Britain’s financial watchdog has unveiled plans to rein in the cost of credit and overdrafts, but has faced criticism that its measures do not go far enough.
Under new regulations set out by the Financial Conduct Authority, “rent-to-own” shops that sell appliances and furniture for small weekly payments but with a high interest rate face a price cap, while there are also measures aimed at tackling exorbitant fees associated with doorstep lending and catalogue shopping.
Three million people in the UK use high-interest credit, such as a payday loan, doorstep loan or pawnbroking loan, says the BBC, and single-parents aged 18 to 34 are three times more likely than the national average to use such a loan.
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The Daily Telegraph says the crackdown could save vulnerable customers more than £200m a year.
The City watchdog has also ordered banks to do more to help the 19 million people who regularly use their overdrafts by warning customers via mobile alerts, flagging extra charges and being more transparent about overdraft fees.
The FCA found that some indebted consumers were paying as much as £450 in overdraft fees each year.
However, the regulator stepped back from limiting overdraft fees amid fears that it would be challenged in court by the banks, a decision that “has dismayed campaigners seeking a cap on the £2.3bn fees made when customers go into the red”, says The Guardian.
They had called for the restrictions on the cost of payday loans, first introduced in 2015, to be used as a template for the rest of the high-cost credit market.
Greg Stevens, chief executive of the Consumer Credit Trade Association, which represents 300 lenders, said: “You can’t simply wish away the costs of servicing this customer group. The FCA gets this and it is taking its time to get the balance right”.
The FCA chief executive Andrew Bailey has promised that a more radical shake-up of overdraft rules was still on the table and could form part of a wider review of retail banking expected later this year.
