BRITAIN'S financial watchdog has launched a crackdown on high-cost credit as part of efforts to protect vulnerable consumers.

Following a wide-ranging review into the market, the Financial Conduct Authority (FCA) is proposing reforms to bank overdraft charges, rent-to-own operators, door-step lending and catalogue credit and store cards.

FCA chief executive Andrew Bailey said: "High-cost credit is used by over three million consumers in the UK, some of who are the most vulnerable in society.

"Today we have proposed a significant package of reforms to ensure they are better protected including the possibility of a cap on rent-to-own lending.

"The proposals will benefit overdraft and high-cost credit users, rebalancing in the favour of the customer."

Gareth Shaw, of consumer publication Which?, said: "Just last week we revealed that unarranged overdraft charges can still be more than seven times more expensive than a payday loan. It's wrong that the regulator continues to delay taking action, leaving consumers affected by this unfair practice trapped in debt.

"Last summer, the FCA expressed serious concerns about how unarranged overdrafts work, and now almost a year later it is still refusing to take action.

"As the FCA continues to drag its heels, the Government must urgently intervene to ensure unarranged overdraft charges are brought into line with arranged overdrafts, to finally help all those struggling from these rip-off fees."

John Glen, economic secretary to the Treasury, said: "We want to do everything we can to help people with the cost of living, and tackling high-cost credit is a vital part of this.

"That's why we gave the FCA the power to bring in tough new rules - and that's what they are proposing today.

"It's often the most vulnerable who get stung by these dodgy deals, and today's new rules will go a long way in helping people to look after their hard-earned money."

Gillian Guy, chief executive of Citizens Advice, said: "The FCA's willingness to cap rent-to-own credit is good news for the thousands of people who rely on it to cover essential items.

"It shows they're prepared to be decisive, but that makes it even more disappointing that they haven't extended these measures to the doorstep lending market, which 1.6 million people use to help make ends meet.

"The FCA should reconsider their decision not to consult on a cap in this market. If they fail to act to protect these consumers, the ball will be firmly in the government's court."

Shadow Chancellor John McDonnell said: "It is deeply disappointing that the FCA has failed to introduce caps on overdraft interest and charges, as Labour and campaigners have called for.

"A greater sense of urgency is needed from the regulator with immediate action, given the scale of the problem.

"The next Labour government will limit the cost of borrowing by capping credit card and overdraft charges, and will bring in a £10 an hour minimum wage to help lift families out of the misery of the debt trap, to help build an economy for the many, not the few."