Five questions on: Payday lenders crackdown
Simon Read is Personal Finance Editor at The Independent. He edits the Saturday Your Money section and writes the Daily Money column and Wednesday’s Midweek Money section in i newspaper. He also writes for the news and business pages of the Independent and i newspaper and is a regular money commentator on TV station London Live. He has won numerous awards including Consumer Finance Journalist of the Year.
Friday 14 March 2014
What have the lenders done now?
It's more a question of what will become of them. Payday lenders have been warned today that the City watchdog will not tolerate poor treatment of borrowers. The Financial Conduct Authority is taking over responsibility for high-cost credit providers on 1 April and this week said it will make its first priority to investigate the way they collect debts and treat struggling borrowers. Chief Martin Wheatley warned: "There will be no place for payday lenders that only care about making a fast buck."
Isn't that all of them?
Evidence from the charity Citizens Advice suggests that payday lenders are harming consumers with widespread irresponsible lending and debt-collection practices. Gillian Guy, chief executive of Citizens Advice, said: "Lenders' failure to check a customer's ability to pay back money traps people in a cycle of debt and leaves borrowers struggling with loan repayments they can't afford to pay off."
So what does the watchdog plan to do about it?
It's already published new rules for payday lenders, which will force them to carry out proper affordability checks on borrowers before lending.
The FCA said it will take a close look at the culture of each payday lending firm to see whether the focus is really on the customer – as it should be – or simply oriented towards profit.
So is it really getting tough?
It seems so. From the noises the regulator has made so far it intends to clean up the sector. Bear in mind that it's still more than a couple of weeks before it will take over responsibility for the high-cost credit companies. Hopefully its work will mean a swift end for rogue firms which prey on vulnerable people and encourage them to take out debt they can't afford to repay. That will send out a message to the rest to play fair or face closure.
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