The Financial Conduct Authority (FCA) has published new findings about high-cost short-term loans, as Walker Morris consumer finance expert Jeanette Burgess explains.
On 24 January 2019, the FCA published new data on insights and trends in the high-cost short-term credit market, the first time it has published market analysis based on consumer credit firms’ regulatory returns data. The analysis also draws on the FCA’s Financial Lives Survey 2017, its largest tracking survey of UK consumers and finance, based on nearly 13,000 interviews.
The FCA found that:
- Loan volumes have been increasing but remain well below 2013 levels, with over 5.4 million loans made in the year to 30 June 2018;
- The market is concentrated, with the top 10 lenders accounting for around 85% of the total number of new loans;
- Consumers borrow £1.3 billion per year and repay over £2 billion;
- On average borrowers are due to repay 1.65 times the amount they borrow;
- Borrowing costs have been stable and are lower than before the price cap;
- London, the North West and the South East have the highest number of loans;
- There are more loans per capita in the North of England;
- The average value of loans is lower in the North of England and higher in London; and
- Borrowers are predominantly young, tend to live in rented properties or with parents, are less likely to be confident managing money, more likely to be in financial difficulties, and have lower confidence in the financial services industry.
The analysis does not focus on products in the wider high-cost credit market, including overdrafts, home-collected credit, catalogue credit, some rent-to-own, pawn-broking, guarantor loans and logbook loans. The FCA recently announced the next package of measures forming part of its high-cost credit review. See the November/December 2018 edition of our Regulatory round-up for details.