On This Morning!
Debtwizard Facebook Debtwizard Twitter

Call 03339 870 180  
Monday to Thursday: 9.00am - 8.00pm, Friday 9.00am - 5.30pm

Simple debt advice - with no up-front costs

New proposals for high cost credit and are we to see a cap on rent to own credit?

Thursday, 31st May 2018

The Financial Conduct Authority (FCA) has announced comprehensive new proposals designed to protect millions of people who use high-cost credit and bank overdrafts. Most is on improved regulation and practices but with a possible cap on the price of rent-to-buy credit.

The FCA is required to formally consult on rules it proposes to introduce, any consultations must be open and transparent, and the FCA cannot prejudge the result.


In 2016, the FCA estimates UK banks made £2.3 billion in revenue from overdraft charges alone, with 30 per cent of this was being from unarranged overdrafts.

The FCA also revealed that the majority of unarranged overdraft charges are paid by only 1.5% of customers, who pay around £450 each in fees and charges per year. The new proposals are aimed at saving the consumer circa £140 million per year in unnecessary fees and charges.

Managed bank accounts

The FCA is also consulting on mandatory rules to make it easier for customers to manage their accounts.

These include:  

  • mobile alerts warning of potential overdraft charges
  • stopping the inclusion of overdrafts in the term 'available funds'
  • requiring online tools to make the cost of overdrafts clearer
  • introducing online tools to assess eligibility for overdrafts
  • making it clear overdrafts are credit or borrowing

Home-collected credit (doorstep lending)

Home-collected credit sector is also to be reformed to raise standards in disclosure and sales practices, this will include preventing home-collected credit firms from offering new loans or refinancing during home visits without the customer specifically requesting this. Changes in this area are estimated to save consumers up to over £34 million a year. There are no proposals to cap this form of credit.

Catalogue credit and store cards

Catalogue credit and store card firms will be required to do more to help customers avoid persistent debt – in the same way as credit card providers have been made to do by the FCA. See - New credit card rules introduced by the FCA (DebtWizard page)

These changes are estimated to save consumers up to £27.5 million a year.

The FCA has already transformed some high-cost sectors such as payday loans with these firms making substantial improvements and paying more than £900 million in redress to customers across consumer credit. The series of measures announced today by the FCA builds on this work. There are no proposals to cap this form of credit.

Rent-to-own – Possible cap on rent-to-own costs

Also to be included in the review is the rent-to-own sector where costs for some of the 400,000 customers can be very high. The FCA quotes examples where people have paid over £1,500 for essentials like an electric cooker, which could be bought on the high street for less than £300.

The FCA has identified a need to intervene to protect financially vulnerable consumers in this market and is considering 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 along with how it might be structured. The FCA will undertake this work over the next few months with the aim of introducing changes, if appropriate, in the rent-to-own sector by April 2019.

BrightHouse ordered to pay 15m compensation to 249,000 customers (DebtWizard page)

Extended warranties

These are usually offered at the point of the sale as the customer is about to pay for the goods. Under the consultation the FCA will consider banning these with a view to saving the consumer close to £8million per year.

Andrew Bailey, Chief Executive of the Financial Conduct Authority said:

'High-cost credit is used by over three million consumers in the UK, some of who are the most vulnerable in society. Today we have proposed a significant package of reforms to ensure they are better protected including the possibility of a cap on rent-to-own lending. 'The proposals will benefit overdraft and high-cost credit users, rebalancing in the favour of the customer.

'Our immediate proposed changes will make overdraft costs more transparent and prevent people unintentionally dipping in to an overdraft in the first place. However, we believe more fundamental change is needed in the way banks charge customers for overdrafts. Given the size of the market our work here will be completed as part of our wider review into retail banking.'

Full press release from FCA here

Related reading

DebtWizard short blog My thoughts on the FCA proposals to reduce high cost credit and unarranged overdraft fees

UK Consumer Debt Numbers January 2018 - Our top 10 (DebtWizard page)





For no nonsense advice just submit the short form and Mike or one of his team will get back to you.

Unsecured debt

--Debt Amount--

Home owner

Yes No

No. of creditors


Current payments

£0 - £25

Affordable payments

£0 - £25



Email Address

Phone Number


Yes No Can we leave a voicemail

Yes No Can we contact you via SMS

Yes No Can we contact you via email

Best time to call


Please note: If you continue you are agreeing to our privacy policy, available here.