CCTA commentary: FCA Financial Lives Survey 2017 – Summary of Findings

The Financial Conduct Authority Financial Lives Survey 2017 is the first wave of their new tracking study. The survey has been offered to wider use by the public and stakeholders and weighted data tables have been released alongside the report and are available for wider research purposes following agreement by the FCA.  While the Financial Lives Survey considers a wide range of the financial products, this summary reflects only the findings generally relating to consumer credit.

Key Findings

3% of UK adults are unbanked, and 77% of them show characteristics of potential vulnerability. 1 million UK adults are both unbanked and potentially vulnerable.
Of those unbanked, the most affected group are aged 18-24.
People showing characteristics of potential vulnerability are twice as likely to have used high cost credit in the last 12 months as other UK adults.
75% of UK adults have had one or more consumer credit products or loans in the last 12 months.
3.1 million UK adults have one or more high cost loans now or have had one in the last 12 months, including, for example, payday loans and home collected loans.
12.9 million adults (25% of all UK adults) have been overdrawn in the last 12 months.
3.1 million adults have used an unauthorised overdraft facility, either by exceeding their limit or never arranging one, in the last 12 months.
Informal or non regulated loan use in the last 12 months include 3.6m UK adults borrowing from friends and family, and 0.1 million borrowing from unregistered lenders.
18% of all UK adults with a payday loan are 18 24 year olds.
37% of all UK adults with a payday loan are 25 34 year olds.
25 34 year olds are big users of consumer credit, especially those with young families.

25 34 year olds have above average holdings of credit or loan products.

Women aged 18 24 years old are far more likely to use credit than men of the same age. Half (48%) of women aged 18 24 have used some form of credit or loan in the last 12 months, compared with 37% of men.

Despite making up only 18% of all UK adults, 25 34 year olds account for around one quarter of all UK adults who hold a personal loan (24%), revolve a credit card balance (25%) and hold a motor finance agreement (23%). They also account for 22% of those borrowing using any retail finance product, which includes borrowing on store cards, catalogue credit or other retail credit.

9% of 25 34 year olds have held at least one high cost loan product at some point in the last 12 months. 25 34 year olds are the most likely age group to use payday loans (3%) or short term instalment loans (2%), making up three in eight (37%) and three in ten (29%) respectively, of all UK adults who have had these forms of lending in the last year.

Around one in twenty (6%) UK adults, or 3.1 million people, have a high cost loan now  or have had one in the last 12 months. This includes payday loans (single payment), short term instalment loans, home collected loans, pawnbroking, hire purchase (other than for a motor vehicle) and logbook loans.

Payday loans, short term instalment loans and pawnbroking are more popular with younger adults (18 34 year olds) and singles. Hire purchase and logbook loans are more popular with older adults and couples.

Home collected loans and payday loans are used more by women than men.

High cost loan products are most used by adults:
• aged 25 34 (9%) and 35 44 (9%)
• with financially dependent children (9% for people with one or two children, 14% for those with three or more children)
• who are single parents (14%), and in particular single parents aged 18 34 (17%)
• who are unemployed (9%)
• who rent their home (9%)
• with a physical or mental health condition or illness that affects their day to day activities a lot (9%)
• with no savings or investments (16%)

Just under 8 million are over indebted

Just under 100,000 have used an unregistered lender in the last 12 months.

When interviewed, 7% of UK adults were borrowing from friends and family, or had done so in the previous 12 months; 6% had taken one or more high cost loans in the same period.

Credit cards are the most widely held credit product. Three fifths (62%) of all UK adults, or 31.6 million people, have a credit card, but only one fifth (19%), or 9.6 million people, revolve a balance.

Nearly 13 million UK adults have been overdrawn in the last 12 months.

Of those overdrawn in the last 12 months, 24% have had an unauthorised overdraft. This equates to 3.1 million people, or 6% of all UK adults.

Overdraft use is higher for younger adults than for older adults. For example, two in five (38%) adults aged 35 44 have been overdrawn at some point in the last 12 months, compared with one in five (19%) adults aged 45 54.

Motor finance is used by just over 5 million UK adults.

Those with characteristics of potential vulnerability are more likely than the non vulnerable to hold more expensive forms of credit. They are less likely to hold any form of insurance or protection, savings or investments. They are twice as likely to have high cost credit, and four times as likely to have a Post Office card account.

At least 9% of UK adults, or 4.5 million people, state they have been declined a financial services product in the last two years.

More had been declined a credit card or a personal loan than any other product. These customers are more likely to be over indebted. This suggests that providers may have been right to refuse these customers.

100,000 of those in credit arrears in the last 12 months have found their provider to be unsympathetic, not willing to allow them more time to pay, and not to have encouraged them to use free debt advice.