High-cost credit crackdown ‘too weak’

Campaigners say FCA measures fall short of
capping fees that affect 19 million UK customers

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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.

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.