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StepChange Debt Charity response to FCA update on high-cost credit review PDF Print E-mail
Thursday, 01 February 2018
Today the FCA issued an update on their review of high-cost credit, with concerning findings that a small minority of overdraft users are paying almost half of all overdraft charges, including high cost unarranged overdraft charges. This echoes StepChange Debt Charity’s recent research that 2 million people are stuck in persistent overdraft debt. The FCA should consider eliminating unarranged overdraft charges in their upcoming consultation, as they have previously stated they may not have a place in modern banking. The FCA should also work with banks to identify and support those in persistent overdraft debt.  

Lack of access to affordable credit means households on lower incomes are paying the highest prices for essential household goods, as the FCA also finds that high cost credit products such as rent-to-own are causing difficulties for the most vulnerable, who also have fewer options.

This chimes with StepChange Debt Charity research findings that 1 million people are using high cost credit for everyday essentials3. To prevent those who are struggling most from falling into problem debt, the charity is calling for urgent government action on creating alternatives to high cost credit, following the Australian model of a no interest loan scheme and has joined the End Child Poverty coalition’s call for a price cap on rent-to-own goods4.

Peter Tutton, Head of Policy at StepChange Debt Charity, said: “We welcome this update from the FCA that echoes the findings of our own research. The pressing need now is to call time on harmful persistent overdraft debt and charges causing hardship for people who are already financially vulnerable. We are keen to get to work with the banks and the FCA on solutions, as personal banking is just too important to everyone’s financial health to allow these problems to continue.

“Furthermore, government must ensure families do not have to pay a poverty premium to get the most basic household goods, and help develop alternatives to high cost credit.”
 

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