"High-cost credit products remain a key focus for us because of the risks they pose to potentially vulnerable customers."
In a review, the FCA said regulation of payday lending has delivered "substantial benefits to consumers". FCA data shows that 760,000 borrowers are now saving a total of £150m per year as firms are much less likely to lend to customers who cannot afford to repay.
The FCA has therefore decided to leave the existing payday loan price cap in place, and to review it again in 2020.
However, the review established "clear concerns" with other forms of high-cost credit. In particular, the FCA believes that fundamental changes in the way that unarranged overdrafts are provided may be necessary.
The FCA also identified particular concerns in the rent-to-own, home-collected credit and catalogue credit sectors. The FCA will consult on action to address these concerns in Spring 2018.
Andrew Bailey, Chief Executive of the FCA, said: “High-cost credit products remain a key focus for us because of the risks they pose to potentially vulnerable customers. We are pleased to see clear evidence of improvement in the payday lending market after a period when firms’ treatment of customers and their business models were often unacceptable.
“However, there is more that we can do, and this review is about identifying the areas where consumers may be suffering harm so that we can focus our efforts accordingly.
“In particular, the nature and extent of the problems that we have found with unarranged overdrafts mean that maintaining the status quo is not an option. We are now working to resolve these issues while preserving the parts of the market that consumers find useful.”