The FCA is trying to make fair credit more accessible in light of the tight cost of living
The Financial Conduct Authority wants to encourage companies to offer fairer credit to vulnerable borrowers after payday loans have slowly declined.
The UK high-interest lending market has shrunk significantly in recent years with the exit of Provident Financial and the troubled Amigo, which has fought off bankruptcy.
The regulator, which has been increasingly restrictive on payday loans because of their impact on vulnerable people, is now looking for means that can fill the gap in the market, The Times first reported.
It comes amid cost pressures that see rising energy bills, rising inflation and the harsh pandemic costs many families in Britain have had to swallow over the past two years.
With inflation soaring to a 30-year high, some fear borrowers could be attracted to illicit loan sharks.
A spokeswoman for the FCA said: “It is very important to ensure consumers can afford the credit they can access, especially when the cost of living is rising so rapidly.
“We recognize that consumers can benefit from access to credit they can afford, but that the supply of high-priced credit products has declined. We started researching with consumers to understand the implications for them, including their alternative options.
“We also talk to companies and individuals [with] an interest in this topic to better understand what the supply of credit to these customers might look like in the coming months and years and whether we could take action to remove barriers to future affordable and sustainable supply of credit to low-borrowing customers.”