The Financial Conduct Authority (FCA) have announced plans to crackdown on the issuing of high interest loans.
The independent financial watchdog launched an 18 month review into high-cost credit.
It has now put forward a set of recommendations with regards to rent-to-own schemes, doorstep lending and catalogue shopping, alongside a review into bank overdraft fees.
Initially, campaigners sought a cap on the £2.3 billion overdraft fees, however the FCA decided against the move amid concerns of opposition by the banks.
Specifically, the FCA recommended that banks send mobile text alerts warning of potential overdraft charges, alongside suggesting greater clarity with respect to these loans.
The suggestions included stopping including overdraft as “available funds”, as well as emphasising the customers that overdrafts are in fact classified as credit or borrowing.
It said that it expects the crackdown initiative to save customers around £200 million in total per year.
Moreover, the FCA noted it would consider imposing price caps on rent-to-own, where shops such as BrightHouse sell cookers and household appliances on weekly payments.
Its findings revealed that customers ended up spending more than £1,500 for cookers that retail in other high street stores for less than £300.
“The FCA believes the harm identified in this market is sufficient in principle to consider a cap on rent-to-own prices. It will now carry out the detailed assessment of the impact that a cap could have on the rent-on-own sector and how it might be structured,” the regulator said.
It is expected that the cap is set to come into force next April.
The FCA is a financial regulatory organisation in the UK, which succeeded its previous incarnation the FSA in 2013.
