MPs and consumer groups have criticised the City Watchdog for lacking teeth ahead of its taking over responsibility for payday lenders next month.
The Government was also criticised for not ensuring urgent changes to protect vulnerable people who are preyed upon by unscrupulous high-cost credit companies.
The Business, Innovation and Skills committee had called for a series of tough new measures. These included calls for the number of rollovers to be cut to one, the urgent setting up of a real-time database of lending and a ban on payday loan advertising on children’s television.
But MPs said the responses from the Government and the Financial Conduct Authority show they are not going far enough.
The number of times a loan will be allowed to rollover, for instance, will be two, the FCA confirmed, saying: “There is a need for some flexibility for consumers to rollover their loans.”
The Watchdog said it couldn’t ban payday loan ads from kids TV under European Human Rights laws concerning “the right to freedom of expression".
Sheffield Labour MP Paul Blomfield, who sat on the BIS committee, said: “I’m disappointed that the Government aren't backing our recommendation for a tougher approach to advertising, particularly given its impact on children.”
He added: “I’m concerned that the Government has not accepted the case for a real-time database of lending, which has been shown in other countries to be vital in stopping the multiple lending that pushes people into spiralling debt.”
The FCA said there are blockages to real-time data sharing which it is discussing with the industry. “We will conclude these discussions in the summer,” it said.
Peter Tutton of debt charity Step Change, said: “The introduction of a real-time data sharing regime should be an essential part of the FCA’s strategy to fix the payday lending markets.”
Stella Creasy, Labour’s Shadow Minister for Competition and Consumer Affairs, said: “This report further highlights the need to act as quickly as possible to reform the consumer credit market, as well as the way in which it uses data.”
She also slammed the government for not introducing a cap on the cost of credit quickly enough. It plans to introduce a cap in January 2015. “The cap on the cost of credit should be brought forward to 2014,” Ms Creasy demanded.
Richard Lloyd, the executive director of Which? also demanded faster action. He said: “With millions increasingly reliant on payday loans and other high cost credit, we want to see the FCA act swiftly to ban excessive fees and charges when borrowers default.”
Meanwhile Citizens Advice chief executive Gillian Guy was angered by the FCA’s admittance that it had not considered proposals to force payday lenders to give notice before using a continuing payment authority, which gives them the right to clean out people’s bank accounts.
“The misuse of continuous payment authorities is one of the most damaging factors in payday lending,” she said. “Bank accounts are raided without warning leaving people penniless meaning they’re unable to pay to travel to work or buy food. It is important the FCA keeps an eye on this.”
The FCA said it “will consider consulting on such a rule after the transfer of regulation”, adding fuel to criticism that it is not ready to get tough with lenders when it takes over responsibility for the sector in April.Reuse content