In a recent blog, Alison Walters, Director of Consumer Finance at the FCA discussed how credit is a huge part of many people’s lives – and how the role of credit is changing.
For example, the 2024 Financial Lives survey found that 84% of UK adults (45.7 million people) held at least one credit or loan product in the previous 12 months. While this statistic seems innocent and does not raise concerns, the figures show how deeply embedded credit is in daily life – and the complexities involved when it becomes a lifeline rather than a tool. The survey also showed that 40% of adults with credit or loans said they suffer anxiety/stress because of their debt and 22% of those in financial difficulty used debt advice.
The statistics show that for some, credit isn’t about luxuries, it’s about surviving in a difficult economy.
What has been learned
Over the years, the FCA have listened to consumers, firms, and community organisations and three key lessons stand out:
- Credit isn’t always the answer, and signposting customers to alternatives such as help may be the better option, and this aligns with the Consumer Duty.
- Technology has transformed the sector: it has made access to finance quicker, but can also be used to spot issues and difficulties.
- The best results happen when parties work together in a collaborative manner that better suits the customer, the financial institution, the regulators and government, both local and national.
What’s the plan for consumer credit over the next decade?
The FCA and other parties have spent the last decade or more raising standards of the industry and the regulator. This has improved the financial environment, raised consumer awareness and trust and benefited the consumer, the market and the economy. It has also removed the ‘bad firms’.
So what is the focus of the next decade? The Government has outlined their plan for growth and encouraging investment in the UK economy. As a result, the FCA has a 5-year strategy of supporting growth and helping consumers navigate their financial lives. This is about forging a better outlook.
Because a healthy, innovative consumer credit sector can protect consumers and help them – and firms – to thrive. Three priorities will guide FCA work:
- Innovation; the ability to use technology to create products that are intuitive, transparent and useful add value to consumers, to firms, to regulators and the economic.
- Vulnerable customers getting compassionate support and the difference between recovery and crisis will depend on how customers are treated by firms and regulators.
- People need credit that’s both accessible and right for them and getting the balance between growth and protection is essential.
There’s no single solution. But by working together – regulators, firms and communities – the FCA can nurture a system that supports consumers at each stage of their financial lives.
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