Consumer Finance Up 3% in September 2017

The latest on consumer finance in the UK According to the latest figures by the FLA (Finance & Leasing Association), consumer finance growth is up by 3 percent in September 2017 compared to the same period last year. Q3 2017 has seen a new business growth of 6% compared to Q3 2016.In September 2017, new business generated by credit cards and personal loans grew by 3% compared to September 2016. Online credit and retail store new business increased by 6% over the same period. Second charge mortgage value (new business) also grew at a similar pace in September 2017. However, new business volumes dropped by 2 percent over the same period.

According to Geraldine Kilkelly, Chief Economist and Head of Research at the FLA, new consumer credit is expected to increase by 3.3% in 2017, a significant drop from the 6.3% growth in 2016. This forecast comes in the wake of subdued consumer confidence and the slowest business growth since April. Consumer confidenceAccording to the most recent Lloyds Bank spending power report, consumer confidence is at the lowest level in 2.5 years (since April 2015). Consumer confidence is a measure of how consumers feel about their current as well as the future state of their finances and economic conditions as a whole.

In the IPSOS MORI monthly survey involving 2000+ UK bank account holders, 61% felt positive about their finances in October, a 3pp drop from 64% the previous month. Consumer confidence is a vital consumer finance metric. The measure is at its lowest level in 30 months. Statistics indicate that there is a huge gap between different age groups. Majority (78%) of individuals over 65 years old are positive about their financial situation compared to 60% of individuals between ages 18 and 24 years and 61% of individuals aged between ages 25 and 34 years. The latest statistics also show that women are less positive than men in regards to consumer confidence, i.e., 58% against 64%. Although we are approaching the festive season which is characterised by overly positive consumer finance metrics (increased borrowing and spending), 38% of individuals in the Ipsos MORI survey are worried about personal spending during Christmas. 13% of individuals in the survey are planning to cut back on typical spending to cater for festive spending.

The number of UK households with comfortable financial situations dropped in October 2017 by two percentage points to 60%. The situation is worse among households with children aged 18 and below. Lloyds Bank customer account data analysis shows that people are spending more on essentials. The latest statistics show a 2% growth in essential consumer spending in October. This represents a 17-month consecutive growth in essential spending with food accounting for approximately 40% of all essential spending.

Fuel spending is also significant according to the Lloyds Bank data analysis with an increase of approximately 5% which represents a 14-month continuous growth. Electricity and gas spending increased by 2.5% from 1% last month. Energy spending has been rising for the 3rd consecutive month after enjoying a continuous decline for three years. According to Robin Bulloch, Lloyds Bank Managing Director, although most people are positive about their finances, there was a significant drop in overall consumer confidence in September 2017. Bulloch attributes the drop to factors like inflation. Since inflation is at a 5-year high, Bulloch states that consumers, more so millennials, have begun to feel the pinch more than everyone else. He doesn’t find it surprising that the UK government reached out more to millennials in this week’s budget. As inflation rises and wages stagnate, UK consumers are being forced to rely on loans. This explains why there are more and more people taking out payday loans, credit cards and other forms of short term loans today. Consumer finance growth isn’t necessarily a good thing if consumer confidence remains low especially among the population that is supposed to drive the economy forward.

Although the budget has some interesting perks that will see minimum wage workers earn more and households save more in taxes, critics argue that the budget perks don’t mean much when you consider inflation. As the cost of essential increases, it is advisable to spend wisely during this festive season. You should stick to affordable goods during this season to avoid starting 2018 in debt. Avoid loans at all cost except for emergencies. Managing your finances is critical during this period since loans are easily accessible now more than ever before and we are approaching a time of the year characterized by overspending.

Shocking Number of Nurses Taking Out Payday Loans 2017

Payday loans for nursesMore than 1 in 20 NHS nurses are being forced to take payday loans to cater for everyday expenses. This is according to a new poll by the RCN. The recent Royal College of Nursing workforce poll revealed that 6% of nurses in the past year had been forced to rely on high-interest loans to meet daily expenses. 40% of the nurses questioned admitted to losing sleep over financial worries while 25% admitted to having borrowed money from their bank, family members or friends to meet regular monthly expenses.

