Council welcomes tougher payday loan measures
Plymouth City Council has welcomed the announcement from the Financial Conduct Authority (FCA) that it will introduce tougher regulations for payday loan companies when it takes over from the Office of Fair Trading (OFT) next April.
This follows the Council's action to ban payday loan advertising on hoardings in the city centre and to block website access across its computer network.
Cabinet member for Co-operatives and Community Development Councillor Chris Penberthy said: "Any measures to curb the activity of these irresponsible lenders is good news, however I am concerned that this may not go far enough.
"While the FCA is saying there will be tighter restrictions on what payday lenders can say in adverts, we believe this could still mean vulnerable people are drawn into the cycle of spiralling debt. These companies charge astronomical interest rates and those people who desperately need the loans often aren't as aware of alternative lenders because the payday lenders spend so much on high profile adverts.
"This is why here in Plymouth we are working hard to make it easier for people to get access to credit unions and loans that won't trap them with sky high interest rates.
"Today's announcement shows that there is action needed to control payday lenders but I think now we also need to see responsible lending given a higher profile and more support at a national level."
The FCA said:
"The proposed regime will allow the FCA to provide stronger protection and better outcomes for consumers than the existing OFT regime. There will also be tougher requirements for payday lenders, including a mandatory affordability check on borrowers, limiting the number of loan roll-overs to two, and restricting (to two) the number of times a continuous payment authority (CPA) can be used. There will also be tighter restrictions on what payday lenders can say in adverts, while the FCA will be able to ban any that are misleading.
"FCA regulation will apply 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."
Martin Wheatley, the FCA’s chief executive, said of the new regime:
“Our aim is to create a regime that protects consumers and allows businesses to operate. There is a balance to be struck here, and to make sure we get it right we want to hear from as many interested parties as possible.”
Commenting specifically on payday lenders, Mr Wheatley continued:
“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.”
