Consumer body Which? has called for greater “transparency, fairness and clarity” across the UK’s £158 billion credit market.
The group called on City watchdog the Financial Conduct Authority (FCA) to clean up an industry that it claims is littered with misleading and unclear information, irresponsible lending practices and a failure to explain risks.
In a new report, called Credit Britain 2, Which? proposals include capping default fees for all credit products and withholding licences to operate from firms that rely on customers defaulting.
Which? executive director Richard Lloyd said: “The regulator has so far rightly focused on the unscrupulous practices of payday lenders; however, we have found problems across the whole of the credit market.
“It’s now more important than ever that all credit products are up to scratch, so that consumers can more easily manage their borrowing.
“The FCA must crack down on poor practices and help put consumers back in control of their credit, and lenders should step up and improve their products and practices.”
Which? also wants a ban on the term “0%” on credit products that charge an upfront fee, and an end to retailers automatically signing up customers to a credit account they have not actively applied for.
Since the financial crisis UK households have paid down debt, cutting unsecured borrowing by £50 billion since 2008 to £158 billion.
But Which? warns that, as the economy recovers, consumer debt levels have started to rise again.
In April the FCA said it would launch a probe into how the country’s £150 billion credit card market works for poorer consumers.
At the time FCA chief executive Martin Wheatley said: “Among the UK’s 30 million-plus cardholders, something like 3.7% make minimum payments for 12 months, which is the equivalent to more than a million borrowers making 12 or more consecutive minimum payments.
“There are some obvious questions and challenges here for regulators and industry: why are card issuers providing the means, in some cases, for the most indebted consumers to escalate their way into further debt?”
There are 56 million individual credit cards in use in the UK, which is around 70% of all credit cards held in Europe.
But head of policy at the UK Cards Association Richard Koch said the credit card industry made a number of changes in 2011 which increased minimum repayments and gave customers longer warnings ahead of rate increases.
Mr Koch added: “In a highly competitive market it’s no surprise there are a wide variety of deals available for customers and we acknowledge that this can sometimes make it difficult for consumers to choose.”
“We are always looking for ways to help customers make the best decisions, in ways that don’t stifle competition and choice.”