FCA’s high-cost credit review published

The FCA has concluded its review into high-cost credit, and based on issues it found has published two consultations:

  • CP18/12 on rent-to-own, home-collected credit, catalogue credit and store cards, and alternatives to high-cost credit, and
  • CP18/13 on arranged and unarranged overdrafts.

In the rent-to-own category, which covers hire-purchase and condition sale agreements, it found that customers were paying disproportionately high costs from financed products compared to up front high street products. Additionally customers were being sold ‘warranties’ that were of limited if any use.  Accordingly, in CP18/12 the FCA is considering introducing a price cap for rent-to-own arrangements, and invites discussion on rent-to-own pricing.  It is also proposing to ban the sale of warranties as an add-on, requiring a ‘cooling off’ period before they can be sold. Other proposed rules and guidance relate to the provision of assistance and information to customers of catalogue credit, store cards and home-collected credit.

The proposals in CP18/13 do not go as far as to include a price-cap on overdraft fees (at this stage anyway – a further consultation will follow in late 2018), but do include requirements for lenders to engage further and at an earlier point with customers, for example providing clear information at account opening, prohibiting the inclusion of an authorised overdraft in ‘available’ funds, and providing warning alerts to customers of unexpected overdraft usage that may result in charges.

The FCA invites responses to the rent-to-own pricing discussion questions by 13 July 2018, and on all other consultation proposals and questions by 31 August 2018.