26 Feb 2015

A question about : Regulation of credit and payday lenders: Tell the FCA what you think

On 1 April 2014, the Financial Conduct Authority (FCA) will take over the regulation of the consumer credit industry from the Office of Fair Trading. This will cover a range of firms including those offering credit cards and personal loans (including payday lenders), hiring out cars and tools etc. and providing debt counselling.

The FCA wants to allow firms to operate and also improve consumer protection and is consulting on how it should regulate the industry.

*** Consultation now closed ***

Summary of its main proposals

The FCA is proposing tougher requirements for payday lenders including limiting the number of times a loan can be rolled over to two. It also wants lenders to provide information on free debt advice before customers ‘roll over’ a loan.

Payday lenders use rollovers to continuously extend customer's loans, so while a loan may be advertised as lasting for a month at a small cost, it is often rolled over time and time again and will end up lasting much longer. Some lenders actively encourage those aiming to repay to do this.

The FCA also wants affordability checks for every credit agreement and all adverts and promotions to be clear, fair and not misleading, for example payday loans must have risk warnings.

For more info see our Credit Consultation guide or the full consultation document on the FCA's website.

Have your say

Reply to this thread to let the FCA know what you think. Use the questions below as a guide or just email your views to consumercredit2@fca.org.uk. Q1) Do you think the FCA’s proposals will help to improve protection for consumers?

Q2) Advertising should be clear, fair and not misleading – how would you like to see this enforced?

Q3) Lenders must consider the customer’s ability to repay a loan and whether a loan will adversely affect the customer’s financial situation. How can the FCA, firms and consumers make this work?

Q4) What do you think the impact will be of limiting payday loan rollovers to a maximum of two?

Q5) How would you like lenders to provide information on free debt advice before a payday loan is rolled over?

Best answers:

  • I don't think the proposals will help at all.
    Desperate customers will obviously lie about their ability to repay and can easily go to alternative payday lenders for 3rd/4th etc loans so the rollover limit is pointless.
    These are pie in the sky, pointless proposals. The most important change should be to set a reasonable limit on the maximum amount of interest any lender can charge. It would also help if all lenders had to comply to a legally enforced code of practice.
  • I have today sent the following email to the above. Let's see if it has any effect. Maybe readers would like to copy the email and send it off as well.
    I think it is a scandal that Loan Brokerage Companies are scamming people into paying up to Ј99 to supposedly find people a loan, and taking this money as an 'up front fee' from accounts immediately, often from people who think they have been dealing directly with a loan company. The Money Saving Expert website forum has been flooded with complaints about this practice which seems to be growing. There does not appear to be any regulation over the actions of these companies.
    Much detail seems to be hidden in the small print of the Terms & Conditions of the companies concerned.
    I would suggest that no company should be able to take a 'finders fee' until they have found a loan for a client, the loan has been offered by the loan company concerned, and the loan has been accepted by the client. Additionally, the fact that a company is a broker should be featured in a very prominent position on the Home Page of any loan brokerage company, and in any advertising in print, on TV, on the internet or on Radio.
    I would suggest that the advertisements for a company called Cash Lady (see http://www.cashlady.com/) is a typical example of how the company hides the fact that it is a loan broker in small print on their TV advertisement and on the website, and gives a very ambiguous explanation as to the fees it charges.
  • until recently, the Government was totally uninterested in these companies. not too long ago, there was a big 'push' against illegal companies, loan sharks as they are more commonly known, not because of the hardship they were causing or the damage that was often inflicted, if stories are true and i suspect they are, to those who couldn't repay on time.
    the main reason, i think this happened was, in my opinion, simply because the Government had no idea how many people were in the position of borrowing like this, how much was borrowed and there was, therefore, no way of collecting any tax!
    it has now changed because so many people are being forced further and further into debt by the totally absurd rates of interest being changed by the 'pay day lenders'. although the Government can get it's 'tax due' from these companies, with the cuts that have also been made to benefits etc, and more people being made homeless, the Government has been forced into a corner. i doubt, however, if whatever proposals or rules that come out will be of any use. once the 'look what we have done to try to ease this situation' has finally been looked at, it will be seen to be as most of what this Government has done, not worth the paper it is written on!!
  • I don't know why the high street banks don't solve the situation by offering loans to those on low incomes at a higher rate than those who have a good credit score. If a customer wants to get a loan for Ј100 and they give their national insurance number where it can be taken out of their earnings/benefits but they can't get a top up/roll over until the first loan is cleared and it should show up on a credit reference search so that lenders can see they already have a pay day loan. One lender beginning with P pushes borrowers into taking extra credit out, they don't even do a credit check!
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