We respond to FCA high cost credit proposals
31 May, 2018
The FCA today published the outcomes of a review into high cost credit, including overdrafts, doorstep loans, catalogue credit and rent-to-own borrowing. The proposals are being consulted on from today.
Responding to the FCA announcements, Phil Andrew, Chief Executive of StepChange Debt Charity said:
“We have long argued for action on high cost credit. Its regular use to meet essential costs by those already struggling can lead to debt spiralling out of control. Our recent research shows the number of people who used high cost credit for essential household costs rose to 1.4 million last year, so we welcome the focus the FCA is placing on protecting consumers in this market.
“We also welcome the transparency measures on overdrafts as we found that over two million people in the UK are stuck in a constant cycle of persistent overdraft debt. However, we're looking forward to the FCA abolishing unarranged overdraft fees and introducing substantive steps to identify and support people in or at risk of persistent overdraft debt through the banking review.
“Rent-to-own is a very expensive type of credit, not just due to interest rates, but the price of the goods themselves, other possible add-ons and the length of period for repayment, so we believe the FCA is moving in the right direction by considering price capping and banning point of sale warranties.
“We’ve previously pointed out that there’s a risk that a lack of access to affordable credit could push more vulnerable households into problem debt, so it’s right that the proposals focus on this too. The Government and the FCA need to look creatively at working with businesses to provide low- and no-interest loans, learning from successful schemes in Australia and elsewhere.”