In a wide-ranging speech at the City Banquet at London’s Mansion House, Financial Conduct Authority (FCA) chief executive Andrew Bailey said his organisation was currently facing three significant challenges, which are:

  • Consumer credit
  • Long-term savings and retirement provision
  • The impacts of an ageing population

Almost two-thirds of the firms the FCA supervises are credit firms of one form or another, and the regulator considers that many of these firms’ business activities pose a high risk to consumers.

On the subject of consumer credit, Mr Bailey first addressed high-cost credit. He acknowledged that this form of borrowing had a role to play in helping people who experienced fluctuations in their income, but added that “we are concerned about the cost and terms of such credit and the propensity for over-indebtedness.” He went on to say of these products that “some of the terms encourage over-indebtedness with little or no incentive to pay down debts.”

Regarding credit cards, he spoke of the new FCA proposals to help people who are in persistent credit card debt, which include requiring firms to give customers options to switch to cheaper loans, and to cancel debt where appropriate. However, he said that he did not believe a price cap, similar to that which exists for payday loans, was appropriate for revolving credit products.

Mr Bailey added that the FCA was concerned about the high costs of the rent to own sector, and was considering whether “fundamental change” was needed to the way unarranged overdraft charges are applied.

Turning to savings and retirement, the FCA chief executive acknowledged the role equity release and other similar arrangements could play in allowing people to enjoy a comfortable retirement, and commented that the regulator had published new proposals in this area.

He added that the FCA’s Pension Strategy would be published later in the year, but also said that the regulator was taking action now against firms who exhibited poor practices when giving pension transfer advice to their clients.

Finally, Mr Bailey addressed the issue of the UK’s ageing population. He commented that the FCA has recently issued a major study in this area. He suggested that some of the most significant issues facing older consumers when it comes to financial services are:

  • The switch to online and digital access to many financial services, which may have disadvantaged older people who are uncomfortable with technology
  • Older people may be less able to use technology to compare prices
  • Upper age limits and product innovation in the mortgage sector may not be working in the interests of older consumers
  • Firms may not always understand the vulnerability issues affecting older customers, and may not therefore treat them appropriately
  • Older people may have difficulty accessing appropriate advice regarding their long-term care needs

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article