Regulator targets high-cost credit deals on consumer goods, loans and overdrafts

Watchdog could introduce price caps on catalogue credit and rent-to-own, similar to those imposed on payday loans.

This article was written and taken from –

A wide range of high-cost credit – from catalogue loans to overdrafts – is to be reviewed by the Financial Conduct Authority in a move that could herald price caps similar to those imposed on payday loans.

Since 2015, the City regulator has prevented payday loan customers paying back any more than twice the value of the amount borrowed. The FCA will now look at whether the cap has restricted credit, driving customers to loan sharks. The findings of the review will be published in the summer of 2017.

It is thought that as many as 400,000 people use high-cost credit deals from retailers to buy household appliances and furniture. After interest is added, consumers can often end up paying more than twice the original price, spread over a number of years.

Andrew Bailey, the chief executive of the FCA, said: “This is a significant moment for our approach to consumer credit regulation as we continue to ensure that this market works well for consumers.

“We have come up to the point of reviewing the cap on payday lending, making now the right time to take a broader view of the issues around high-cost credit, including unarranged overdrafts, and to consider whether our requirements remain appropriate.

”The evidence-gathering exercise – known as a call for inputs – will look at whether high-cost loans are causing detriment to customers. This could prompt the FCA to take action, such as imposing caps on rates. It listed doorstep lending, catalogue credit, some rent-to-own, pawnbroking, guarantor and logbook loans – where cars are used as security – as being in its sights.

Overdrafts are also part of the review, which the regulator signalled earlier this month when it said these loan facilities would be part of its review into high-interest loans.

The regulator is also aiming to establish what impact its intervention on payday loans has had. High-cost, short-term credit loans are capped at 0.8% of the amount borrowed per day, and for borrowers who do not repay their loans on time, default charges must not exceed £15.

“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 regulator said.

If you are struggling with debt in Scotland and would like some free help get in touch by leaving your details on our enquiry from or use the details below & we can offer a free face to face visit to check if it is the right plan for you.