The Financial Conduct Authority (FCA) has today set out its vision for regulating consumer credit with stricter demands.
A more stringent system with the FCA, which is due to take over from the Office of Fair Trading (OFT) on 1 April 2014 and will be taking on over 50,000 already licensed firms, will "create a regime that protects consumers and allows businesses to operate". There will be tougher requirements for payday lenders, with mandatory affordability checks on borrowers, a limit of two roll-overs and a restriction (to two) on the number of times a continuous payment authority can be used. There will also be tighter restrictions on advertising and what payday lenders can say, with the FCA able to ban misleading adverts.
Commenting on payday lenders, Martin Wheatley said:
We believe that payday lending has a place; many people make use of these loans and pay off their debt without a hitch, so we don’t want to stop that happening. But this type of credit must only be offered to those that can afford it and payday lenders must not be allowed to drain money from a borrower’s account. That is why we’re imposing tighter affordability checks, and limiting the use of rollovers and continuous payment authorities.
Today I’m putting payday lenders on notice: tougher regulation is coming and I expect them all to make changes so that consumers get a fair outcome. The clock is ticking.
The regulation will apply, the regulator says, to "any firm or individual offering credit cards and personal loans, selling goods or services on credit, offering goods for hire, or providing debt counselling or debt adjusting services to consumers".