The review suggests that credit unions and Community Development Finance Institutions be reformed to help make a sustainable alternative to high-cost credit.
The regulator also recommends that in addition to making sure lending is affordable, that lenders focus on meeting the needs of their borrowers for the time they hold their product.
The FCA will publish its business plan in April 2021 and will then give further details of its response to the Woodall Review.
Charles Randell, Chair at the FCA, said:
"Unaffordable credit can damage the lives of people who are already struggling to manage everyday expenses. While we have made progress in reducing unaffordable debt in the years before coronavirus, the pandemic has had an unequal impact on households. Many people have been able to reduce their debts, but some of the poorest in our society have exhausted any savings or run up more debts. All the authorities which cover debt and debt advice must act together systematically to prevent problem debt and to help people get out of a spiral of debt through properly funded debt advice.
"Regulation should be consistent and the Review shows how we can ensure high standards in consumer credit regardless of the form of credit.
"The Review has powerful recommendations on debt advice and insolvency including on the IVA market. We are ready to work with other regulators to reduce the harm that IVAs can produce for people that use them, and to reduce the scope for unscrupulous operators to prey on vulnerable indebted people through for-profit debt packaging.
"As the market innovates and changes, regulators and legislators need to respond quickly and decisively to protect consumers by facilitating credit where it is beneficial and clamping down on it when it does harm. The FCA agrees that there is a strong and pressing case to bring buy-now pay-later business into regulation."
