Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), said the watchdog is concerned about the sustainability of the lending to poorer consumers.
The regulator stated the majority of the growth in consumer lending in recent years has been to borrowers on higher incomes, and is therefore not of particular consequence for financial stability in the UK.
Mr Bailey was speaking at the annual dinner of the Financing and Leasing Association in London yesterday (27 February.)
He said: "Borrowing on credit cards with 0 per cent offers and motor finance are concentrated among people with higher credit scores.
"And, motor finance and 0 per cent credit cards have accounted for a majority of consumer credit growth since 2012. In contrast, people borrowing on interest-bearing credit cards tend to have lower credit scores."
But he said the provision of credit for consumers in more straightened circumstances is more of a concern.
Mr Bailey said: "It is reassuring that credit growth has not been disproportionately driven by those who are most vulnerable. But, I am not sanguine here.
"Even though the high cost credit markets are small as a share of total consumer credit, and even though they are not the fastest growing, as a conduct regulator with a consumer responsibility my conclusion from our work is that the main issues and problems are in these markets.
"This is where there is a higher concentration of more vulnerable consumers."
Mr Bailey said many of the poorest consumers are using credit cards as a source of long-term finance, which is not the intention of those vehicles.
He added some consumers are repaying £2.50 for every £1 borrowed, and said the FCA intends to spend far more time on examining the consumer credit market than it had expected to, when it first became responsible for regulating the consumer credit market in 2014.
His comments come in the context of the FCA publishing new rules requiring lenders to work with persistently indebted customers to help them manage their debts.
The rules, to be implemented from 1 March, will require that if a consumer has been in persistent debt for 18 months and making low repayments, the credit card issuer must contact the consumer and warn them to increase their payment or risk having the card suspended.
Consumers who have been in persistent debt for 36 months must be shown "forbearance" by the card issuer, including offering a repayment plan, and perhaps forgiving some of the debt.
david.thorpe@ft.com
