Insights ¦ Public Financial Lives 2024 survey Credit & loans Selected findings

ey Take Aways

• The survey reveals that 84% of UK adults hold or have held credit or loans recently, maintaining high engagement levels despite fluctuating economic conditions.

• Mainstream credit products, notably credit cards (65%) and overdrafts (21%), continue to dominate consumer borrowing, with significant increases in credit card possession among the older population.

• Usage of high-cost credit has increased modestly, now held by 6.4% of adults, with payday loans and rent-to-own schemes most prevalent.

• Decline rates for regulated credit applications remain steady, but 22% of applicants experienced rejection, predominantly those applying for high-cost credit, overdrafts, or personal loans.

• Consumers’ ability to compare products before borrowing remains low; only about half of high-cost credit holders usually compare offers, with disparities linked to financial capability.

• Awareness of support options if customers face repayment difficulties remains limited; only just over half of debt holders feel confident in understanding available support channels.

• The survey indicates a rise in persistent credit card debt, affecting 5% of adults, especially within vulnerable demographic groups such as lone parents and those with low financial resilience.

• The frequency of borrowing from friends, family, or unlicensed lenders remains relatively low but shows slight increases among specific groups, including the unemployed.

• Problems experienced with credit products, such as unexpected changes or fees, rose to 21%, with a notable increase in issues presented as nuisances or stressors.

• Complaints are still comparatively low, with only 24% of those experiencing problems lodging formal grievances; reporting barriers include perceived complexity and lack of knowledge.

• Use of Deferred Payment Credit (DPC) rose by 3 percentage points, now used by 20% of adults, with most transactions occurring for budgeting purposes or during online shopping.

• Consumer engagement levels on product understanding and enforcement of responsible lending principles require strengthening, given the evidence of low engagement and awareness.

Key Statistics

• 84% of UK adults held or accessed credit/loans in the last 12 months, with regulated credit at 79%.

• 65% of adults hold credit cards; 19% revolve balances, with 5% in persistent debt.

• High-cost credit is held by 6.4% of adults, an increase from 5.3% in 2022; payday loans are used by 2%.

• 22% of adults experienced application rejection in the past two years, mainly for high-cost credit or overdrafts.

• Only about 50% of consumers compare products before taking out high-cost or motor finance.

• 95% of credit card users received the trading terms and information, but only 18% read all conditions carefully.

• 66% of motor finance holders shopped around, predominantly online; 25% selected based on interest rates.

• 21% of DPC users borrowed £50+ in outstanding debt; 20% borrowed in excess of £500.

• 21% of credit holders experienced problems in the last 12 months, with delays, high fees, and unforeseen changes as common issues.

• Only 24% of those with problems filed a complaint, with barriers including perceived complexity and lack of clarity.

• 47% of high-cost credit holders feel comfortable discussing repayment issues; only 45% understand available support.

• 38% of catalogue credit users believe they repayment before interest rate increases; 66% pay most or all debts on time.

Key Discussion Points

• The enduring high engagement in credit products highlights sustained consumer reliance on credit despite macroeconomic fluctuations.

• The ongoing stability in application refusal rates, with particular concern over rejection for high-cost credit, underscores persistent access challenges for vulnerable groups.

• Consumer product comparison behaviour remains underwhelming, which presents risks for financial wellbeing and responsible lending.

• Underuse of engagement with credit agreements, including limited reading of pre-contract information, suggests gaps in financial literacy and informed decision-making.

• The rise in persistent credit card debt, especially among vulnerable populations, highlights escalating repayment difficulties and potential debt spirals.

• The low uptake of support channels indicates a need for better communication of available assistance, especially among those in financial difficulty.

• The increased use of DPC reflects its role in budgeting but raises concerns over affordability, understanding, and potential debt trap scenarios.

• Consumers’ limited awareness of mis-selling and the barriers to complaint suggest systemic issues around transparency and consumer confidence.

• The survey points to the importance of targeted financial literacy initiatives to improve comparison behaviour and product understanding.

• The demographic disparities in borrowing, including ethnicity, age, and health status, warrant tailored risk mitigation and consumers protection strategies.

• Although complaint rates are low, the increasing complexity of problems signals a need for proactive engagement and simplified complaint processes.

• The overall findings reinforce the importance of reinforcing responsible lending practices, improving transparency, and encouraging better consumer engagement with credit products.

Document Description

This article offers an in-depth overview of the FCA’s Financial Lives 2024 survey, detailing consumer behaviours, product holdings, and attitudes related to credit and loans in the UK. It covers mainstream and high-cost credit, unregulated loans, and product-specific insights into product comparison, awareness, problem experiences, and complaint behaviours. The report provides critical evidence on consumer engagement, product understanding, and areas requiring regulatory or industry focus to promote responsible lending and enhance consumer financial resilience. It serves as a comprehensive resource for senior managers seeking to understand current trends, vulnerabilities, and opportunities within the UK’s consumer credit landscape.