The City watchdog sets its sights on overdrafts and other high cost products, after its success with payday loans
The City watchdog is taking a closer look at overdrafts and other high-cost credit products, following a crack down on payday loan price caps last year.
The Financial Conduct Authority (FCA) has today launched a consultation, calling for evidence and feedback, on products where it is concerned the cost to consumers might overweigh the benefits.
Products which have caught the watchdog's beady eye include pawnbroking, doorstep lending, catalogue credit and some rent-to-own arrangements.
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The move follows an introduction of price caps for payday loans in January of last year. As part of this most recent call for evidence, the FCA will also be investigating whether that price cap is working as it should and, in particular, whether consumers are being pushed onto the black market because the introduction of the price limit means they are no longer eligible for mainstream products.
"This is a significant moment for our approach to consumer credit regulation as we continue to ensure that this market works well for consumers," said Andrew Bailey, chief executive of the FCA. "As an organisation, we have already taken many steps to address the risk of consumer harm by putting in place new rules for high-cost short-term credit firms and taking action against non-compliance across all credit markets.
"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."
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The FCA, which took over the regulation for consumer credit in April 2014, will be accepting feedback on high-cost credit until 15 February 2017.
The watchdog recently released its mission document, which urged for feedback on issues such as whether vulnerable consumers should be protected as a priority and whether it was taking the right approach as to when and how to intervene.
Welcoming the review of the charges, Martin Lewis, founder of MoneySavingExpert.com, said:
We need a fair marketplace that protects the many vulnerable people out there who, in desperation or in times of bad decision-making – whether due to mental health problems, gambling addictions, substance abuse or more – fall prey to lenders at terms that are inappropriate.