What’s more is 23% admitted to having taken on another job just to cover typical bills/expenses. The survey which involved 7,720 nurses across the UK also showed that a record 50% of NHS nurses rely on overtime to meet their monthly bills. There’s more! 56% have been forced to make drastic financial decisions such as cutting back on travel and food expenses. 20% struggle to pay electricity and gas bills while 11% have been late meeting rental or mortgage payments at least once in the past year. Some nurses (2.3%) have also been forced to rely on food banks or charities to survive.

The RCN survey also indicated that 37% of nurses are seeking new employment opportunities which is a 24% rise compared to the same period a decade ago. What’s more interesting is majority of nurses looking for new jobs are searching for employment outside the NHS. 14% admitted to looking for employment opportunities abroad. The RCN survey shows that 70% of nurses feel worse off financially today than they were five years ago. The NHS employs 80% of the nurses in the survey. The current predicament is attributed to the NHS failure to meet its financial obligations as an employer. The RCN found it disturbing that the NHS is losing nurses because it is unable to pay wages promptly. Some nurses have gone as far as considering a total change in career.

Many nurses are ready to take on early retirement and find new jobs outside the industry. Some nurses are even discouraging new entrants in the industry despite being so passionate about nursing. The poll which was released before this week’s budget implored Philip Hammond to tackle issues surrounding public sector pay. According to Janet Davies, the RCN C.E.O and general secretary, these shocking findings show the amount of financial pressure faced by nursing staff in the UK today. Davies finds it ludicrous that the UK health service industry is losing highly-trained staff because the sector can’t be able to pay monthly bills on time. She goes further to state that the NHS may have managed to make savings, however; this has come at the expense of their staff.

The NHS is guilty of reducing remuneration for nurses every single year in real terms which explains why the health service sector has a shortage of 40,000 nurses currently in England alone. According to Janet Davis, the budget needed to give a clear way forward on wages for public servants. Hammond’s budget brings hope to UK workers including disgruntled nurses. In his budget reading on Wednesday 22nd November 2017, Hammond stated that the income inequality level in the UK is at its lowest in three decades. The poorest individuals have enjoyed faster income growth since 2010 compared to the richest . The percentage of full-time low-paying jobs has also decreased drastically.

According to Hammond, Britain’s conservative government is delivering a fairer country. Hammond has gone ahead and increased income tax personal allowance. The new limit (£11,850 per person) takes effect in April 2018. According to Hammond, this increase will mean typical basic rate taxpayers stand to save £1,075 yearly compared to 2010. Full-time workers who are on a national wage will enjoy an extra £3,800+ every year. The Chancellor has also increased higher rate tax threshold from £45,001 to £46,350 allowing people to earn much more before they are required to pay more tax. Most importantly, the Chancellor has raised the national living wage to £7.83 from £7.50. The raise which takes effect in April 2018 is expected to give full-time workers a £600 pay hike.

Many find Hammond’s budget a win-win for everyone although the wealthiest are expected to pay more income tax. Some critics, however, argue that the new budget doesn’t do much to help those in desperate need. According to critics, the budget incentives are mere inflation adjustments that don’t do much to solve the wage stagnation problem facing the UK in the past decade. As long as wages continue to fall behind the spiraling cost of living, nurses and many other workers in the UK will continue to depend on payday loans among other types of short term loans to get by. The average salary of a registered nurse in the UK stands at £23,319 according to the latest statistics. If the salary was to be adjusted in line with inflation, (by 14%, since the 2011 pay freeze), it should be £26,584 which is £3,265 more.

Global Trends in Financial Services Regulation

Financial sector regulators globally have been taking measures to protect financial services consumers. The FCA in the UK, for instance, has been spearheading financial services regulation in the lending sector to ensure borrowers are safe from unscrupulous lenders.

The FCA’s regulatory reforms started in the payday loan sector and are expected to shift focus to regular banks as the FCA looks to protect all borrowers from unnecessary charges.
While the UK financial services regulator is busy streamlining the financial services industry, countries like Canada among many others are following suit. So what are the global trends being experienced in financial service regulation?

According to the 2017 Global Regulatory Development & Impacts report, global financial services regulation is focusing on; enhancing transparency, imposing statutory best interest on advisors, banning embedded commissions and improving advisory proficiency. The report touches on financial services regulation implemented in 16 countries. There are many variations in the report in regards to the type of financial products under regulation.

