Don’t lump consumer credit products together, warns FLA

The FCA’s consultation of the high cost credit industry, with a particular focus on pay day loans, closed yesterday.

Launching the review late last year chief executive Andrew Bailey said: “This is a significant moment for our approach to consumer credit regulation as we continue to ensure that this market works well for consumers.

“As an organisation, we have already taken many steps to address the risk of consumer harm by putting in place new rules for high-cost short-term credit firms and taking action against non-compliance across all credit markets.”

However, Fiona Hoyle (pictured), head of consumer and mortgage finance at the FLA, said the questions in the Call for Input assume that it is possible to “lump together very different products simply on the basis of price”.

She said: “The credit market is highly diverse and many products are priced for risk, as in other markets. Customers may experience problems for reasons quite unrelated to product design. It is important to maintain a supply of properly-regulated and responsibly-provided credit to people otherwise unable to access the credit markets. The FCA needs to ensure that the regulatory regime is proportionate and fact-based, and – for example – does not assume that measures designed to mitigate specific problems in one sector can be rolled over to others.”

Since taking over regulatory responsibility of the consumer credit industry in 2014, the FCA says arrears rates have fallen by a quarter and 800,000 fewer people took out a payday loan over an 18-month period.