Until we educate people about what interest means, regulation will not solve the problem.
There has been a great deal of media coverage of recent FCA recommendations of how to curb the usurious practices of a range of lenders, including high street banks, who provide credit to hard pressed families.
Bank overdraft charges, so called ‘rent to own’ operators, door step lending and catalogue credit all come into the category of high interest credit providers, which the FCA has highlighted.
Estimates vary, but it looks like Banks raked in £2.3bn from overdraft charges in 2016, with about one third of that coming from the most vulnerable customers via unarranged borrowing.
The FCAs proposals are welcome and should be acted on at once, but they will not achieve the changes that are required to halt the misery of entrenched debt that blights the lives of millions.
Until we have a planned programme of finance and life skills education for every young adult there will continue to be widespread ignorance, especially amongst the groups most at peril, about what interest is, why it exists, how it is calculated, and what it really means in cold, hard, weekly/monthly repayment terms.
Combining that understanding with a clear picture of how the whole personal finance system works, then adding to that crucial guidance and training showing that career development is intrinsic to avoiding the lure of high cost debt, as the only route into a well paid job, is the only way to deal effectively with these huge problems.