Claro Wellbeing teams up with Channel 4 to highlight pitfalls of debt from luxury spending, ahead of the introduction of FCA’s Consumer Duty
June 2023
Claro Wellbeing, the financial wellbeing provider has partnered with Channel 4’s UNTOLD to commission a study into the rise of debt due to purchases of luxury items, ahead of the introduction of the Financial Conduct Authority’s Consumer Duty rules.
The research found that more than one in five (21%) 16-34 year olds are taking out credit monthly, and one in 10 are using it weekly or more often to fund purchases of ‘Drip’ or luxury items, such as expensive trainers, designer clothes and jewellery.
In addition, 30% of young people surveyed have missed a credit card or Buy Now Pay Later (BNPL) payment. The new Consumer Duty rules will further protect consumers before they take out financial products, as the consequences of missed repayments can be severe, leading to spiralling debt.
Despite the cost-of-living crisis, half of young people are currently in debt. Almost a third (29%) have less than £100 in savings, and a further one in six (17%) have no savings at all. The full findings have been published in Claro Wellbeing’s Drowning in Drip - Breaking the Bank for a Luxury Life report.
The financial coaching and education provider undertook the exclusive in-depth study of 2,000 UK-based Gen Z and Millennials – those aged 16-34 years old – for the latest series of Channel 4’s current affairs strand UNTOLD. The digital-first investigative series is aimed at viewers aged between 16 and 34, and airs on ALL4 and Channel 4. It has won awards and created headlines for its previous series of remit-defining and bold journalism.
With less than two months to go until the FCA’s Consumer Duty standards come into practice, Claro Wellbeing has teamed up with the free-to-air public broadcaster to raise awareness of the disparity that still exists between consumers’ financial understanding and the level of uptake of many financial products.
The Consumer Duty rules which come into practice on 31 July 2023 establish higher and clearer standards of consumer protection across financial services, and require firms to put their customers’ needs first.
Galina Barengo, Head of Partnerships and Chief of Staff at Claro Wellbeing, said:
“Despite the current cost-of-living crisis luxury fashion retailers are continuing to announce rising sales and profits. However, it’s not just wealthy people that are making high-end purchases, young people are increasingly driving sales of expensive shoes, clothes, jewellery, cars and holidays despite not having the budget to match. Our research shows a large proportion of young people are spending significant sums of their income on luxury purchases, and also getting into debt to project a certain look.
With so many young people spending beyond their means the new Consumer Duty guidelines cannot come soon enough. Until now, financial institutions have only had an ethical responsibility to do more to support the financial education and literacy of their consumers. But from July 31st, a proactive approach is required to make sure financial services companies meet the terms set out by the financial regulator, the FCA.
The new rules will ensure customers are put first, receiving communications they understand and products that meet their needs. One way of helping firms meet some of their obligations is by introducing engaging and interactive financial content to increase customers’ understanding of what they are buying. Content such as a financial health check, educational videos and articles, budgeting tools and calculators, and 1-2-1 financial coaching all boost the understanding, and ultimately the protection of the consumer. There are fewer than two months to introduce these measures, so partnering with a financial education expert that can provide this content and support quickly is a good idea.”
Claro Wellbeing recently joined the Consumer Duty Alliance, an independent professional body supporting the personal finance sector to adopt and implement good Consumer Duty outcomes. As a member, Claro Wellbeing will share and develop good practices in financial services and help raise industry standards.
Ahead of the introduction of new Consumer Duty guidelines, credit card and Buy Now Pay Later firms, as well as other financial services providers, will be required to take further steps to protect their customers, and increase their understanding of the products they are undertaking.
Galina Barengo, Head of Partnerships and Chief of Staff at Claro Wellbeing, continues:
“We have been leading the conversation around regulation of the Buy Now, Pay Later industry for some time. We took to the streets of the capital and proudly shared our “Say bye to Buy Now, Pay Later” message with the city’s financial establishments and the broader public. More recently we have also joined the Consumer Duty Alliance to help raise industry standards. For too long financial services firms have offered their products to young people without the adequate education and understanding, leading to large numbers of people getting into debt without realising.”
Read the full report: Drowning in Drip - Breaking the Bank for a Luxury Life, from Claro Wellbeing
Watch the full programme: UNTOLD: Addicted To Drip
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For media information, please contact PR Agency One on 0161 871 9140 / claro@pragencyone.co.uk or contact:
Asha Hipperson E: asha.hipperson@pragencyone.co.uk
Holly Gregory E: holly.gregory@pragencyone.co.uk
Rick Hollister E: rick.hollister@pragencyone.co.uk
About Claro Wellbeing:
Claro Wellbeing is a financial wellbeing provider that offers one-to-one coaching sessions, in-person and remote employee webinars and workshops and access to financial courses and content to support employees financial goals.
Claro Wellbeing is offered as an employee benefit package that provides accessible financial guidance and educational resources to help employees feel more confident and supported in their roles, boosting engagement and performance, whilst also enhancing a company’s workplace benefits to help retain staff and attract first-rate talent.
Employees can take advantage of the Claro Wellbeing learning and wellness packages by speaking to an expert financial coach about topics that matter most to them including budgeting, buying a house, pensions and investments and managing debt.
Claro Wellbeing, which has built a community of over 45,000, employs certified coaches that have completed its high-quality training. Claro Wellbeing’s Financial Coach Training Programme has been independently accredited by industry-leading body, The London Institute of Banking and Finance.
The Claro Wellbeing team is made up of a number of banking and tech industry experts, who are dedicated to democratising financial guidance, investment and money management.
