In a speech to the Credit Summit 2018, Jonathan Davidson, executive director of supervision – retail and authorisations at the Financial Conduct Authority, said: “We have found that some customers were well-nigh perpetually in debt. We found more than three million credit cardholders with a total of four million accounts in ‘persistent debt’ – paying more in interest and charges than they have repaid of their borrowing over an 18 month period.”

He added that the FCA had introduced significant new rules, meaning both firms and customers are encouraged to avoid credit card debt becoming persistent in the first place, and customers who cannot afford to repay more quickly are given help. The regulator is expecting to see customer savings of between £310m and £1.3bn a year as a result of the new rules.

Davidson also said the regulator expects lenders to do more than backward-looking credit checks. “Will the customer be able to repay without causing them wider financial difficulties?” he said.

The FCA is also paying attention to the motor finance market. Davidson pointed out that the number of motor finance agreements for new and used cars has grown from around 1.2m in 2008 to around 2.3m in 2017. While most of this growth has been to lower credit risk consumers, arrears and default rates are rising.

It is also concerned about the level of debt among young people. He said: “Among 25-34 year olds, 19% have no savings whatsoever, and a further 30% have less than £1,000 saved to use on a rainy day. Indeed, 36% had been overdrawn in the last 12 months.”

Higher levels of self-employment, and potentially higher interest rates are also adding to the financial vulnerability of some groups.

However, Davidson added that the sector has not reached levels of debt where there is systemic risk, or where lenders are vulnerable to going bust.