The City watchdog's crackdown on the £2bn payday loan industry has come under fierce criticism for letting rogue lenders off the hook.
Campaigners said out-of-control high-cost credit companies could only be effectively regulated by the introduction of a cap on the total cost of credit. Chris Leslie, shadow financial secretary to the Treasury, said the Government has let consumers down by delaying introducing tougher new measures until next year.
He said the fact the new rules will not come into force until next April was not good enough: "It is astonishing that ministers are still moving at such a snail's pace.
"They are refusing to speed up new powers for the regulator, delaying real-time monitoring across the high-cost loans sector and prevaricating about a cap on the total cost of credit. The payday lenders are making a mint while ministers sit on their hands." London MP Stella Creasy, who has led a nationwide "Sharkstoppers" campaign said: "The lack of real action again on the actual cost of credit itself will be a blow for many caught in a spiral of debt due to payday lenders."
Sheffield MP Paul Blomfield, who introduced a Private Members' Bill this year to curb lenders' activities, said: "We need tougher controls on payday advertising – with clear 'health warnings' and signposts to free debt advice on all adverts. Affordability checks need to be matched with mandatory real-time data collection and we need lending limits."
The new consumer-credit rulebook announced by Financial Conduct Authority (FCA) chief executive Martin Wheatley, coming into force in April, will force lenders to ensure borrowers can afford loans. It also plans to slash the number of times payday firms can grab cash out of people's accounts by allowing them to use continuous payment authorities (CPAs) only twice.
Lenders will only be allowed to roll over loans twice, which will drastically reduce the chances of struggling borrowers seeing their loans soaring. That will hit the profits of the leading lenders, who rely on rolling over loans to boost turnover. There will also be tighter restrictions on what payday lenders can say in adverts, with the FCA be able to ban any that are misleading.
In the past, rogue payday lenders have been caught encouraging students to borrow money to "party" while others have used TV personalities such as the twice-bankrupt Kerry Katona to suggest loans could fund a celebrity lifestyle.
The FCA takes over responsibility for consumer credit from the Office of Fair Trading next April but will give firms until October to comply fully with the new rules. Consumer Minister Jo Swinson said the new rules, while falling short of a credit cap, would restrict lenders from charging vulnerable people outrageous fees.
She added:"Those companies that have taken on high-risk borrowers so they rely on making money through imposing significant numbers of rollovers will have to reassess their business models... restricting lenders' uses of CPAs and making them give borrowers three days' notice will allow people to ensure they have enough cash for food or other essentials."