FCA warns firms of 'tough' action as it takes over consumer credit

The Financial Conduct Authority today formally took responsibility for regulating the £200 billion consumer credit market.

Related topics:  Finance News
Amy Loddington
1st April 2014
Latest News

50,000 businesses who offer some form of credit to the UK consumer will now be subject to the FCA’s consumer protection rules and Principles for Business. This means every person that uses a credit card, has an overdraft, seeks help from a debt management firm, or takes out a loan will be better protected than before.

Financial Conduct Authority Chief Executive, Martin Wheatley, said:

“We have a big task ahead; it’s our job to make sure firms put their customers at the heart of their business and don’t just see them as an easy target or a profit line.

“We won’t shy away from taking tough, decisive action to make sure that the people who rely on these products are treated fairly.  There will be some firms that don’t get the message, or won’t play ball, those firms should know that we won’t let them carry on.”

Consumer credit providers will need to ensure that they give customers the right information to make informed choices, that their services meet consumer needs, and that people in difficulty are treated fairly. The biggest changes come for payday lenders and debt management companies, including limiting the number of loan roll-overs to two; restricting (to two) the number of times a firm can seek repayment using a continuous payment authority; requiring debt management firms to pass on more money to creditors from day one of a debt management plan, and to protect client money.

Today the FCA has published research into low income consumers, identifying three distinct borrower groups: survival borrowers, lifestyle borrowers, and reluctant borrowers.

The research findings will help the FCA to understand the drivers that push people into untenable financial situations and will also be used in its work with firms to ensure they are treating customers fairly.

Research by the Government’s Money Advice Service revealed that 9 million Britons are considered in serious debt and facing serious problems with debt and just 1.5 million have sought debt advice – often leaving it late in the day which limits their options. Worse, 1.8 million people do not even acknowledge they are in debt.

In 2015 the FCA’s consumer credit agenda will include a thematic review into the way payday lenders collect debts, plus studies into credit cards, overdrafts, debt management and logbook loans.

Martin Wheatley said:

“Many people use credit in some shape or form and the majority manage their finances well, but there is a significant number who rely on credit as a means to an end.

“Last Christmas over a million people planned to use a payday loan to help with their bills, so the need for transparent and effective regulation of the sector is clear.”

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