FCA reveal new high-cost credit proposals

The regulator will consult of a raft of changes designed to give consumers greater control over their finances, such as greater transparency around overdrafts, potential intervention into the 'rent to own' sector, and ensuring catalogue or store credit providers do more to help consumers avoid 'persistent' debt.

Andrew Bailey, Chief Executive of the Financial Conduct Authority said: "High-cost credit is used by over three million consumers in the UK, some of who are the most vulnerable in society. Today we have proposed a significant package of reforms to ensure they are better protected including the possibility of a cap on rent-to-own lending.

The proposals will benefit overdraft and high-cost credit users, rebalancing in the favour of the customer.

Our immediate proposed changes will make overdraft costs more transparent and prevent people unintentionally dipping in to an overdraft in the first place. However, we believe more fundamental change is needed in the way banks charge customers for overdrafts. Given the size of the market our work here will be completed as part of our wider review into retail banking."

Responding to the Financial Conduct Authority (FCA)'s publication of the outcome of its high-cost credit review, Eric Leenders, Managing Director, Personal Finance at UK Finance said:

“People up and down the country use credit as a helpful means of managing their everyday spending, so we have been working closely with the regulator to develop alerts for customers who may be about to slip into the red as well as a range of prompts that make it much easier to keep on top of finances and reduce costs. The industry is also introducing proactive support where persistent use of an overdraft facility might be a symptom of financial difficulty. We will continue to work closely with the FCA to make overdrafts more transparent and ensure customers take full advantage of the banking services available to them.”