On 29 November 2016 the FCA launched a call for input on high-cost credit including review of the high-cost short-term credit (HCSTC) price cap. This builds on the work undertaken by the FCA in 2014 on price caps (Policy Statement 14/16), the Law Commission’s report on the review of the Bills of Sale Acts[1] in September 2016, and the Competition and Market Authority’s final report on the retail banking market investigation in August 2016. The FCA’s focus in this call for evidence is on products that they believe pose the greatest risk to the consumer protection objective.

The call for input covers:

  • High-cost products – the FCA is considering broadening the scope to include credit cards, motor finance, overdrafts, and some instalment lending. The FCA is also considering interventions if there is detriment to consumers.

  • Definition/boundaries of HCSTC – the FCA is aware that firms are exploring the boundaries of the HCSTC definition and will continue to keep this under close review. The FCA is considering if the APR/repayment period continue to be appropriate given firms’ product innovation/interpretation of the rules.[2]

  • Overdrafts – the FCA published its response to the Competition and Market Authority’s report in November 2016. The FCA is examining overdrafts from a consumer protection and competition perspective. Specifically, the FCA will consider the nature and level of charges and lack of transparency. The FCA acknowledged that further evidence is needed to assess consumer detriment and appropriate solutions.

  • HCSTC price cap review – the FCA is to review the price cap in H1 2017. The FCA is considering whether there is evidence to suggest the price cap should be changed. The FCA is also keen to establish whether consumers are turning to illegal money lenders as a result of being excluded from high-cost credit due to the price cap.

  • Repeat and multiple HCSTC borrowing - the FCA is to continue to review data regarding market trends and this will influence the decision on the price cap change.

Responses to the call for input are due by 15 February 2017. The FCA will assess the evidence form the call for input in Q2 2017. The HCSTC price cap review results will be published in mid 2017. If further work is required on the price cap this will take place H2 2017 – H1 2018. Further work on issues regarding high-cost credit and overdrafts will take place Q2 2017 onwards.