Sunderland MP calls for more action over high-interest credit

Britain's financial watchdog has launched a crackdown on high-cost credit as part of efforts to protect vulnerable consumers.

Sharon Hodgson, Labour MP for Washington and Sunderland West, has welcomed a crackdown on big-cost credit, but says yet further efforts could be made to ensure those most vulnerable do not end up in an ever-increasing spiral of financial trouble.

The measures are being made by the Finance Conduct Authority (FCA) in a bid to shield those most likely to find themselves in difficulty through overdraft charges, rent-to-own deals, doorstep lenders, store cards and catalogue shopping.

Sharon Hodgson has said yet more action is needed to help people avoid getting into debt.

High-interest credit is said to be used by 3 million people in the UK, with single parents aged 18 to 34 more likely to use payday, doorstep or pawnbroking loans than the national average.

Mrs Hodgson MP said: “I welcome the FCA report which supports Labour’s calls for more stringent action in the consumer credit market.

“Debt is a contributor to poor physical and mental health and can cause a breakdown in relationships.

“That is why it is important that we protect consumers from accumulating high, and unnecessary, debt.

“I am disappointed that the FCA has failed to introduce caps on overdraft interest and charges, as this would go further in protecting consumers from the misery of the debt trap.”

The FCA estimates banks made an estimated £2.3 billion in revenue from overdraft charges in 2016.

It is considering measures to make it easier for customers to manage accounts, including mobile alerts warning of potential overdraft charges and stopping the inclusion of overdrafts in the term “available funds.”

In the home collected credit market, the watchdog is introducing requirements which will prevent firms from offering new loans or refinancing during visits without a customer request.

In catalogue credit and store cards, the FCA will ask firms to do more to help customers avoid persistent debt.

The FCA is also considering imposing a cap on rent-to-own merchants after finding costs can be exceptionally high.

It cited examples of people having paid over £1,500 for an electric cooker which could be bought on the high street for less than £300.

The FCA believes its new measures will save customers up to £140 million a year.

Beyond that, it will consider more radical options to ban fixed fees and end the distinctions around unarranged overdraft prices.