The Financial Conduct Authority (FCA) has said that an increasing number of young people are relying on debt to cover the cost of living.
Speaking with the BBC, Andrew Bailey, the Chief Executive of the FCA said that there was a worrying level of borrowing amongst young people, with many reliant on credit to cover basic needs.
He said: “There is a pronounced buildup of indebtedness amongst the younger age group. We should not think this is reckless borrowing. This is directed at essential living costs. It is not credit in the classic sense, it is [about] the affordability of basic living in many cases.
“There are particular concentrations [of debt] in society, and those concentrations are particularly exposed to some of the forms and practices of high-cost debt which we are currently looking at very closely because there are things in there that we don’t like.”
He has call called for “more focus on what is sustainable, affordable credit provision”, with action being taken to reduce long-term credit card debt and high-cost payday loans, as well as rent-to-own practices that charge high interest for renting products, such as televisions and washing manchines.
The latest data from the Insolvency Service show that the number of 18 to 34-year-olds becoming insolvent jumped by nearly a third between 2015 and 2016, with seaside towns in England and Wales recording some of the highest levels of debt amongst young people.
Joanna Elson, the chief executive of the Money Advice Trust, said: “Andrew Bailey is absolutely right to highlight the growing debt burden on young people – often to meet basic livings costs.
“While this trend may not yet be considered a risk, on its own, to the economy as a whole, debt problems at such an early age can have a huge impact on the individuals involved. Debt advice can make all the difference, but worryingly, far too few young people are seeking advice when they fall into difficulty.”
The Money Advice Trust’s latest Borrowed Years report found that 37 per cent of 18- to 24-year-olds are already in debt, owing an average of £2,989 – excluding student loans and mortgages, while about half report that they regularly worry about money and one in five sometimes cannot sleep as a result.
