Over-regulating risks bad debt solutions

A consumer finance body has warned the coalition not to put too many restrictions on credit, or risk pushing people into bad debt solutions.

The Finance & Leasing Association has issued a warning to the government that regulating the market too much could force consumers to resort to the services of a loan shark, rather than face bankruptcy.

The comments come after the passing through parliament of a Private Members' Bill on Consumer Credit last week. The well-intended cap on interest rates would inadvertently mean higher prices and less competition for consumers.

The FLA says this would undermine responsible credit, meaning borrowers will have to find forms of credit which could quickly end up with the need for debt solutions.

Kevin Still, director of Atlantic Financial Management said: "There is a balance to be struck between responsible lending and charging excessive interest that can be detrimental to UK consumers with low income or an impaired credit record, which can then cause further debt problems."

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