Which? is calling for the Financial Conduct Authority (FCA) to broaden its efforts to clean up the credit market.
Our new Credit Britain 2 report identifies a series of problems that are making it difficult for consumers to efficiently manage their borrowing and shop around for the best products.
The report calls for the FCA to ban use of the term ‘0%’ on credit products that charge more than 0%, such as credit cards with an upfront fee.
It also calls for high-cost lenders to be forced to include health warnings on their products, and to show the cost of credit as pounds per £100 borrowed over 30 days – as APRs can often mislead consumers.
The Which? credit card comparison tables let you search all available cards from all available providers to choose the best deals based on quality of service as well as cost and benefits.
Which? Comparison Table: Credit cards – compare the best deals on the market
Credit companies should put consumers in control of their borrowing
It was identified that consumers can’t easily shop around for many credit products because making a number of credit applications close together can damage their credit score. The report therefore calls for the introduction of mandatory ‘quotation searches’.
It also calls for a cap on default fees on all credit products, to ensure that they are not used to cross-subsidise the headline cost of the product.
The FCA were also urged to ensure minimum repayments on credit cards were set at a level which strikes a fair balance between affordability and ensuring that the debt is paid off over a reasonable time.
A survey conducted as part of the report revealed that one in five (21%) of those who used a credit product in the last year run out of money by the end of the month.
Find out more: How to deal with debt – a range of useful advice
FCA should focus on problems across the whole of the credit market
In March 2013, Which? set out five ways the FCA should act to clean up credit and send a clear message to irresponsible lenders.
We are now calling for the regulator to build on its work in tackling payday lenders and ensure that poor practices are being eradicated right across the credit sector.
Which? chief executive, Richard Lloyd said: ‘The regulator has so far rightly focused on the unscrupulous practices of payday lenders. However, we have found problems across the whole of the credit market. It’s now more important than ever that all credit products are up to scratch, so that consumers can more easily manage their borrowing.’
‘The FCA must crack down on poor practices and help put consumers back in control of their credit. And lenders should step up and improve their products and practices.’
Find out more: Credit Britain 2 – read the report in full