Fury as FCA is accused of wimping out of tough new regulations on payday loans

 

Personal Finance Editor

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.

Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas