FCA’s response to its call for input into its review of high cost credit has concluded it will keep the HCSTC cap at its current level, but review it again within the next 3 years. It has found an improvement in consumer outcomes since it imposed the cap, and a practice developing of offering longer term multiple instalment loans. While these increase the chance of default, research showed many customers miss only one payment. FCA has also found no evidence of negative outcomes for consumers who have not been able to get HCSTC since the cap was imposed – for example there has been no increase in other high cost credit product usage or evidence of increased use of illegal money lenders.
More widely, FCA has identified other concerns, on which it will consult with proposed solutions next year. Its concerns include:
- the high costs of rent-to-own borrowing
- home-collected credit and how these markets may incentivise long-term indebtedness
- catalogue credit, which typically has high levels of arrears
- wider concerns about high-cost credit – which FCA will address while being mindful of the risk that any action it takes may result in consumers not being able to access credit and
- its longstanding concerns about overdrafts (discussed in this post)
FCA is consulting on changes to its rules and guidance on assessing creditworthiness, in which it wants to clarify that firms are understanding the difference between affordability and credit risk. The consultation focuses on this, on factors that firms should use when deciding the proportionality of assessments, the role of income and expenditure information and what it expects from firms’ policies and procedures. It proposes new handbook text, in particular deleting CONC 5.1-5.3 and creating a new CONC 5.2A on creditworthiness assessments, and, in respect of P2P agreements, deleting CONC 5.5 and creating a new CONC 5.5A. It asks for comments by 31 October.