I posted about this last month, the need for these types of credit to be regulated just like any other loan.
Use of these types of loan went up fourfold last year with 5 million people using them to finance purchases worth £2.7bn.
75% of users are aged 18 – 36 and 90% of transactions were for fashion and footwear.
Many have called for action, including Money Saving Expert’s Martin Lewis, as it can be easy to build up debts of thousands of pounds – credit reference agencies and other lenders do not know about these – no one asks whether the individual can repay.
Now, following their investigation into credit services, the Financial Conduct Authority have said that it will regulate, having discovered the reality behind these loans, including that 10% of users had debt arrears elsewhere.
New legislation, including providers having to make affordability checks before lending, will be consulted on.
I am not sure how long this will take to come, but I hope this is not too little too late for many users.
At least some of the major providers have agreed that regulation is needed and I assume that they will not wait for the law to come in before they implement improvements.