The FCA should help to reform the short-term finance market, so that consumers can climb the “credit ladder”, a report has said.
The study carried out by think tank ResPublica said while there are issues with the payday loan market, a reformed short-term market would people to improve their credit situation.
It said: “Tougher regulation and sanctions have seen a marked reduction in the provision of credit to consumers served by this sector.
“Indeed, many of those at the bottom of the credit-worthiness curve have been excluded from finance almost entirely due to these changes.
“Further measures that restrict low or middle income households accessing credit would, in our eyes, be detrimental to many of those struggling with cost of living issues.”
The report made a number of recommendations, including some which it says the FCA should take action on.
It said the FCA should ensure “all forms of consumer credit come with debt warnings and advice” and that it should encourage further use of real-time data-sharing.
Between March 2010 and March 2013 the number of new payday loans issued a month went up from just below 400,000 to more than 1.2m - though since then the number has been falling.
The growth of payday loans has proved controversial because of the level of interest they charge.