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I very much hope that in time we don’t look back and regret that a legal industry that was popular with borrowers has been replaced by unregulated, illegal lenders.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.

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