The Monetary Conduct Authority performed a wide-ranging evaluate on high-cost credit score and proposed reforms on Thursday.
The City watchdog is planning a price cap for rent-to-own retailers as part of a crackdown on high-cost credit and overdrafts to save consumers more than £200m a year. The regulator is also seeking feedback on a proposal to ban the sale of extended warranties at point of sale, which could save consumers up to 7.7 million pounds a year.
Greg Stevens, chief executive of the Consumer Credit Trade Association, which represents 300 lenders, said: "You can't simply wish away the costs of servicing this customer group".
Andrew Bailey, the head of the FCA, said the watchdog had put forward a significant package of reforms to protect consumers, adding: "High-cost credit is used by over 3 million consumers in the United Kingdom, some of whom are the most vulnerable in society". "Today we have proposed a significant package of reforms to ensure they are better protected".
They had called for the restrictions on the cost of payday loans, first introduced in 2015, to be used as a template for the rest of the high-cost credit market.
The FCA believes that the way banks operate and charge for overdrafts needs "fundamental reform". "We will continue to work closely with the FCA to make overdrafts more transparent and ensure customers take full advantage of the banking services available to them".
Beyond that, it said it would also consult on the radical option of banning fixed fees. Proposed changes could save consumers up to £34 million and £27.5 million respectively, according to the FCA's own research.
The home collected credit lender said it was "pleased" to see the United Kingdom regulator try to implement new rules in the sector to "ensure fair customer outcomes". "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 FCA says it'll collect extra proof and evaluation earlier than any formal selections are made.
The FCA "intends to strengthen protections for vulnerable users" of high-cost credit in stores and at the door by implementing new requirements to raise standards in disclosure and sales practices.
They will prevent home-collected credit firms from offering new loans or refinancing during home visits without the customer "specifically requesting this".
We consider that our historical technological developments and future enhancements, already in scope, alongside our conservative growth targets put us in good stead following the FCA announcement today.
More than three million people have dipped into an unauthorised overdraft in the course of a year, exceeding their agreed limit.
If appropriate, these options will be consulted on later this year to coincide with the wider Strategic Review into Retail Banking so that the FCA is able to take into account the part that overdrafts play in the current United Kingdom banking model. "It is important that this option remains firmly on the table".