Martin Lewis says current high-cost credit regulation is “farcical” as FCA proposes raft of measures to better protect consumers millions of people who use overdrafts and high-cost credit

Martin Lewis, Founder of MoneySavingExpert.com today responds to the raft of proposals put forward by the FCA designed to protect millions of people who use overdrafts and high-cost credit.

On capping costs

Martin Lewis said: "The current regulation is farcical. While rightly the cost of payday loans are capped, other short-term high-cost lenders are allowed to charge what they like – and many are far more expensive. This includes doorstep lending, rent-to-own and bank charges for busting your overdraft limit. 

"While the FCA is thankfully considering capping rent-to-own costs, the rules should apply to all forms of short-term lending. Regardless of what type it is, a simple rule like ‘no one should pay more interest than the amount they borrowed’ for lending less than a year should be looked at."

On overdraft charges

Martin said: "It’s now nearly a decade since the Supreme Court overturned bank charges reclaiming on a technicality – that bank charges didn’t need to be fair. Until then over £1 billion had been paid back.

"The impact of that campaign did work to get rid of those hideous £35 per transaction fees for being past your overdraft limit, which meant people could rack up £100s of charges in minutes without being aware. Yet things still aren’t good enough – those who struggle cross-subsidise those who don’t.

"The changes today are a step in the right direction. Stopping overdrafts being part of ‘available funds’ and reframing the language so that they are thought of as borrowing is right. After all, many people think credit cards are ‘bad’ and debit cards ‘good’ – yet if you’re overdrawn a debit card is a debt card too. But whether simply relying on pushing competition and transparency is enough is questionable, regulating the costs for some of society’s most vulnerable people should be considered."