Consumer credit and payday lending

I am committed to ensuring that more households can manage unexpected costs through affordable credit. Tackling the problems caused by high-cost credit requires a comprehensive approach. That is why the Government wants to both encourage the growth of the social lending sector as an alternative to high cost credit like payday loans, and ensure that the existing payday lending sector is effectively regulated. 
 
The Financial Conduct Authority (FCA) established, reformed and toughened rules governing payday lending in 2015, which included a holistic cap on the total cost of payday loans, so that no payday loan consumer should have to pay back more than twice what they borrowed. In addition, the FCA is consulting on a further package of regulatory reforms for the high-cost credit market. I believe that more can and should be done to build on this progress.
 
That is why I welcome the measures outlined in the recent Budget to make credit even more accessible, and help people manage problem debt. The Budget proposed a 'breathing space scheme', which would allow for a 60-day protection period from debt recovery action by creditors. The policy, the finer details of which are currently being considered following a public consultation, is intended to allow people time to work out a path to consistent pay-back of debt.

Regulation of the consumer credit market, including the power to cap the cost of all forms of credit, resides with the FCA. As I understand, the FCA has previously considered applying a cap to credit cards but concluded that a cap, while appropriate for fixed-sum products like a payday loan, would not be appropriate for running-account credit agreements with no fixed end date such as credit cards. Similarly, the FCA has considered introducing a simple price cap in the overdraft market but concluded that a cap could signal that prices at the cap are acceptable and lead to providers with low or no charges to raise them.

I hope this reassures you that action is being taken to help people access affordable and reliable credit. I will continue to make my voice heard to defend the interests of hardworking people.