The report reveals that there is a special emphasis on restrictions imposed on investment products in some jurisdictions while other jurisdictions focus on almost all financial products ranging from investment to insurance, deposit, and mortgage as well as other commission driven products. Different countries have also approached conflict of interest issues differently indicating differing market characteristics. Nevertheless, something is being done globally in regards to financial services regulation. Below is a summary of the major global trends.

1. Most countries favour enhanced disclosure

Most countries globally are in favour of financial industry players improving disclosure as part of the new financial policies and principles. Out of all the 16 countries reviewed in the Global Regulatory Development & Impacts report, the U.S. is the only country that hasn’t implemented enhanced disclosure initiatives. This trend focuses on ensuring financial industry players offer their customers as much detailed information as possible on fees and commissions to boost transparency.

2. Most countries are in favour of banning embedded commissions although few have taken action

The report also indicates that most countries have reviewed options to ban embedded commissions. This move has been spearheaded by securities regulators in many jurisdictions however, only the U.K., Australia, the Netherlands and South Africa have proceeded to ban embedded commissions. This represents just 13% of the $39.4 trillion global mutual fund assets market. In most of the markets that have implemented the ban, the decision was triggered by local circumstances. In the U.K. for instance, the ban was triggered by scandals in the financial industry. In Australia, the ban was triggered in reaction to the collapse of three main financial industry firms.

In seven countries namely; Germany, Hong Kong, Ireland, Sweden, Denmark, Singapore and New Zealand, the governments as well as securities regulators have ruled out banning embedded commissions entirely but promised to take some action.
Europe, on the other hand, has proposed to restrict independent advisors from receiving commissions. Some analysts, however, claim that these efforts aren’t enough since the independent advice channel is the smallest in the EU funds industry representing 11% of the total assets. Most fund sales in the EU are done via banks where the restrictions don’t apply.

3. Few countries have a best interest standard

Although most countries have expressed interest in creating a fiduciary/best interest standard, Australia happens to be the only country with a broad statutory best interest standard in place for advisors in the retail funds’ industry. The U.S. has made some steps in the right direction as well by adopting a rule which makes the definition of fiduciary more extensive under the employment retirement income security law. This change makes investment advisers offering retirement advice as well as insurance agents and broker-dealers subject to a fiduciary standard. The rule was supposed to come into full effect on 9th June 2017.

Summary

There is a collective global effort to improve financial services regulation. Most countries are however in the formative stages of reform. The U.K. led the way with the FCA by introducing tough regulation against unscrupulous payday loan lenders to protect the huge population dependent on payday loans. The U.K. must do more in regards to regulating other financial industry players.

But let’s not forget most countries including Britain only started making financial services regulatory changes recently. It will take time before the success of ongoing and already established changes is evaluated conclusively globally. In the UK however, the FAMR (Financial Advice Market Review) has already seen major improvements in the financial advice industry. The U.K. now boasts of offering better quality financial advice. However, accessibility is still an issue. There is a need to do more, faster, in the U.K. and the world at large although the world is on the right path in regards to financial services regulation.

Jobs That Risk Being Rendered Useless by Technology in The Future

As much as technology has made life easier, it has destroyed countless jobs in the process. Although this is one of the most notable cons of technology, let’s not forget the jobs that have been created by technology in the past few decades. Nevertheless, we can’t help but think of jobs that might be rendered useless by technology. To avoid being a victim of technology in a few years or decades to come, here are the top jobs that stand to be obsolete in the future.

1. Driving jobs

Self-driving cars are already here with us. This automatically puts driving jobs at risk in the future. Although it may take decades for self-drive cars to fill every city in the world, driving jobs are expected to be taken over by computers. Many companies have already invested in self-driving technology today like Tesla Motors and Google. Tesla Motors, for instance, is already working on self-driving trucks. If Tesla succeeds, this will mean fewer jobs for truck drivers. There are however many hurdles stopping self-driving from becoming a reality soon. The technology is however here with us and it poses risks to people who drive for a living.

