Credit card and loan rates to be investigated – Martin Lewis says it's a 'golden opportunity' after years of campaigning
Credit card and loan rates are to be investigated by the financial watchdog over concerns that the true cost of borrowing is not being made clear to consumers. MoneySavingExpert.com (MSE) has campaigned for years for an overhaul of the rules, so that more people get the rate that is advertised rather than being charged a much higher cost of borrowing.
APR (which stands for Annual Percentage Rate) is the total cost of borrowing on either your loan or credit card over a year, including interest plus any additional fees. Current rules require 'representative' APRs to be used in credit advertising – meaning firms can meet the rules if only 51% of those accepted get the advertised rate or lower.
In 2022, MSE published a report which found that 'representative' APRs frequently had a negative impact on consumers, and called for 'typical' APRs to be used instead. Typical APRs require at least 66% of accepted applicants to get the advertised rate or lower.
Today (Wednesday 29 April 2026), financial regulator the Financial Conduct Authority (FCA) has published a consultation to review whether the ways the cost of credit is communicated to consumers could be improved, including whether the 51% acceptance threshold is still appropriate, and whether firms should set out the range of APRs in advance, indicating the types of consumers who might be offered each rate.
Martin Lewis: 'For years we've railed against this and now we've a golden opportunity for change'
The whole system is effectively anti-shopping around and anti-competitive. Almost half of applicants can legally be charged a higher interest rate than the one advertised. That is demoralising and financially dangerous.
It's worse with 0% deals, where there are no fixed rules on how many must get the advertised 0% length. Many only find out what they'll get once they apply, and each application marks your credit file meaning it can become even harder to find a cheaper deal elsewhere.
This isn't the way things should work in a modern tech society. For years we've railed against this, and now we've a golden opportunity for change with this FCA consultation.
Lenders tend to make most of their profits 'from the tail' – those people who get charged higher rates – and often they're the ones with weaker finances. We used to have 'typical APRs' where 66% of customers got the advertised rate, then we were told due to EU homogenisation rules that had to drop to 51%. Well, those rules are gone so it's time to move back to 66% and higher for all APRs and all promotion rates.
I'm grateful the FCA recognises the problem and is looking at the ideas for improvement we put forward.
We can't give consumers a crystal ball, but we can at least make it less of a stab in the dark. Reverting to typical rates will improve fairness and transparency, as well as helping to protect people's credit files.
The review will consider whether the cost of credit could be made clearer
According to research conducted by the FCA, around two million adults in the UK in the last two years were offered a regulated credit agreement they felt to be completely unreasonable and of those, 80% were offered a higher interest rate than was initially advertised.
To address the problem of unclear communication when it comes to the cost of credit, the FCA is looking at a range of options including whether:
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Firms should set out a range of APRs that might be offered. This could mean setting out which types of 'typical customer' could be offered which rates.
This could also mean firms would be required to explain under what circumstances a customer would be offered a particular rate (for example, having a poor credit history). -
Firms should set out the maximum APR that might be offered. This would be alongside setting out the representative APR.
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The 51% 'representative' APR threshold should be increased to a 66% 'typical' APR threshold. The FCA has specifically cited our 2022 report as a reason for considering this option.
The FCA is asking for views on this matter and the consultation will run until 17 June 2026. After this point the FCA will collate its feedback and publish its next steps.
'Representative' APRs have been harmful to consumers – what MSE recommended
In our 2022 report, which was submitted to both to HM Treasury and the FCA, we made several other key recommendations including:
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Capping the difference between the typical and maximum APR. There is currently no cap on what can be charged, meaning those who don't get the advertised rate can be offered any rate, without limit – and can see debts soar due to this.
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Mandating firms to disclose the average proportion of successful applicants who don't get the advertised APR, and by how much.
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Applying the typical APR rule to advertised 0% deal lengths for credit cards too. This would mean at least 66% of those accepted get the advertised 0% length. Currently, there isn't a rule on this. (It should also apply to other risk-based pricing models.)
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Considering mandatory quotation searches (or 'soft' credit searches) for credit card and personal loan applications. Or at the very least, before application, firms should communicate prominently the rate range for those not accepted at the advertised rate.
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