The Financial Conduct Authority (FCA) has published it’s ”Assessing creditworthiness in consumer credit’ policy statement which provides rules and guidance on assessing creditworthiness in consumer credit.
The announcement coincides with the Bank of England revealing the amount of credit held by UK households increased by £3.7 billion in June and the rate of credit card lending has risen by 11% in the last three months.
In response, Gillian Guy, Chief Executive of Citizens Advice, said “People’s finances are increasingly stretched with many turning to credit to make ends meet. Our figures show 25% of UK households with a volatile income used credit to pay for essentials such as food and bills. In the last year, we helped 125,000 people with consumer credit issues. The FCA has been explicit that lenders must carry out a credit check before a credit limit is increased from November 2018. Last year, nearly 6 million people were given extra credit they had not asked for, encouraging them to fall into unnecessary debt. This must stop.
“Lenders need to be serious about safeguarding their customers from future problem debt by only lending what people can afford to repay. We find that even £100 or £200 here and there can quickly mount up and become difficult to manage.”
Fiona Hoyle, Head of Consumer and Mortgage Finance at the FLA, said: “Today’s policy statement will require careful reading but, at first glance, we are pleased that the FCA has listened to industry feedback on household income, and agrees that allowing only an individual’s income to be taken into account in lending decisions would have had an adverse impact on financial inclusion. We also welcome the FCA’s recognition that different approaches to affordability assessments are appropriate in different markets.”
“Responding to industry concerns, the FCA has also agreed to a longer implementation period for the new rules, which will give firms more time to make the necessary system changes.”