2. Research-related legal jobs

IBM has already developed an artificial intelligence system (Watson supercomputer) capable of doing legal research. The computer is capable of searching through millions of case files in seconds and identify data points which lawyers can use in court. The system was rolled out in 2016 and is in use in several law firms today. In the future, such systems are expected to help experienced lawyers perform more in-depth research reducing the number of research-related legal jobs.

3. Surveyors

Significant advancements have been made in surveying technology. For instance, robotic total stations have allowed surveyors to do more in less time. Although surveyors are still in demand for jobs which have not been automated yet i.e. reviewing sites and certifying boundary lines, the demand for surveyors is expected to reduce.

4. Bank teller jobs

Bank teller jobs have been at risk since ATMs became popular in the 1970s. The jobs have however been safe due to the banking expansion that has taken place over the past few decades globally. Online and mobile banking has however introduced fresh fears. People no longer need to visit banks to transact. Banks are slowly closing down branches as people prefer online and mobile banking over traditional over-the-counter transactions.

5. Newspaper journalism jobs

Online publications and blogs have been challenging the traditional newspaper industry for several years now. People no longer buy newspapers like before since they can get the same information online for free. Advertisers have noticed this and turned their attention to online marketing. The number of people paying for newspaper ads is reducing yet this revenue has been used to pay newspaper journalists for a long time. Online journalism has taken over and what’s more interesting today is, many people are practicing journalism online without proper qualifications. If you are yearning for a career in journalism, you need to think online or electronic media as opposed to print media.

6. Insurance underwriter

In the past, insurance underwriters used to evaluate applications, risk and appropriate premiums individuals seeking cover would pay for manually. Today, most insurance companies are using algorithms to determine eligibility and premium rates. The demand for insurance underwriters is slowly reducing.

7. Cashiers

There are self-checkout kiosks today that are taking up cashier jobs. Coupled with electronic payments, the demand for cashiers will reduce in the future. Furthermore, most retail industry stakeholders see technology as a means of reducing overheads and theft that takes place at checkout points. Customers have also become increasingly comfortable using self-checkout kiosks because they are faster.

8 Translators

Translators also risk being rendered jobless by translation applications in the future. People no longer need a person who speaks or reads a different language to understand different languages. There are Smartphone apps that can translate written as well as verbal language real-time and what’s more interesting is, translation apps are becoming more accurate. They have also reduced the time it takes to translate and the awkwardness of using an intermediary to talk to someone who speaks another language.

Summary

Technology has come with many benefits and some cons. Many people risk being rendered jobless in the future with the ongoing technological advancements. People are also more open to using technology today more than ever, and this is bound to continue in the future. Considering technology can’t be stopped, it is important for people who face the highest risk of being rendered jobless to retrain and gain new skills to take up jobs with more security before it is too late.

The Fastest Way to Pay up Short Term Loans

Living in debt can be very stressful. You have to make sacrifices to meet your debt obligations or face serious consequences like getting a bad credit rating, losing an asset, taking up more debt, etc. It gets worse when you live in a country like the UK where the standard of living keeps rising yet wages have stagnated forcing most people into debt. The current debt situation in the UK is alarming given the fact that the number of insolvent individuals (young people between 18 and 34 years) has increased drastically by 31% over the past year alone according to the Insolvency Service. Debt is apparently a problem so how do you get out of debt, especially short-term debt?

It doesn’t matter if you have payday loan debt or credit card debt. The tips/steps discussed below should work for all (if not most) types of short-term debt.

1. List all your debt

Debt repayment becomes a problem when you have more than one loan so, start by listing all the short-term debt you have from the largest to the smallest. It may seem obvious, but most people can’t tell you how many short term loans they service every month. This is understandable considering you can take multiple credit cards today, a payday loan, overdraft, small personal loan all at the same time. To ensure you don’t leave anything out, look for your monthly income statements and follow all deductions to ensure you don’t miss anything. The listing should include all important information, i.e., loan amount, interest amount, etc.

2. Identify the most expensive debt

After listing all your debt, you will be able to identify the most expensive debt. You should prioritise repayment from the most to the least expensive. Most people do the opposite for psychological reasons, but this shouldn’t be the case. The cost of the debt should be your utmost concern if you want to repay the debt fast and effectively.

