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warning over levels of personal debt

Personal debt levels are high enough to merit the whole sector coming under the microscope of the UK’s financial regulator, the head of the Financial Conduct Authority (FCA) has said.

FCA chief executive Andrew Bailey said that the cap on payday lending had protected consumers but that the whole of the high-cost credit market needed examination.

Bailey said there had been a big increase in consumer borrowing, such as loans, overdrafts, credit card debt and car [and presumably motorcycle] finance.

This echoes concerns raised by the Bank of England. Its Financial Policy Committee said there had been an acceleration in debt last year.

Consumer credit lending is still less than 10% of all lending by UK banks to household borrowers. It is also far smaller than mortgage lending, which amounts to 70% of loans to households, but UK lenders stand to lose much more on their consumer credit loans if there is an economic downturn and their borrowers default on their credit card and other personal loans.

A Lords committee also recently called for stronger controls such as a cap on “rent to own” products.
 

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