Choice could be widened for high-cost credit consumers, regulator suggests

The choice of alternative options could be widened for consumers considering taking out high-cost credit, the City regulator has suggested.

The Financial Conduct Authority (FCA) published an update on its work in the high-cost credit sector, which includes overdrafts, rent-to-own, home-collected credit and catalogue credit.

It said work undertaken since July 2017 has shown an emerging picture of the case for intervention in some parts of the market - but there were also limits on what could be achieved only through traditional regulatory interventions.

The regulator said it was prepared to look at solutions designed to increase the choice and encourage the availability of alternatives to high-cost credit.

It will look at the guidance given to social landlords and others about referring to cheaper sources of credit.

The regulator said it was also inviting innovators in this area to put forward ideas that were in the interests of consumers.

Christopher Woolard, executive director of strategy and competition at the FCA, said: "High-cost credit products remain a key focus for us.

"This review and the analysis we have conducted so far give an emerging picture of the need to intervene in some parts of the market.

"At the same time we can also see the social utility of these credit products.

"We need to address both the choice and range available and how this market can work better for consumers."

The FCA said it remained concerned about the "high fees and charges" for unarranged overdrafts, especially when compared with the relatively small amounts lent.

Its analysis will feed into a review looking at different elements of personal current accounts and retail banking products, including overdrafts.

The FCA plans to provide further updates later in 2018.

In most areas the FCA intends to publish conclusions and proposals for consultation in the spring.

Overdrafts will be addressed as part of the FCA's Strategic Review of Retail Banking Business Models, reporting later in the year.

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