A new Financial Conduct Authority study has shone a spotlight on the typical circumstances of different individuals who experience financial difficulties. The team of FCA and external experts carried out a comprehensive analysis of the credit files of almost 500,000 UK adults over a three-year period from 2015 to 2018.

Individuals who had no debts were not included in the study, as were those who were already in persistent debt, as one of the aims of the exercise was to establish how individuals reacted to changing circumstances.

12% of the participants experienced financial distress during the period they were under observation. For the purposes of this study, financial distress was defined as experiencing one or more of the following:

  • Reaching 90 days or more in arrears on any credit product or bill
  • Defaulting on any credit product or bill
  • Having a County Court Judgement issued against them
  • Having a credit account passed to a debt collector
  • Being declared bankrupt

Those experiencing distress were more likely to:

  • Be in a younger age group
  • Have a lower credit score
  • Have higher total debt
  • Hold more expensive forms of credit
  • Live in London, the West Midlands and urban areas of North West and North East England and Southern Scotland

The report’s authors divided the participants into four sub-groups, according to the principal form of borrowing they held – note it was not necessarily the only form of credit they had:

 % of sample in this categoryAverage total debt (£)Average monthly current account turnoverAverage credit scoreAverage age% of this group who experienced distressAverage time in distress (months)
Mortgage holders38136,0002,4656134465.9
Standard cost borrowers345,0951,9926075086.5
High cost borrowers191,1791,32857240187.8
Household bills only991Not stated5955158.3


For those in the high-cost borrowers group, 95% of their debts are in high cost credit. Here this was defined as anything with an interest rate higher than that of a typical credit card, including overdrafts, payday loans, store cards and home-collected credit.

People in the household bills only group typically had very little in the way of credit. 99% of the debt reported by participants in this area was outstanding household bills – typically utility and telecoms services bills.

The authors of the report, which was published on the FCA’s Insight website, were:

  • Adiya Belgibayeva – a Senior Economist in the research team at the FCA, who specialises in understanding households and their financial circumstances
  • Karen Croxson – Head of Research at the FCA, who leads an interdisciplinary programme, integrating economics, data science, and behavioural science to understand markets, design policy, and improve FCA internal operations
  • Zanna Iscenko – a technical specialist in regulatory economics and advanced data science methods, with a particular interest in consumer behaviour in financial markets
  • Jesse Leary – a Technical Specialist in the FCA’s Economics Department who conducts data-intensive research and policy analysis
  • Jonathan Shaw – a Technical Specialist in the Economics Department research team at the FCA, who works on understanding households and their financial circumstances, as well as applying data science tools to answer economic questions

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