Rogue Payday Lenders Receive Warning

April 1, 2014

Lucy_2 (Custom)
By Lucy Palmer-Richeson

The Financial Conduct Authority (FCA) has issued a warning to payday lenders, saying it will “take out” those that do not follow stringent new rules.

The FCA, who is taking over regulation of credit providers, hire purchase and debt management firms from the Office of Fair Trading (OFT), has said it wants to focus on massive charges and to stop people with financial difficulties being pushed into a cycle of debt.

Martin Wheatley, chief executive of the FCA, told BBC Radio 5 Live: “Our processes will probably force about a quarter of the firms out of the industry, and that’s a good thing, as those are the ones that have poor practices.
“What we are concerned about are the people who frankly shouldn’t be lent to, who can’t afford the loans and who then get rolled over and get pushed ever further into a debt cycle.

“We won’t shy away from taking tough, decisive action to make sure that the people who rely on these products are treated fairly.  There will be some firms that don’t get the message, or won’t play ball, those firms should know that we won’t let them carry on,” he said.

The trade body for payday loan firms, Consumer Finance Association, argued that if such lenders were not around, people would be forced to take loans from “less reputable sources”.

The action from the FCA comes after recent concerns that payday loan companies are making the majority of their profits from people who are facing serious financial difficulties, and are struggling to pay the money back. The FCA hope that these warnings will encourage payday lenders to play fair, otherwise they will be shut down.

The FCA has greater powers to affect change than the OFT did, meaning it is able to issue unlimited fines, order refunds and ban misleading advertisements.

“If we don’t like the practices in a firm, the first instance is to get them to change it. If they won’t change it, then we take away their permission to operate,” said Mr Wheatley.

According to research by the Money Advice Service, 9 million Britons have serious debt problems, with only 1.5 million of them seeking advice