The Financial Conduct Authority (FCA) has today announced that it is seeking evidence and feedback to further inform its work on high-cost credit, including a review of the payday loan price cap.
Since taking over regulation of consumer credit in April 2014, the FCA has focused on products that it believes pose the highest risks to its consumer protection objective. One area of focus has been high-cost credit, which includes payday loans, home-collected credit, catalogue credit, some rent-to-own, pawn-broking, guarantor and logbook loans. Other credit products – such as motor finance, credit cards, overdrafts and some instalment lending – may be high-cost, particularly for less creditworthy customers or depending on how they are used.
The Call for input covers:
High-cost products – The FCA will look across all high-cost products to build a full picture of how these are used, whether they cause detriment and, if so, to which consumers. This will enable the FCA to consider whether further policy interventions are needed.
Overdrafts – The Competition and Markets Authority (CMA) identified a number of competition issues with overdrafts, which include poor price transparency and the nature and level of charges, especially for unarranged overdrafts. The FCA will look in more detail at overdrafts from a consumer protection, as well as a competition, perspective using its full range of powers.
The high-cost short-term credit (payday loan) price cap – The price cap came into force on 2 January 2015. The FCA committed to reviewing the cap two years after its implementation, in the first half of 2017. The FCA will assess whether there is evidence that suggests that the cap should be changed. The FCA is also 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. The FCA expects to publish its findings on the review of the payday cap next summer.