On 22 July 2019, the FCA published a report that provides an update on the key issues it identified in Consultation Paper 18/35: Rent-to-own and alternatives to high-cost credit – feedback on CP18/12 and consultation on a price cap (our blog is here).
In the report the FCA:
- examines the market for alternatives to high-cost credit by looking at consumer demand and the availability of credit and non-credit alternatives;
- sets out the actions it has taken following the commitments it made in its high-cost credit publications of November and December 2018; and
- explains its role and other organisations’ roles in supporting alternatives to high-cost credit.
In chapter 2 of the report the FCA discusses that three million consumers use high-cost credit with demand often driven by the need for essential household goods. However, the FCA is mindful that there are often alternatives to using high-cost credit such as loans from credit unions or lenders with social objectives. These alternatives are covered in chapter 3 and Annex 2 of the report. In chapter 4 of the report the FCA makes several suggestions to improve the market for alternatives to high-cost credit. Among others, the FCA recommends in the longer term that HM Treasury consider if there is value in reviewing the credit union and society legislation. In chapter 5 of the report the FCA summarises its work to improve the regulatory environment for organisations involved in the provision of alternatives to high-cost credit. One of the FCA’s central aims is to improve consumer awareness of both credit and non-credit options. In chapter 6 of the report the FCA encourages the Money and Pensions Service, registered social landlords and others to actively signpost consumers to alternatives to high-cost credit. In chapter 7 of the report the FCA explains how it fosters innovation and encourages new market entrants to increase the availability of lower cost credit alternatives through FCA Innovate and its authorisations function. In chapter 8 of the report the FCA summarises how it is working with the Government and other stakeholders to provide expertise on and support for their initiatives on alternatives to high-cost credit. Finally, the FCA notes that the demand for and availability of alternatives to high-cost credit can only be understood within the broader economic and social context in which they operate. The FCA considers that it can best contribute by helping to facilitate the actions of other organisations for the benefit of consumers. The FCA explains this further in chapter 9 of the report. An overview of actions and recommendations is set out in Annex 1 of the report.