Evolution of consumer credit
Our 2024 Financial Lives survey[1] found that 84% of UK adults (45.7 million people) held at least one credit or loan product in the previous 12 months. But for some, credit isn’t about luxuries – it’s about getting by.
- 5% (2.8 million) had persistent credit card debt, meaning they paid more in interest and charges than they paid off.
- 21% (11.4 million) had been overdrawn at some point in the past year.
- Of those with personal loans, 10% - equivalent to around 1.6 million UK adults - used them to cover everyday expenses like food, travel, or rent.
These figures show how deeply embedded credit is in daily life – and the complexities involved when it becomes a lifeline rather than a tool.
What we’ve learned
Over the years, we’ve listened to consumers, firms, and community organisations. Three key lessons stand out:
- Credit isn’t always the answer. For some, the right support might be getting help with managing your money, checking benefits or finding work - not another loan. Signposting consumers to help is an appropriate outcome - which also aligns with the Consumer Duty[2].
- Technology has transformed the sector – especially when it comes to spotting harm. Digital tools may have made credit more accessible, but it can also be used to spot early signs of financial difficulty. We recently echoed[3] this in our call for improvements to digital loan processes, highlighting the need for fairer, more transparent online journeys.
- The best results happen when we work together - and that means traditional banks, fintechs, community lenders and mutuals, and the rest of the commercial sector. Take our 2024 Financial Inclusion Tech Sprint, where one of the winning collaborations between community lender Moneyline and fintech Inbest.ai developed a signposting toolkit for customers declined for credit. The tool offers tailored referrals to debt advice, income maximisation resources, and social tariffs – and in some cases, provides small crisis grants to those most in need. It’s a powerful example of how innovation and partnership can deliver meaningful support beyond credit.
How did we get here?
We took over responsibility for consumer credit in 2014. Since then, we’ve concentrated on raising standards. We introduced the high-cost-short-term-credit price cap, which has benefitted 760,000 customers, saving them £150m annually. We strengthened support for borrowers in difficulty and acted against firms not getting it right. Both the Senior Managers & Certification Regime[4] and the Consumer Duty have also built a strong foundation for a fairer, more resilient and more innovative consumer credit sector all round.
Some firms have thrived adapting to these reforms. Others ended up leaving the market - particularly high-cost credit firms. While this has reduced harmful practices, it’s also made access to credit more difficult for some, highlighting the complexity of consumer needs.
What’s the plan for consumer credit over the next decade?
If the last decade was about raising standards, the next must be about forging a better outlook. This is tied to our mission in our 5-year strategy of supporting growth and helping consumers navigate their financial lives. Because a healthy, innovative consumer credit sector can protect consumers and help them – and firms – to thrive.
Three priorities will guide our work:
- Innovation that adds real value. The best financial products are intuitive, transparent and genuinely useful. Simplicity unlocks confidence and economic activity.
- Vulnerable customers getting compassionate support. This is non-negotiable. Any one of us can face hardship. The difference between recovery and crisis often lies in how firms respond.
- People need credit that’s both accessible and right for them. Getting that balance right between access and protection is essential – not just for individuals, but the whole economy. We’re playing an active role in the Government’s Financial Inclusion Committee[5], helping to shape policies that promote fair access to affordable credit and financial services – particularly for those most at risk of being turned down and left out.
There’s no single solution. But by working together – regulators, firms and communities – we can nurture a system that supports consumers at each stage of their financial lives.
We invite all firms to be part of this conversation and the solutions it inspires. Together, we can shape a fairer, more resilient financial future.