Five Questions On: New payday lending rules


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The Independent Online

Are lenders being forced to act responsibly at last?

 Under new rules that came into force on Tuesday, payday lenders must act more responsibly or face being put out of business by the regulator.

What do the new rules involve?

Crucially, high-cost credit companies have been banned from rolling over loans more than twice after it emerged that some lenders were making around half their profits from the practice. Encouraging people to roll over loans again and again – sometimes as much as 12 times – boosts lenders' profits but increases the debt woes of hard-up people and leaves them deeper in the financial mire.

Any other restrictions?

Payday firms have also had a limit set on how many times they can attempt to take money from borrowers' bank accounts under controversial continuous payment authorities. The CPAs give lenders access to people's accounts and have been used over and over to drain them of money, leaving people in financial hardship. Now payday firms can only make two attempts to claw money out of people's accounts using a CPA.

That all sounds good news. What about banning annoying payday ads from our TV screens?

The regulator hasn't gone that far yet, despite widespread calls for the ads to be banned from children's television. But it has forced lenders to include "risk warnings" on television adverts in future and a link to getting help from the Money Advice Service.

Has the regulator gone far enough?

I don't think so. However, the payday lending industry is under investigation by the Competition and Markets Authority and it's hoped the probe will throw up further action to curb the actions of irresponsible lenders. In its provisional findings, it called for an independent price-comparison website to be set up to help people compare payday loan costs.

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