FCA to review rent to own, guarantor and payday loans

"As an organisation, we have already taken many steps to address the risk of consumer harm by putting in place new rules for high-cost short-term credit firms"

It will also review the payday loan price cap, which was introduced in January 2015, in the first half of 2017.

The regulator says that since taking over regulation of consumer credit in April 2014, it has "focused on products that it believes pose the highest risks to its consumer protection objective".

The FCA will look across all high-cost products to assess whether they cause detriment, and will then consider whether further policy interventions are needed.

In a statement, the FCA says it will assess whether the payday loan cap should be changed and is keen to see if there is any evidence of consumers turning to illegal money lenders directly as a result of being excluded from high cost credit because of the price cap.

Andrew Bailey, Chief Executive of the FCA, said: “This is a significant moment for our approach to consumer credit regulation as we continue to ensure that this market works well for consumers.

“As an organisation, we have already taken many steps to address the risk of consumer harm by putting in place new rules for high-cost short-term credit firms and taking action against non-compliance across all credit markets.

“We have come up to the point of reviewing the cap on payday lending, making now the right time to take a broader view of the issues around high-cost credit, including unarranged overdrafts, and to consider whether our requirements remain appropriate.”

Citizens Advice Chief Executive, Gillian Guy, added: “Payday loan problems have fallen, but other high cost credit products are causing problems for thousands of borrowers.  

“We’ve been helping people who have got into financial problems after taking out a rent to own agreement and logbook or guarantor loan. Where high interest rates and charges have made it difficult to pay back what they owe.

“Our new report on the rent to own market out today highlights specific problems within this industry including inadequate checks to make sure people can pay back what they borrow and poor treatment when payments are missed.

“By turning it's attention to the wider high cost credit market, the FCA has an opportunity to build on the success of tackling the payday loan industry, by extending the price cap and introducing more protections for consumers.”