3. Pay more than minimum

Once you have a clear picture of the debt you have, it’s time to start making repayments. To repay your debt in the fastest way possible, you must make sacrifices and pay more than the minimum payments every month. Besides repaying your debt in the shortest time possible, you will also save money on interest repayments. However, find out if you are liable to any prepayment penalties or charges before you get started. Some lenders discourage early repayment, so it’s important to find out where each lender stands.

4. Consider stopping your monthly savings/investment

To pay more than minimum every month, you need more money. For short term debt, it may not be practical to make lifestyle changes. Furthermore, these changes may not have a significant impact. You can stop your monthly savings/investment every month and channel this money to debt repayment. This option is great because it is easily accessible and doesn’t attract penalties. Furthermore, there is no need to continue saving when you have expensive short-term debt. Savings should resume after you have cleared such debt.

5. Consolidate

If you have a substantial amount of expensive debt that can’t be covered effectively by your monthly savings, you can consider options like debt consolidation. This option allows you to merge all your debt into one debt making it more manageable and cheaper. There are however shortfalls to consolidating debt. For instance, you need to be very disciplined since this debt repayment method works only when you meet your repayment obligations to the letter. It may also be a bit expensive when paying up debt in a short time.

NB: Although the above information is bound to help you clear your short-term debt in the fastest and most cost-effective way, it is worth noting that there are exceptions. For instance, it might not be prudent to settle the most expensive debt first because of penalties that may be charged for early repayment. Furthermore, you need to decide what is more important to you, i.e., settling the debt in the fastest way possible or settling all your debt regardless of how long it takes.

Lastly, you need to make some critical financial decisions going forward to avoid finding yourself in the same situation. For instance, you need to prepare and stick to your budget and avoid spending habits that cause you to borrow excessively. You should also seek professional help if you feel you can’t make significant progress on your own.

6 Non-Financial Habits That Affect Your Finances

You don’t need to misappropriate your finances to find yourself in financial problems. Many factors affect your finances indirectly. Most of these factors revolve around habits. In fact, your habits more so, non-financial habits play a crucial role in your finances. Forget about impulse buying and exceeding credit card limits for a second.

Below are the main non-financial habits that make/break your finances.

1. Planning – You need to be a good planner to get ahead financially.

The rich aren’t just good planners financially but in every aspect of their life. A good planner knows how to manage their time well. Good planners also avoid habits like procrastination which are among the leading causes of failure in life. Planners also have more clarity and direction in life. They are better placed to achieve non-financial goals which contribute to success. If you want to be financially free, start by planning every aspect of your life including your leisure. You will be startled by the amount of money you will start making/saving in the process.

2. Healthy living – Adopting a healthy lifestyle also has a big impact on your finances.

Exercising and maintaining a healthy diet can save you a lot of money considering most health problems are lifestyle-related. Eating right and exercising daily can save you multiple trips to the doctor and pharmacy. Although most people think living a healthy lifestyle is expensive, it is possible to cut costs and save a substantial amount of money. For instance, you don’t need to buy organic vegetables and fruits from an organic grocery shop. You can set up your own kitchen garden with a little money. You can also keep fit without paying for expensive gym membership. You can walk or cycle to work every day and keep fit while saving transport costs. Contrary to popular belief, healthy living is cheaper as long as you plan well.

3. Reading – Reading is another great non-financial habit that affects your finances.

Developing a reading habit is a great way to get financial education. Most people have a hard time becoming financially independent because they are not financially literate. Reading is a great way to learn everything you need to know to improve your finances. The internet has a lot of useful information about money, investments, budgeting, planning, self-discipline, etc. You don’t have to pay a financial adviser to become a good financial planner or investor. Furthermore, reading is a cheap hobby/habit. You can get books for free from your local library. The internet also has affordable books with priceless information that will help you improve your finances directly and indirectly. Avid readers never stop learning about finances and other crucial subjects.

4. Optimism/pessimism – Your attitude about life in general has a significant effect on your finances.

Optimists tend to be more successful in life because they don’t treat challenges as permanent setbacks but important lessons. To be successful in life, you need to have a positive outlook on everything including money. Optimism can be defined as a habit since pessimism comes naturally to many people who face challenges in life. To become successful, you have to believe you have what it takes first and trust the process regardless of the hurdles you find on your way. It’s impossible to work hard when you are a pessimist. Pessimists also have a hard time identifying and seizing opportunities in life.

