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FCA publishes review of high cost credit


04 Aug 17

The FCA has this week published a review of high-cost credit. Matt Bland, Head of Policy and Compliance at ABCUL, talks about the positive steps forward it made :

"On Monday the Financial Conduct Authority published its feedback statement following its review of the payday lending cap and the wider high-cost credit market, including rent-to-own, home credit, catalogues, unarranged overdrafts and motor finance. Given the role credit unions play in disrupting the activities of these kinds of lenders, and the many tales of credit unions helping consumers piece their lives back together after falling foul of unscrupulous lenders, ABCUL has consistently supported the payday lending cap regime. Within this process, we highlighted the positive effect it has had on reducing consumer harm, further suggesting that similar measures were needed in other high-cost credit markets.

“While there had been some speculation that the FCA was planning to water down the payday lending cap, we were very pleased to see the FCA confirm that it would not be revising the level of this and plans on keeping it as it is until at least 2020. This is after receiving overwhelming evidence that it results in better outcomes for borrowers.

“We were also pleased to see that the FCA will be publishing proposals for tighter regulation of rent-to-own, home credit and unarranged overdrafts in 2018. Particularly interesting is the commitment from FCA to look at why more affordable alternatives, such as credit unions, are not better able to meet demand in these markets. This may create an opportunity to discuss some of the regulatory barriers that credit unions face in expanding services more quickly.

“The FCA also published a new consultation on clarified rules and guidance in relation to creditworthiness and affordability assessments. While most credit union lending is exempt from these requirements, they should always be looked to as best practice and we will be summarising and circulating details of these proposals in due course. The consultation focuses particularly on the distinction between credit risk and affordability, the use of income and expenditure information and considerations for lenders in making their assessments proportionate. 

“Finally, the FCA has also updated on plans to do more work in the motor finance market. This is of interest to credit unions as there has been growing interest in the role credit unions might play in secured lending for used cars, but this has been subject to obstacles in terms of the FCA’s interpretation of the Credit Unions Act. We believe that allowing credit unions to lend in this market would increase competition and choice for consumers and therefore help FCA achieve its regulatory objectives.”

To find out more about the work of ABCUL’s Policy Team, contact Matt Bland or Dan Arrowsmith on 0161 832 3694 or


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