FCA posts concerns over repeat lending by credit firms
The UK’s Financial Conduct Authority (FCA) has posted concerns about firms which allow customers to repeat borrowing, following a review into the sector.
The review, completed prior to the coronavirus pandemic, underlines concerns about “poor practices by some firms”.
It notes that “nearly half” of consumers regretted borrowing more money from the same firm. Some consumers told the FCA they had experienced financial difficulties as a result.
The FCA writes: “Nearly half of consumers who took part in research commissioned for the review said they regretted their decision to borrow more money, and for some products this rose to over 60%.”
Several concerns focus on firms’ poor practice in the use of apps to encourage consumers to borrow more. It also criticising marketing which emphasised the ease, convenience and benefits of taking more credit.
“Before the pandemic we saw increasing numbers of complaints about high-cost lenders’ re-lending practices,” says Jonathan Davidson, executive director of supervision, retail and authorisation at the FCA.
He adds that the results show firms have “failed to adequately assess affordability”.
“We expect firms to review their re-lending practices in light of our findings as they start to lend again, and to make any necessary changes to improve customer outcomes.”
Payday no way
The FCA review comes after a series of collapses for payday lenders in the UK market at the tail end of last year.
Piggybank, MMP Financial and QuickQuid all fell into administration following a regulatory clampdown on their lending capabilities.
The UK has around three million payday borrowers, with the average loan sitting at around £260.
The FCA published its Alternatives to High-Cost Credit Report in July 2019, attempting to highlight credit unions and community institutions as alternatives to high-cost credit.