The FCA has a highlighted a link between the number of firms registered with the financial regulator and the growing level of consumer debt.
Jonathan Davidson, Director of Supervision at the FCA, was speaking to delegates at London’s Credit Summit in March.
The latest figures show that more than 40,000 firms are now registered with the regulator, while the level of consumer debt has grown by 9.3 per cent. Likewise, total credit lending to individuals is nearing record levels observed in September 2008.
Mr Davidson said lenders need to recognise that excessive debt can be as harmful to the borrower as it is to the lender.
He says there is a worrying number of householders who still may be “in too deep”.
For example, one in five mortgages today are interest only mortgages, with the majority due to mature in or around 2032. Experts have previously commented that many homeowners have not made appropriate plans on how to repay the loan, which may lead to repossession of their property.
In the motor finance industry, the number of agreements for new and used cars has grown from around 1.2 million in 2008 to 2.3 million in 2017.
The warning is particularly relevant to young people. 19 per cent of 25 – 34 year olds have no savings whatsoever, while a further 30 per cent have less than £1,000 in “rainy day” funds, according to research.
“There are a significant number of households that are in so deep that the slightest sign of rough weather could see them in over their heads”, said Mr Davidson.
He added that lenders should exercise caution before jumping to lend to consumers, as a subsequent credit crisis could bring down the industry.
In February, BBC research revealed that the value of outstanding personal loans in Great Britain has grown four times faster than wages.
Experts have warned that if consumers are struggling with debt, it is important to speak with their lender straight away.