5. Getting up early – Most successful people are early-risers.

Almost everyone who is someone today attributes this habit to their success. So, why is getting up early a good habit? Well, first and foremost, early-risers have enough time to read, plan their day, exercise and do many other things that have a direct/indirect effect on their finances. Furthermore, most people are more productive in the morning. You are bound to get more things done in the morning than late at night. Most people prefer a head start than trying to catch up. This is precisely why getting up early is such a great habit.

6. Resting – You need to have enough sleep to be productive (at least 6 hours of sleep every day).

Resting also gives you time to think and forge better plans. Fatigue/stress is also a cause for many health problems today. Considering everyone seems to be in a hurry today, resting is another great non-financial habit that has a positive effect on your finances.

9 Great Ways to Save Money in a Fancy Restaurant

The UK is home to some of the best restaurants in the world. Although fine dining experiences bring great pleasure to many, they can be prohibitively expensive if you don’t know how to find great deals. This article is for people who love fancy restaurants and bargains. Here are some great tips to help you save on your next fine dining experience.

1. Use deal websites

The internet is a great place to find deals. You can use websites like Groupon to find great fine dining discounts in the UK. Contrary to popular belief, fancy restaurants also offer great deals through deal websites, so it doesn’t hurt to go online and see what your favourite restaurant is offering. Deal websites are easy to use. You just need to visit the site and search for fancy restaurants near you. Alternatively, you can subscribe for updates to get notifications in your inbox when there are deals that might interest you.

2. Attend restaurant soft opens

New restaurants always have launches packed with great deals. Attending a fancy restaurant soft open is a great way to enjoy fine dining experiences at a bargain since prices are usually subsidised to attract customers. You can even dine for free in dry runs where the kitchen and waiting staff practice food preparation and serving before the official open. This tip is great as long as you have your ears on the ground. You need to keep tabs with the expansion strategy of your favourite restaurant to utilise this tip effectively.

3. Attend restaurant weeks/restaurant festivals

Many cities in the UK including London have special restaurant events such as restaurant weeks where participating restaurants offer amazing deals such as fixed prices (”bottomless meals”) among other incentives to walk-in customers. You just need to find out when the next restaurant event is happening near you to save money dining in a fancy restaurant.

4. Dine during lunch hour

Sometimes it’s as simple as choosing the time you visit a restaurant. Most fine dining restaurants in the UK and around the world have cheaper lunch menus. Although lunch menus may miss some offerings, you are assured of scoring a great meal at a bargain when you fine dine during lunch hours and not dinner time.

5. Avoid alcohol

Alcoholic drinks are usually overpriced in fancy restaurants so avoid alcohol at all costs if you wish to save some money. Ideally, you should focus on the unique food and have drinks elsewhere, later. If you have to take alcohol in a fancy restaurant, ask for the drinks menu first and then choose accordingly.

6. Consider regular menus over specials

Special meals aren’t usually the best priced. Fancy restaurants spend a lot of time and special ingredients coming up with specials. Although specials are meant to offer unique meals, they are also used to maximize profits per plate on simple ingredients or food that needs to be cleared out. So, ”don’t buy the hype”.

7. Ask for deals, gift cards,…

Fancy restaurants offer deals to those who ask. You can ask for gift cards online or in person if you want to treat a special person to a birthday dinner, anniversary dinner, etc. Fancy restaurants have deals for special occasions so don’t be afraid to ask. You can also go as far as asking your waiter for the best value meal/s, wine, etc. You can pay less for wine with a ripped label or a damaged top. Fancy restaurants care a lot about presentation so asking for the ”bin end list” is a great way to enjoy significant savings.

8. Split meals or skip appetisers and desert

You don’t have to take the full course meal. Fancy restaurants are guilty of serving you more food than you can consume. If the restaurant serves big portions, you can split appetizers and dessert with a companion. But don’t forget to ask since some restaurants charge extra for splitting menu items. Alternatively, you can skip appetisers and desert if the offering is nothing out of the norm. For instance, you can have some ice cream and cake when you get back home. Appetisers and desert are usually costly in fine dining establishments. You can save over 30% by taking the main meal only.

