UK : Consumer credit review

After a series of reports about rising consumer debt, the FCA says it will review the consumer credit sector, which falls under its remit since 2014 and its consumer credit conduct rules. It will encompass credit cards, personal and unsecured loans, and car finance.

"While largely driven by credit card lending, the increase in consumer credit moved from an annual growth rate of 10.2 in March to 10.3 April causing the Financial Policy Committee to establish this warning."

There has been an increasing reliance on usually more expensive, short-term lending as real incomes are squeezed. It is reason for growing concern about risking the stability of the UK financial system as consumer credit went up by £1.5bn in April. While largely driven by credit card lending, the increase in consumer credit moved from an annual growth rate of 10.2 in March to 10.3 April causing the Financial Policy Committee to establish this warning.

Despite the mortgage market review (MMR) setting out clear affordability rules that were applied to the mortgage market, it appears that these same rules are not upheld when it comes to lending on personal and car loans, PCP (Personal contract purchase) and credit cards.

This is a problem as these lending products are typically adding a greater burden on consumers due to their higher rates, but they are also securitised - packaged together and sold on to investors as bonds - as it was the case with the sub-prime mortgages, which caused the 2007 credit crunch.

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