The Financial Conduct Authority (FCA) has announced that they are planning an in-depth review of payday lenders and other high cost short term lenders. The review will target some of the biggest payday lenders in the UK and focus upon the way the lenders collect debts and manage borrowers who are struggling to make repayments.
As of the 1 April 2014 the FCA will be the new regulator of consumer credit, taking over from the Office of Fair Trading who will cease to exist as of the 31 March 2014. This review will be one of the FCA’s first actions as the new regulator of consumer credit.
Martin Wheatley, the FCA chief executive, announced “Our new rules mean that anybody taking out a payday loan will be treated much better than before. But that’s just part of the story; one in three loans go unpaid or are repaid late, so we will be looking specifically at how firms treat customers struggling with repayments.”
The decision to investigate such matters comes about because 6 out of 10 complaints to the Office of Fair Trading relate to how debts are collected. Many of the loans are rolled over or refinanced which result in the consumer incurring penalty fees and charges on top of already high levels of interest.
The new FCA rules are aimed at reducing this number by:
1. Ensuring that companies within the sector carry out proper “affordability” checks on borrowers: and
2. Preventing companies from rolling loans over more than twice.
The review will look at how lenders treat their customers when they are in difficulty. Payday lenders will be required to seek full FCA authorisation to continue doing credit business, but the FCA expects that a quarter will fail to meet the FCA’s higher consumer protection standards.
Slater and Gordon Lawyers have over 30 years experience in business crime and are independently recognised as market leaders.
If you are in this sector and:
- Are worried about your business compliances with the new FCA rules
- Are subject to a review by the FCA
- Are asked to assist with an FCA investigation.