address some of the fundamental problems that still exist in consumer credit market, including persistent credit card debt, persistent overdraft debt and multiple payday loan borrowing.

“The FCA has said that the status quo on unarranged overdrafts is not an option and that there is a case for fundamental reform. The charges for unarranged overdrafts are a real problem for our clients and it is disappointing that no action will be taken until spring 2018. The market is already showing signs of movement on this issue, so there is no need to delay vital changes that could address a major source of consumer detriment.

“The FCA is right not to loosen the payday loan cap and we have seen a marked fall of in the number of people coming to us with payday loans problems. There are currently over one million people using high-cost credit to cover everyday essentials. We need to ensure that people who need credit for essential costs are able to access products that are genuinely affordable and which don’t push them deeper into hardship. We believe that the Government will need to provide major financial backing to support a low and no interest loan scheme.