Credit lenders have come under fire from the FCA today as they released findings on relending practices in the high-cost credit sector. High-cost credit can include products such as “payday loans” which can notoriously leave customers in dire financial straits.
Jonathan Davidson, the Executive Director of Supervision, Retail and Authorisations at the FCA, provided the following comments along with the findings: “We have significant concerns that repeat borrowing could be a strong indicator of levels of debt that are harmful to the customer.
“Before the pandemic we saw increasing numbers of complaints about high-cost lenders’ relending practices, which showed that firms had failed to adequately assess affordability, and they were not relending in a way that was sustainable for customers.
“We expect firms to review their relending practices in light of our findings as they start to lend again, and to make any necessary changes to improve customer outcomes.
“We will continue working with firms to raise standards, and we will continue to take action where we see harm.”
StepChange, the debt charity, responded on the FCAs findings.
Adam Butler, a Public Policy Manager for the charity, had the following to say: “Today’s report is a timely reminder that high-cost credit products like payday loans, home credit and guarantor loans often put people at significant risk of financial harm.
“Since the start of the pandemic, our research has found nearly one million people have used high cost credit products as a safety net to meet everyday living costs.
“While the FCA’s previous work into high cost credit has delivered great steps forward, it’s evident that there is more work to be done to address the drivers and sources of the harm caused by high cost credit use.
“With support schemes and payment holidays winding down, it’s more vital than ever we see fair and sustainable alternatives to these products developed as soon as possible.
“The government must act quickly to develop a national no interest loan scheme, which would provide a mechanism to influence access to affordable credit more directly.
“In the meantime, the FCA can further curb the harm caused by high-cost credit products by tightening lending rules, looking at harder at the product features that can trap people in debt and improving forbearance measures.”