The  FCA has rejected calls to cap interest rates charged on credit cards saying that planned measures to help people avoid excessive debt should be given time to work. Speaking at Reuters Financial Regulation Summit Andrew Bailey, Chief Executive of the Financial Conduct Authority said “We are not there at the moment,” said in response to calls from Britain’s Labour opposition party for a cap on interest payments on consumer credit card debt.

Bailey said that the FCA has been doing a “lot of work” on consumer credit cards and was finalising measures following public consultation. “Our general approach is look, we would rather like to see what the effect of those measures is.”

Bailey said the focus of the FCA was on people who are unable to pay down their credit cards in a timely way. “An interest rate cap in some parts of (the) credit market would not work because the credit is not structured in a way that lends itself to a cap. The most obvious case is rent-to-own, where it would not work. I am concerned we don’t choke off all access to credit.”

Credit has a role to play for those in the “gig economy”, where income is erratic, as it can help smooth out earnings, while social housing usually needs furnishing when people move in and therefore credit is needed to buy appliances. Cutting them off has consequences. Leaving them in the hands of payday loans has consequences.”

The FCA’s CEO said he was no rush to intervene in the car financing sector where “personal contract purchase” or PCP loans offered by the financing arms of automakers, a model common in the United States, have increased rapidly in Britain. “I am not persuaded that per se the structural shift in car credit in this country towards PCP is a bad thing.”

Source: Reuters