Young people are ‘having to borrow money to live’, financial regulator warns
The boss of the FCA said action is being taken to reduce long-term credit card debt and high-cost payday loans
AN increasing number of young people need to borrow to cover the most basic everyday bills, the boss of Britain’s financial regulator warned.
Andrew Bailey, the chief executive of the Financial Conduct Authority (FCA), expressed concerns over the growing number of young people who need loans to make ends meet.
He added that there was a shift in generational pattern of wealth and income.
In an Mr Bailey said: "There is a pronounced build up of indebtedness amongst the younger age group.
"We should not think this is reckless borrowing, this is directed at essential living costs. It is not credit in the classic sense, it is [about] the affordability of basic living in many cases."
Experts previously warned that interest rates could rise from their current record lows of 0.25 per cent as early as November - which is why credit should be "affordable" for indebted customers, according to Mr Bailey.
He added: “There are particular concentrations [of debt] in society, and those concentrations are particularly exposed to some of the forms and practices of high-cost debt which we are currently looking at very closely because there are things in there that we don’t like.”
How to pay down your debt in 6 steps
HERE are some tips from Citizens Advice
- Check your balance on a regular basis: Knowing your spending patterns is the first step to managing your money
- Work out your budget: By writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs. - Pay off more than the minimum: If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker.
- Pay your most expensive credit card sooner: If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
- Prioritise your debts: If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them. Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
- Get advice: If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further. Citizens Advice can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
The financial regulator's boss said action was being taken to reduce long-term credit card debt and high-cost payday loans.
The FCA is also examining the rent-to-own sector which can leave people paying high levels of interest for buying white goods such as washing machines.
His comment come as unsecured personal debts are causing a strain on millions of households.
Earlier this month, Mr Bailey warned that five million consumers are struggling to pay their credit card debts.
He slammed lenders for not doing enough to help those customers "with persistent credit debt."
Earlier this year Citizens Advice accused credit card companies of pushing its most vulnerable customers into further debt by raising credit limits without asking.
The charity previously called on the FCA to ban the practice, to protect people from falling into “long term debt cycles”.
Gillian Guy, the chief executive of Citizens Advice, previously said: “Banning firms from raising existing customers’ credit limits without seeking their express permission first would also help people take more control over their finances.
GET BACK ON TRACK Simple steps to getting out of debt as a charity warns six million families are struggling with bills
“Lenders must act responsibly and direct people struggling with debt towards free and independent advice and support - rather than more credit.”
In June, the Bank of England ordered banks to set aside £11.4 billion to cover risk of bad debt boom.
Lenders are now expected to set aside £5.7 billion in the next six months, with a further £5.7 billion to be put away by the end of 2018.
More about how to get out of debt
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