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I very much hope that in time we don’t look back and regret that a legal industry that was popular with borrowers has been replaced by unregulated, illegal lenders.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

Life and Style
Powdered colors are displayed for sale at a market ahead of the Holi festival in Bhopal, India
techHere's what you need to know about the riotous occasion
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
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

    Recruitment Genius: Evening Administrator

    £8 per hour: Recruitment Genius: This Pension Specialist was established early...

    Guru Careers: Executive Assistant / PA

    £30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

    Paul Scholes column

    I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable