Tougher rules turn half of Britain’s 210 payday lenders away from rapid loans - Loans & Credit - Money - The Independent

Tougher rules turn half of Britain’s 210 payday lenders away from rapid loans

 

Senior Reporter

The tide may finally be turning against Britain’s payday lending companies, according to new statistics showing that the introduction of tougher rules has prompted almost half of them to stop offering rapid loans.

Figures released by the Financial Conduct Authority (FCA) show that around 70 firms have not applied for permission to continue offering quick credit to customers under the strict new regulation regime introduced on 1 April.

Added to the 30 to have lost their lending licences since the start of last year, this means that around 100 of the UK’s 210 payday lenders have stopped offering the service in the past 18 months.

Under the new rules, financial companies involved in “higher risk” business such as payday loans face a much closer level of supervision from the FCA, which now also has the power to ban any misleading adverts.

Payday lenders and debt management companies must now limit the number of loan rollovers to two and can no longer rely on unlimited “continuous payment authorities” – automatic withdrawals from customers’ accounts – to recover money. They must also pass them information on how to get free debt advice.

“We have said before that firms would need to improve their operation or exit the market, and we are now seeing that happening,” said a spokesman for the FCA.

The figures, which emerged after an analysis by the Financial Times, have been hailed by campaigners. A spokesman for the debt charity StepChange said: “The news that a number of payday lenders are leaving the market is welcome. The FCA’s tougher regulatory framework has clearly prompted a number of firms to consider whether they can comply with the new rules or whether their business models are up to the task of functioning in a fair and sustainable credit market.”

But the Consumer Finance Association, which represents some of the best known payday lenders, warned that the hole left by the departing firms may be filled by illegal loan sharks.

Chief executive Russell Hamblin-Boone said: “We are already seeing many lenders leaving the market and I very much hope that in time we don’t look back and regret that a legal industry that was popular with borrowers has been replaced by unregulated, illegal lenders. This is a clear case of ‘be careful what you wish for’.”​

The FCA, which took over consumer credit regulation from the Office of Fair Trading in April, is also set to place a cap on the total cost of credit charges next year. In November George Osborne said this would put a stop to the “absolutely outrageous fees and unacceptable practices” of some firms.

It is currently holding talks with payday loans companies, trade bodies and consumer organisations over how this might work – but any cap is likely to further drive down the number of firms providing quick credit services.

The payday loans industry has become a hotly debated political issue in the past year. Ed Miliband has attacked of Britain’s “Wonga economy” and has promised to introduce a new tax on the firms’ profits if Labour is elected in 2015.

The firms that have caved in…

Cheque Centre

One of the industry’s biggest companies with 451 branches, the Edinburgh-based firm agreed to stop selling payday loans last week after pressure from the FCA, which accused it of treating customers in debt poorly.

QuickLoans.co.uk

Last week, the Barnsley-based company said it was leaving the payday lending market due to “the continuing, even increasing threats of political interference by the Government,” with director Graeme Wingate attacking “political (sic) correct” MPs and campaigners.

And those that are still going…

Wonga

Britain’s biggest payday lender issues loans online within 15 minutes and is still going strong. But the company’s multi-millionaire chairman Errol Damelin is set to stand down soon, after reportedly becoming weary of constantly having to defend its practices.

QuickQuid

Owned by US payday loans group Cash America, it has run a series of advertising campaigns on British television but had not had a UK office – until now. Last month it said it would comply with a request from the FCA to create one, so its activities can be more easily monitored.

News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Sport
FootballFull debuts don't come much more stylish than those on show here
News
i100
PROMOTED VIDEO
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Travel
travel
News
The ecological reconstruction of Ikrandraco avatar is shown in this illustration courtesy of Chuang Zhao. Scientists on September 11, 2014 announced the discovery of fossils in China of a type of flying reptile called a pterosaur that lived 120 millions years ago and so closely resembled those creatures from the 2009 film, Avatar that they named it after them.
SCIENCE
Life and Style
tech
Arts and Entertainment
Matisse: The Cut-Outs exhibition attracted 562,000 visitors to the Tate Modern from April to September
art
Life and Style
Models walk the runway at the Tom Ford show during London Fashion Week Spring Summer 2015
fashionLondon Fashion Week 2014
News
Kenny G
news
News
peopleThe black actress has claimed police mistook her for a prostitute when she kissed her white husband
Life and Style
techIndian model comes with cricket scores baked in
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

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Training Coordinator / Resource Planner - City, London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

    Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

    £400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week