The announcement by the Financial Conduct Authority that it could introduce a cap on the rent-to-own products market by April 2019 is welcome news, but it must go further by extending to doorstep loans and unarranged overdrafts.
Following my cross-party campaign to regulate high cost credit, the Financial Conduct Authority introduced a total cost cap on payday loan debt. This has seen the number of people approaching Citizens Advice for help with unaffordable payday loan debts fall from over 16,000 to fewer than 9000. I have recently been urging the Government to extend the cap to doorstep loans and the rent-to-buy market.
The FCA has rightly acknowledged the need to regulate the rent-to-own market, which involves customers paying eye-watering amounts above normal shop prices for essential household items with extra charges and high interest rates. A cap on this credit will make a huge difference for low-income families, but it should be extended to doorstep lenders too.
1.6 million people use doorstep lenders to make ends meet and they are often trapped in spiralling debt. People should never repay more than double what they borrow. The FCA should learn the lesson of action on payday loans and apply it to doorstep lenders.
Likewise, millions of people are trapped by overdraft debt, often through fixed fees on unarranged overdrafts. Labour has committed to limiting the cost of borrowing by capping credit card and overdraft charges in government. The FCA should reconsider and consult on an overall cap on these markets too.