In an exclusive interview with The Guardian, Bailey said he had concerns about the sheer numbers borrowing to make ends meet, particularly gig economy workers without guaranteed hours who needed credit to fill income gaps.
Debt charity Stepchange also highlighted young people and renters as particularly vulnerable and often borrowing to cover day-to-day expenditure.
Bailey has visited debt charities across the UK and said that many people were facing difficulties with ‘frontline debt’ such as council tax and utility bill arrears. He said organisations extending that kind of credit were often faster to recoup their losses, which can involve bailiffs, court orders and repossessions, than traditional lenders.
According to the Money Advice Service, there are now 8.3m people in the UK with problem debts.
The debt charity StepChange said the percentage of its clients falling behind on payments went over 40% in the first half of 2017, while the average debt of the people it helps has also risen, from £14,251 in 2016 to £14,367 in the first half of the year.
Consumer credit, which covers personal loans, credit cards and borrowing for cars, is rising at just under 10% a year, at a time when wages are falling at 0.4% a year taking inflation into account.
Bailey said: “I don’t think we have a sustainable solution, in terms of the provision of credit where needed,” said Bailey. “No one body might solve it on their own,” he added.
The FCA boss has placed the issue of consumer credit at the centre of the watchdog’s agenda this year.