In an interview with the Guardian, Andrew Bailey, FCA chief executive, stressed that government intervention was required to tackle Britain’s mounting consumer debt problem that is impacting the most vulnerable members of society.
Unsecured consumer credit in the UK has risen at a rate of 10% per annum, taking the total household debt figure to £200bn.
After visiting debt charities across the nation, Bailey reported that many people were currently struggling with “frontline debt” like council tax and utility arrears.
The UK watchdog has been vocal in the past about the perils of rising household debt coupled with low wage growth, but now Bailey said the situation is larger than any one body can handle.
“I don’t think we have a sustainable solution, in terms of the provision of credit where needed,” he said.
“No one body might solve it on their own. It needs government involvement.”
Although August’s employment and wage figures surprised on the upside, with the Office for National Statistics data indicating that weekly earnings grew 2.1% year-on-year, higher inflation put a damper on household spending in the second quarter.
With wage growth slim and the Bank of England potentially set to hike rates by 25 basis points in November, Bailey said he worried about the ability of consumers to pay off the loans they have taken out to make ends meet or afford larger purchases like cars and homes.
“There is a really big question around how do you provide credit,” Bailey continued. “There is a case for people [needing loans] having access to credit, particularly in a world where earnings are more erratic.”
Workers in the gig-economy are particularly at risk, he added, as they are tempted to access credit to smoothe their erratic incomes.
