The City Watchdog this morning accused payday lenders of unfair practices, particularly when dealing with people in debt.
The Financial Conduct Authority’s thematic review marking a year of its regulation of the high-cost credit sector revealed “unacceptable practices from many lenders, including failures to recognise customers in financial difficulty, failure to direct people to free debt advice and firms offering inflexible repayment options”.
The FCA found serious non-compliance and unfair practices in all firms that it reviewed, leading to poor outcomes for many customers and in some cases, serious detriment and financial loss.
Its investigation revealed that three firms were still hounding vulnerable people for debts even after they had provided medical evidence and letters from debt advisors about why they were failing to pay.
Lenders must give people “breathing space” from collections activity if they provide evidence that they are working with a debt advisor to manage their debts.
However, the regulator said many firms have taken steps to change behaviour, including changing senior management, training staff to deal with struggling customers and improving monitoring, compliance and managing risk.
But Tracey McDermott, director of supervision and authorisations at the FCA, warned: “The real test for these lenders will be FCA authorisation where they will have to demonstrate exactly how much progress they have made if they want to remain in the market.”
Which? executive director, Richard Lloyd, said: “This is yet further evidence that payday lenders are failing some of the most vulnerable consumers. The regulator must continue to take action to ensure that borrowers in difficulty are treated fairly and protected from falling further into a spiral of debt.”Reuse content