The Chief Executive of the Financial Conduct Authority (FCA), Andrew Bailey has warned of a pronounced build up of debt amongst young people.

He states that young people are having to borrow for basic living costs.

He also says that there is a pronounced build up of indebtedness amongst the younger age group. He explained the indebtedness is not due to reckless borrowing, it is directed at essential living costs. It is not debt or credit in the classic sense; it is about affordability of basic living in many cases.

Bailey said that he didn’t like some high cost lending schemes. Along these lines, the FCA is looking at charges in the rent-to-own sector which can leave people paying high levels of interest for buying essential white goods such as washing machines.

On the positive side he stated action was being taken to curb long term credit card debt and high cost payday loan debt.

Generational Shift

Mr Bailey did clarify that high levels of consumer debt was not a crisis in the economy at large, however it did matter to struggling individuals whose stories he had listened to during visits to debt management charities.

“There are particular concentrations of debt in Society, and those concentrations are particularly exposed to some other 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”, Mr Bailey said.

“There has been a clear shift in the generational pattern of wealth and income, and that translates into a greater indebtedness at a younger age”.

“That reflects lower levels of real income, lower levels of asset ownership. There are quite different generational experiences”.

The Chief Exec of the FCA was speaking as research shows young people in particular are concerned about the amount of debt they are carrying and their ability to repay that debt.

He said the high price of renting and lack of income growth meant that more people use credit to make ends meet, which isn’t a good long term strategy for utilising debt.

Gig Economy

Recent Bank of England statistics show that consumer debt, excluding mortgages, now totals over £200billion and is approaching levels not seen since the financial crisis.

The increase is what is known as unsecured lending, or debt, on credit cards, car loan schemes, personal loans and overdraughts is running at an increase of 10% a year. (I have previously blogged on this growth of unsecured debt).

The crux of Mr Bailey’s comments I believe are that the growth in debt in the younger generation is not in itself a factor that will destabilise the economy yet. He is concerned however that young people are highly indebted at a very young age, and often before they start their working life. The young see debt and credit as a way to pay for essential living costs and he believes this is never a healthy relationship to have with debt and credit long term.

If you are struggling with debts you cannot pay back, regardless of your age, it is vital you speak to a solicitor who specialises in personal insolvency. Call Farleys Solicitors today on 0845 287 0939 or contact us by email.