The FCA starts by giving itself a big regulatory pat on the back for saving 760,000 consumers some £150 million thanks to its actions on High Cost Credit and in particular the introduction of the payday price cap.  As expected, it has decided to keep the cap in place in its current form and carry out another review in three years’ time in 2020.

So the first headline point to note is a notable victory for the CCTA and other lobbyists acting on the industry’s behalf – namely, the FCA has been persuaded of the need to resist calls for either a tightening of the existing cap, or an extension of it to other sectors of HCC market beyond payday.

This is no small achievement in the face of vociferous lobbying from Citizen’s Advice, StepChange and a host of other debt charities.

However, further interventions (or ‘targeted solutions’ in FCA language) loom for certain HCC sectors identified by the FCA as problematic, namely rent-to-own, home collected credit and catalogue credit.

The Feedback Statement lists the FCA’s specific concerns with each of these sectors and promises a Consultation Paper on its proposed remedies in Spring 2018.  So these sectors will have their work cut out over the next 6 months to justify current practices and make a case for leniency (a battle which the CCTA will be joining on their behalf).

On the rent-to-own, the FCA flags concern about ‘the high costs of borrowing for vulnerable consumers and the consequences of that borrowing’. It will look to see if ‘more affordable alternatives are available […] and foster cross-agency public policy solutions such as social housing providers supplying essential goods’.

On home credit, the FCA notes ‘similar concerns to RTO about the potential for high levels of financial distress’ and flags potential (or likely) ‘restrictions on refinancing and rollovers, imposed time gaps between borrowing and / or time limits on the total duration of borrowing’.

On catalogue, the regulator flags ‘concerns about the high level of arrears and the fees triggered by them’ and the ‘high levels of interest charged outside interest-free periods and the transparency of those interest-free periods’.

But, crucially — and it’s a point that warrants repeating — the FCA has specifically ruled out caps for any of these sectors.  At least for now, proposed final remedies will become known in Spring 2018.

There is also recognition throughout of the need to maintain ‘access’ to credit for HCC consumers, another point the CCTA has been ramming home in successive meetings with the regulator.  The FCA states it is ‘aware that measures to protect certain consumers may deny access to credit for others’. Accordingly, it commits to look at the evidence to ‘make the right judgements about where and how to intervene’.

To this end, the regulator will analyse HCC consumers’ credit ratings and what influences them, as well as multiple and repeat use of products and patterns of longer term indebtedness, and then incorporate insights from this analysis into the CP in Spring 2018.

The other bit of the lending industry in for major changes is bank overdrafts.  The Statement heralds the end of the unauthorised overdraft in its current form, which the FCA doubts ‘should have a place in any modern banking market’.

Arranged overdrafts raise a separate set of concerns, namely ‘long-term debt accumulation to levels which are either persistent, unsustainable or both’.

Proposed changes to these products will also appear in the Spring 2018 consultation paper.

Additional points of note:

The Statement notes that ‘debt charities have indicated that consumers are presenting themselves earlier and with lower debts’.   Conversely, it notes later in the document that FOS has seen complaints go up.   Interrogating this discrepancy will be a key CCTA workstream for 2017/18.

The FCA’s research has revealed no ‘waterbed effect’ following the introduction of the HCSTC cap: it has found no corresponding spike in illegal lending, although it commits to keeping vigilance levels high.

At 73 pages long, there’s a lot to analyse and make sense of.  There are also accompanying research papers on the price cap, plus technical reports and annexes.  A busy morning for the credit industry; and a very busy period ahead for the sectors in the cross-hairs.