Julian Knight: Watchdog finally puts the bite on the payday lenders

We've been given some real action to curb the industry's excesses... but more is still needed

Five years on from when payday lending started to really gear up, finally we are getting some real action to curb the industry's undoubted excesses. The Financial Conduct Authority has published a list of rules it expects payday lenders to live by, and reading through them I think they are fair and strike the right balance between protecting consumers and allowing a free market to operate.

There has been a lot of hysterical commentary around payday lending and I have always tried to tread a middle ground. Payday loans do meet a real need amongst large swathes of the population for short-term cash. What is more, the high APRs are at least on an initial small size loan a little bit of a red herring. If I was to lend to you for instance £100 without security and ask that you repay £120 in a week's time you may not think that too bad a deal as we don't know each other from Adam. However the APR on such a loan would be in four-figure territory.

But where my concerns have always been with payday are over advertising that has been geared to the young, the emphasis that these are easy-to-arrange loans and the practice of rolling over – people being encouraged to take out a new loan to effectively cover the interest on an existing one. There is also an ongoing concern about some of the companies involved in the industry. You or I could get ourselves a credit licence, behave appallingly to customers and it could take up to two years for us to be closed down. There are of course dozens of legitimate lenders too but the point is it is too easy to set up in the payday lending business and the actions of the worst influence the perception of the majority.

What the FCA proposes though does meet many of these concerns with a limit on times a loan can be rolled over – the lenders wanted a limit of three, debt charities one, the FCA decided on two – and also there is a curbing of the ability of lenders to automatically take money from borrowers' accounts, something which can really send an individual's finances spiralling. There is also a pledge to monitor firms' advertising and I think this is a crucial area where the FCA can really make a difference. We need an end to promises of quick decisions on loans and the idea that borrowing money can be a fun thing to do. These are only the first steps and they have taken too long, but I believe we are moving in the right direction over payday.

Don't shut out US prospects

It seems difficult to believe that a country as rich and powerful as the US can suffer such a thing as a government shutdown but then again you'd have thought they'd have managed the dreadful aftermath of Hurricane Katrina much better than they did. Nevertheless, a government shutdown is exactly what has been happening in the US.

Now if such a thing were to happen in the UK I can barely imagine the consequences in the US, though they are rather taking it in their stride, but should investors in the world's biggest economy also be so sanguine?

Actually they ought to be, because to paraphrase ex-US President Calvin Coolidge "America's business is business, it certainly isn't government". It is a country where the private sector both dominates and provides.

The outlook for US corporate is actually rosy at present and, although much of the tech sector is overvalued, in other key parts of the economythe engine of the US is revving up and there is a great deal of value out there for investors.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
Sport
FootballGerman sparks three goals in four minutes at favourite No 10 role
News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Sport
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
athletics
PROMOTED VIDEO
Sport
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Life and Style
Walking tall: unlike some, Donatella Versace showed a strong and vibrant collection
fashionAlexander Fury on the staid Italian clothing industry
Arts and Entertainment
Gregory Porter learnt about his father’s voice at his funeral
music
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Life and Style
Children at the Leytonstone branch of the Homeless Children's Aid and Adoption Society tuck into their harvest festival gifts, in October 1936
food + drinkThe harvest festival is back, but forget cans of tuna and packets of instant mash
Sport
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
New Articles
i100
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
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

    Senior BA - Motor and Home Insurance

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

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    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