Opinion  

FCA's credit review can't regulate against stupidity

Simoney Kyriakou

Simoney Kyriakou

Neither a borrower nor a lender be: this is an old adage but true. 

Lending without receiving repayment can lead to friendships becoming strained; borrowing without being able to repay can lead to penury. I know. I've seen 'Can't pay? We'll take it away'.

But in this, the eighth year of stringent austerity, with over a million people now resorting to foodbanks and hard-working families struggling to stay afloat, it is no wonder the Bank of England credit report shows that household debt and car financing are rising exponentially. 

We may have got rid of the likes of Wonga, but we still have Sunny Loans promising financial freedom on daytime TV - for a whopping 1291 per cent APR. 

Given Asda Money's APR starts at 2.8 per cent, the high APRs on offer from well-publicised loan sharks are eye-wateringly penal.

Therefore the Financial Conduct Authority's (FCA's) latest review into high-cost credit, overdrafts, rent-to-own, home-collected credit and store cards is a welcome step forward for consumer protection.

Therefore the FCA's proposed ban on overdraft fees, as proposed, would be a welcome first step towards helping people back out of debt and onto a solid financial footing.

But even if hire-purchase arrangements have a cap imposed on prices, and overdraft fees are scrapped, there is still the question of how to get people out of the debt trap and into a savings habit. 

Education is incredibly important. The other day I met with people from the London Institute of Banking and Finance, who have created excellent basic financial skills online resources for use with schools, students and young offenders to help them understand debt, budgeting and saving.

Such measures are vitally important and it would be great to see government - and even the FCA itself - do more to provide Plain English educational guidance and information for people of all ages. 

Yet I have to admit, sometimes, people just do not want to learn until it is too late and they are in dire straits.

I've tried, personally, with friends by offering ideas such as a 'loose change jar' to encourage their children to save. But when the mother decided to raid this to 'add' to the household shopping budget, despite both parents working as teachers, I figured a lesson in basic saving had gone over her head. 

Another couple I know are on much lower incomes than the first family I mentioned, and yet still manage to put £10 aside each month for each of their four children. 

The parents are from the same family so were both taught about saving. One listened; the other did not. There's no teaching some people.