Understanding the Experiences of Consumers Using High-Cost Credit

21 June 2018

The Financial Conduct Authority (FCA) recently published the outcome of their review into the high-cost short term credit sector.

Feeding into the final report, PwC Research undertook a programme of consumer research that focused on home collected credit, rent-to-own, and catalogue credit (including store cards). The FCA had identified these three products as needing greater focus due to their potential to cause consumer harm especially through ongoing (i.e. longer term) use. To build on the FCA’s existing evidence base and get a deeper understanding of consumer use and experience, we conducted discussion groups and in-home, one-to-one interviews across the UK with customers of high-cost credit products.

The FCA’s consultation on high-cost credit and PwC Research’s published report can be found here: https://www.fca.org.uk/publications/consultation-papers/cp18-12-and-cp18-13-consultations-high-cost-credit-and-overdrafts

Key headlines from our research include:

  • Drivers of habitual use:  there are three key factors that contribute to more habitual use of high-cost credit: managing finances week by week, lack of perceived choices/options combined with the immediacy of the need for a solution, and having a more impulsive attitude to spending.
  • Drivers of short term use:  convenience and ease of use were seen to be the main motivations for using high-cost credit, but were also perceived to be the biggest drawbacks as these factors can mean that consumers are tempted to spend/buy more.
  • The role of overconfidence: consumers tend to focus on their ability to meet weekly repayments in the short term, without necessarily thinking about the whole repayment period. This overconfidence in their ability to keep paying and not believing their circumstances will change can lead to difficulties for consumers.
  • Helping consumers make informed decisions:  consumers identified a few ways in which they could be encouraged to make more informed decisions regarding their choice of product or lender. These included providing greater clarity around the ‘final costs’ including extras such as delivery and insurance for RTO, for catalogues and store cards, not increasing credit limits without customers’ permission.

The FCA’s proposals include a price cap on rent-to-own products, a requirement for lenders of catalogue credit and store cards to intervene with customers in financial difficulty to bring them in line with credit card providers, and a requirement for home-collected credit lenders to explain the cost of refinancing compared with taking out a concurrent loan.

John Coley, Financial Services Risk and Regulatory Director at PwC, said: “For some firms in the high-cost credit sector, the Financial Conduct Authority (FCA) has issued potentially game-changing proposals, with a range of detailed measures and packages overall. Of the various business models in the high-cost sector, overdrafts and rent-to-own products are particularly in the FCA’s sights. Given the costs of lending in the rent-to-own sector and the vulnerability of these customers, the regulator is considering introducing a price cap for these products.”

For more information, please contact:


Ian Sparham | PwC Research
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Sharron Worton | Principal Insight Consultant
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Duncan Wardley | Director
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