Christmas is coming and retailers are pulling out all the stops to make sure customers spend, spend, spend. But for those already struggling with money problems, the extra debt they rack up will mean misery way beyond New Year.

So, is there a role for the regulator to do more to ensure better consumer protection? This summer, a group of 28 charities and campaign groups sent an open letter to economic secretary John Glen, saying the FCA was guilty of a ‘lack of action on predatory lending’. They demanded a market-wide cap, as now in force for payday loans, on other forms of high-cost credit, including some credit cards and door-step loans.

The letter says the fact this has not been imposed by the regulator ‘calls into question its credibility in respect of consumer protection.’ But is this criticism fair? The FCA has conducted an extensive high-cost credit review and put in place a range of measures, including:

Rent to own
From 1 April, the FCA introduced a price cap within the rent to own sector, which allows customers to pay in installments for household goods. Those in the market include BrightHouse, EasyBuy and PerfectHome and they must now set a total credit cap of 100%, show their prices against three other mainstream retailers and not hike up costs by adding in other products such as insurance, warranties and arrears charges. The regulator has estimated the cap will save consumers up to £22.7 million a year. In February, BrightHouse closed 30 stores with the loss of 350 jobs, suggesting it knew there would be
less scope for high profits.

Buy Now Pay Later
In June, the FCA announced new rules would come into force on 12 November, saving consumers some £40-£60 million a year. These include a ban on charging backdated interest on money already repaid. Typically, retailers offer a promotional period lasting 12 months, and in this time, customers do not need to make payments or pay interest. But, if they do not repay the entire amount within this time, then interest will often be charged from the date of purchase.

But those consumers who had repaid part of the amount owing, were still being charged backdated interest from the date of purchase. This has now been stopped and providers are also now required to give better information including when the offer period is about to end. Buy Now Pay Later is becoming increasing prevalent and available through many stores online and catalogue retailers, with Marks & Spencer recently joining the fray.

Catalogue credit and store cards
New rules were enacted in December 2018 and June 2019, with customers now having to be reminded about the end of offer periods, tighter rules on credit limit increases and stronger protection for those customers who have incurred long term debt.

From 18 December, banks must now make it clearer for customers to understand their spending and to tell if they are using their overdrafts. ‘Available balances’ must now not include arranged overdraft facilities, which can suggest an account is in credit. If an account is overdrawn, it must now be displayed via an ATM or online statement as a negative number.

Banks must also now supply customers with more alerts via their mobile phones, advising about charges. They will also no longer be able to charge higher ranges for unarranged overdrafts and from charging fixed daily fees for borrowing through overdrafts. APRs must be shown to help them compare against other ways of borrowing. Even so, some critics, including shadow chancellor, John McDonnell, have said the FCA could have gone further and implemented a cap on overdraft fees.

A difficult balancing act
Research at the start of the year from the TUC showed consumer debt was £428 billion, with the average per household being £15,385, a new peak and up £886 over the previous year and it may well have increased yet further. The FCA has shown it wants better protection, particularly for those who are likely to become trapped in long-term debt. But equally, if seen as too draconian, some will say its actions are reducing consumer choice and damaging the financial services market. So, has the regulator gone far enough? While it remains too early to tell, as we move into 2020, the effectiveness of these moves will face ongoing and sharp scrutiny.