Here’s what you need to know
The Financial Conduct Authority (FCA) has today published an update on its work in the high-cost credit sector.
The update follows a Feedback Statement the FCA published in July 2017 which identified key areas of concern with the sector including overdrafts, rent-to-own, home-collected credit and catalogue credit.
Work undertaken since July 2017 has demonstrated an emerging picture of the case for intervention in a number of 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. It will look at the guidance given to social landlords and others about referring to cheaper sources of credit and is also proposing to work with government to highlight examples of best practice around alternative models.
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.”