9. Apply for a reward credit card

Lastly, there are many credit card plans in the UK today that offer cash backs or points on purchases. You can get one specifically designed for dining purchases and save money as you eat in expensive restaurants in your area.

You can ”have your cake and eat it” if you use the above tips before enjoying your next fine dining experience. There are many ways to save in a fancy restaurant. Choose any one or more of the above tips.

FCA Warning: Are Young People In The UK Borrowing Too Much?

In a recent ”Money Matters” interview with BBC, the C.E.O. of the FCA, Andrew Bailey expressed concerns about growing debt among young people aged between 18 and 34 years in the UK. His concerns came as the number of insolvent individuals in the 18 to 34 age bracket increased by 31% between years 2015 and 2016, according to the Insolvency Service.

The latest Insolvency Service statistics show that seaside towns in Wales and England have the worst debt levels among the youth in the UK. The towns that are worst hit include; Scarborough, Torbay, and the Isle of Wight.

The FCA is currently focusing on sustainable, affordable credit, i.e., reducing high-cost payday loans and long-term credit card debt. In his interview, Bailey warned that there is an increasing number of young UK citizens taking out credit cards and payday loans among other short-term credit loans to cater for basic living expenses.

Although Bailey goes ahead to state that the current debt levels haven’t reached a critical level from a macroeconomic standpoint, there are serious concerns about why debt levels are increasing among young people. Bailey attributes this new disturbing trend to a generational shift in patterns of wealth and income. He doesn’t view this trend as reckless borrowing per se, but an indication of the current basic living standards.

Bailey feels basic living costs have increased drastically over the decades forcing the young generation to borrow more to meet essential living costs. He points out specifics like the high cost of rental houses as well as poor/lack of income growth as the main causes of the debt problem. Today’s youth also have lower asset ownership levels which is a different generational experience from decades ago.

Bailey also attributes the current debt levels among the youth to an increase in ”unsecured lending” ranging from credit cards and overdrafts to car loan and personal loans. According to the latest Bank of England statistics, consumer debt now stands at over £200 billion and increasing drastically at 10% every year. Savings are also decreasing due to low interest rates and higher cost of living.

Other sentiments

According to Vince Cable, the Liberal Democrat Leader, the current debt problem among young people in the UK is attributed to the conservatives’ failure to implement their manifesto pledge on creating better laws for people facing financial difficulties. Cable claims the pledge to offer legal protection ranging from interest to charges and bailiffs for 6 weeks to individuals in distress because of debt will go a long way to solve the debt problem in the UK.

Jonathan Reynolds who is the Treasury’s shadow economic secretary finds a lot of human tragedy in the UK debt story. According to him, the youth don’t have a choice. Labour suggests there should be a cap on charges on other forms of short-term debt in line with the payday loan cap. According to Shadow Chancellor, John McDonnell, there is a need for special focus on credit card debt which has spiralled out of control. McDonnell has plans to help over 3 million people in the UK who are currently paying more than they should in interest payments.

Joanna Elson, the C.E.O. of Money Advice Trust agrees with Andrew Bailey’s sentiments. Elson states that although the current debt levels among the youth may not be severe to the economy, the trend has a critical effect on an individual level. Elson stresses the importance of debt advice but recognises the fact that very few young people are seeking financial advice when they find themselves in financial problems.

FCA intervention

The FCA is currently looking at some practices as well as forms of high-cost debt which are the main contributors to the UK debt problem. Although a lot has been done to regulate payday loans among other short-term loans in the recent past, the FCA boss would love to see increased focus on sustainable, affordable credit provision. The FCA has also turned its attention to the rent-to-own industry which charges high interest for ”white goods” like washing machines.

The FCA clampdown on payday loan lenders which started in 2015 brought sanity to a troubled industry. Payday loan charges are now capped. Borrowers don’t need to worry about affordability as long as they choose a reputable payday lender. Furthermore, there has been reduced over-dependence on payday loans according to Treasury select committee member, Kit Malthouse.

The next step is making the payday loan rules an industry standard. The FCA boss has stressed the importance of sustainable credit in society and offered assurances on maintaining a close eye on high-cost lending going forward.