Personal debt is spiralling out of control. At least, that seems to be the view of the Financial Conduct Authority, who are considering bringing the sector under its purview in an effort to protect customers.
The UK’s financial regulator has launched its mission statement for the upcoming year, and personal debt dominates a substantial portion of that. According to them, thanks to the low cost of credit, the levels of household debt is now becoming far too unwieldy, and needs to be looked at in greater detail.
That concern chimes with a recent Bank of England statement that revealed that credit card spending was now at its highest point since the pre-banking crisis of 2006. We currently owe over £67bn on credit cards – and financial experts are worried that could precipitate a fresh credit crisis in the near future.
With figures like that, it’s no surprise that the FCA are now committed to seeking new ways to limit the impact of UK households, and look at how best to help those who currently owe more than they can afford to pay back.
As such, rather than zeroing in on specific concerns, they plan to focus on the high-cost credit sector as a while, protecting those most at risk, boosting long-term savings plans, as well as ensuring PPI compensation, which ends in August 2019, is satisfactorily completed.
Citing the success of their crackdown on payday loans, which now features a cap on lending, FCA chief executive Andrew Bailey said that more now needs to be done for other areas of consumer lending, such as overdrafts, loans, car finance and credit card debt. Bailey said:
‘Our Mission is to serve the public interest through the objectives given to us by Parliament. The Mission gives firms and consumers greater clarity about how and why we prioritise, protect and intervene in financial markets. To do this we will continue to make difficult decisions. When we make regulatory judgements, we will be more transparent about how we reached them as we know that this is something our stakeholders want.’
The FCA’s report revealed that while much of the current legislation caters for typical everyday finance consumers, it’s fairly lacklustre when it comes to protecting those who are considered most vulnerable. As such, the regulator believes that a more flexible approach, tailored to individual consumers, is required. Their report suggests that:
‘People can become vulnerable at any time in their lives, and vulnerability can be temporary, sporadic or permanent. Financial services need to be able to adapt to the changing circumstances of real life, rather than being designed for the perfect customer who never experiences difficulty.’
Another issue highlighted by the report is the high increase in online financial services. Given the ease in which we can now apply for all manner of services digitally, including internet banking, the Financial Conduct Authority is worried that we’re spending less time looking at those terms and conditions laid out by the provider, and therefore signing up for services that are entirely unsuitable for our needs.
This also means that older people, who aren’t always as tech-savvy, and those living rural areas without a solid online connection could be getting left behind in the push for online-centric services.
Ultimately, the FCA believe that accessible information, an increase in financial education, and a more active approach by institutions is needed if all consumers are to be able to access the right services for their needs. It’ll be interesting to see how they achieve those sort of goals over the coming financial year.
For now, though, at least the top financial regulator is looking into the issue of our rising personal debt.