James Moore: Watchdog could get its teeth into more than payday lenders

 

Outlook At last some sanity has been brought to the payday loans market.

The Financial Conduct Authority’s belated imposition of a price cap will bring with it a number of  benefits. The most obvious is that the industry will no longer have carte blanche to rip people off.

But the cap will also make the sector much less profitable – and that will curtail its ability to market its wares via those grotesque television and radio adverts that have drawn in a small army of customers, many of whom would otherwise have managed without the industry’s services, to the financial benefit of themselves and their families.

Limits on what payday lenders can levy on those who struggle to repay their loans – no one will now end up paying more than twice the sum they were advanced – will also mean that they have to start paying due regard to customers’ ability to afford them. Some companies will simply give up the ghost, and few will mourn their passing.

However, now the principle of capping has been established, why leave it there?

The FCA actually considered applying the measure to other parts of the lending market, such as credit cards, but it held off. That shows a disappointing lack of ambition on the regulator’s part, because it isn’t only lending where such measures could be of great benefit to consumers.

Price competition simply doesn’t exist in many parts of a financial services industry that offers a suite of highly complicated, and often risky, products. Many of those products – pensions and savings, for example – are extremely important, even essential. And yet the market has almost no power to influence their price. Power rests with the provider.

It doesn’t help that the barriers to new entrants in many, if not most, fields are formidable. As a result, the industry is in effect protected from disruptive competitors.

You are unlikely to see anything like an Aldi or a Lidl or even an Amazon emerging to shake up the establishment by offering cheap deals on, say, pensions.

Even when newcomers do dip their toes in the water, they face a struggle because of consumer nervousness about handing cash over to new kids on the block. People often stick with existing providers on the grounds that it’s better the devil you know.

It’s true that the market does occasionally produce corrective mechanisms: the rise of the price-comparison websites; and the launch, several years ago, of discount brokers, which helped savers get around high upfront charges on products such as unit trusts. But these developments are rare.

Changes to some of the industry’s most antediluvian practices have usually required at least some form of political or regulatory intervention (or both).

There was, then, an opportunity here for the FCA to prove its worth and get ahead of the game for once. Sadly, despite all its tough talk, it appears reluctant to step up to the plate. 

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
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.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London