Labour party chairs of two parliamentary committees are urging the Government to set up an independent public enquiry into £200 billion household debt, consisting of credit cards and car deals.
Led by Rachel Reeves, the Labour chair of the business select committee, and Frank Field, the Labour head of the work and pensions select committee, the pair wish to stop the debt level rising.
The call follows the Treasury select committee’s announcement to hold meetings around the country on the impact of debt on both individuals and households.
Andrew Bailey, the chief executive of the Financial Conduct Authority, on Monday called on the Government to help craft a sustainable solution to enable vulnerable borrowers to obtain finance.
According to reports, personal loans and car deal debts are at the same level as before the 2008 financial crisis; sparking fears that rises in interest rates could put households under pressure.
Reeves told The Guardian that she was shocked at the sharp rise in borrowing to finance new car purchases and soaring credit card debts.
She said: “It is the Government’s responsibility to understand the extent of the issue and who is the worst affected.
“When you have people right up the income scale being told by the banks not to worry that they can’t afford the price of a car, just borrow the money anyway.”
A Treasury spokeswoman said the Government was focused on supporting the growth of secure and better-paid jobs as the route out of debt.
She said: “We have fundamentally reformed the consumer credit market so that the Financial Conduct Authority now robust powers to help consumers, such as protecting 760,0000 people with the new cap on payday loans.
"A record number of people are in work and we are helping them keep more of what they earn by cutting taxes and raising the ‘national living wage’.”
The finance industry, including vehicle finance companies, have come under the spotlight in recent months over concerns about mounting levels of debt, which prompted a series of ‘fact check’ reports from Asset Finance International.
Asset Finance Policy’s founder Julian Rose said: “Asset Finance International’s recent 'fact check' on the national media's reporting of car finance noted that although car finance sold by car dealers has grown significantly in recent years, previously there was far wider use of credit cards, unsecured personal loans and second charge mortgages to fund cars.”
Meanwhile, new research into the point-of-sale (POS) car finance market published earlier this month by Apex Insight found that sub-prime lending makes up less than 2% of car loans sold by car dealers.