The regulator also said he “did not like” some high-cost lending schemes.
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He said consumers, and institutions that lend to them, should be aware that interest rates may rise in the future and that credit should be “affordable”.
Mr Bailey said action was being taken to curb long-term credit card debt and high-cost pay-day loans.
The regulator is also looking at charges in the rent-to-own sector which can leave people paying high levels of interest for buying white goods such as washing machines, he added.
“There is a pronounced build up of indebtedness amongst the younger age group,” Mr Bailey said.
“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.”
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