The Financial Conduct Authority’s (FCA) has warned of a pronounced build-up of debt among young people. In an interview with the BBC, FCA Chief Andrew Bailey has highlighted the ‘growing debt burden’ on young people.
The warning, which follows a tour of visits by Andrew Bailey to debt charities including National Debtline, coincides with new Insolvency Service figures showing the number of 18 to 34 year olds becoming insolvent jumped by nearly a third between 2015 and 2016.
Research for National Debtline (part of the Money Advice Trust) on the issue has previously found that while young people are borrowing and worrying about money, too few are seeking advice.
The charity’s Borrowed Years report found that 37 percent of 18 to 24 year olds are already in debt, owing an average of £2,989 (excluding student loans and mortgages). Around half (51 percent) say they regularly worry about money, while one in five (21 percent) sometimes cannot sleep as a result.
Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said “Andrew Bailey is absolutely right to highlight the growing debt burden on young people – often to meet basic livings costs. While this trend may not yet be considered a risk, on its own, to the economy as a whole, debt problems at such an early age can have a huge impact on the individuals involved.”
“Debt advice can make all the difference, but worryingly, far too few young people are seeking advice when they fall into difficulty. We need to do much more as a society to make sure young people get off to the best start to their financial lives.”
Mike O’Connor, Chief Executive of StepChange Debt Charity said “Our most recent statistics chime with warnings that record numbers of people are getting into debt at an earlier age, with young people relying on credit to cover essential costs. The proportion of younger clients seeking our debt advice has grown by 10% in the last five years and now almost two thirds of clients are under 40.”
“Young people today are less well off than older generations were at the same age, with a fall in real wages and soaring housing costs, especially in the private rented sector, forcing them into debt to get by day-to-day. As owning a property is unattainable to many young people, we are also seeing an increased number of renters contacting us for support with their problem debt, with four out of five of our clients renting.”
“Whilst around half of our clients are in work, the rise of the gig economy and insecure, low paid work mean household incomes are less stable and unable to cover the most basic living expenses. Furthermore, the gender pay gap becomes an important factor to consider as nearly 60% of our clients are women, which is the result of a 5% increase over the last five years.
“These figures should be a wake-up call to the risk of an economic downturn making this situation worse and the need for swift action on appropriate regulation of the credit card and high cost credit markets. The FCA must ensure firms offer credit products that are affordable and right for customers, so they are prevented from inadvertently ending up in persistent problem debt.”