LONDON - The Financial Services Authority has warned that the growing consumer debt was increasing the level of frustration among consumers as they struggled to understand the increasingly complex financial mechanisms. This is the first time that the City watchdog has expressed concern in this regard.
"Even in the current benign economic environment, we are seeing signs of growing distress among consumers, including more insolvencies, more late payments on credit cards and a rise in mortgage repossession orders," the FSA said in its annual Financial Risk outlook report.
The personal debt scenario in the country is worrying with debts soaring to £1,113 billion. This is especially noteworthy since there is high employment and low interest rates prevailing at the moment. Some of the recent FSA surveys have shown that there are almost 55 percent consumers who do not have any pension plans in place and are struggling with debt repayments.
This scenario is only bound to get worse as pensions are all set to be scaled down by major enterprises. "Many consumers focus more on immediate financial concerns than their long-term financial well-being [and] a shift in consumer behavior to remedy the problem may take some time," the FSA report said.
It also said that many consumers were willingly taking risks and buying up saving accounts and pensions without really being aware of the dangers. Some firms were also not clarifying the position of certain products and making them "sufficiently transparent. There remains concern this could lead to unsuitable products being sold to consumers who, in reality, have a low-risk appetite and low risk tolerance."
In a warning to large banks and trading houses, the FSA report said that these institutions have to do their homework on investment products like credit risk derivatives so that they are ready to face any problem that arises in the world financial markets. "Market participants might find it difficult to manage their positions in certain instruments and could struggle to sell large quantities," the report said.
Posted
on : Sun, 29 Jan 2006 08:00 GMT | Debt News
By : Pippa Fielding
|
