Watchdog accused of wimping out on new loan rules

Consumer groups want the City regulator to bare its teeth and tackle payday lenders, writes Simon Read

MPs and consumer groups have criticised the City watchdog for being toothless ahead of it taking over responsibility for payday lenders from Tuesday.

The Government was also criticised for not ensuring the introduction of urgent changes to protect vulnerable people from unscrupulous high-cost credit companies.

The Business, Innovation and Skills (BIS) Select Committee called for a series of tough new measures. But MPs said the responses from the Government and the Financial Conduct Authority show they are not going far enough.

The FCA refused calls to limit the number of times a loan is rolled over, saying: "There is a need for some flexibility for consumers to roll over their loans." It also ignored calls for payday loans to be banned from advertising on children's television, blaming European Human Rights laws.

Paul Blomfield, Labour MP for Sheffield Central, who sits on the BIS Committee, said: "I'm disappointed that the Government is not backing our recommendation for a tougher approach to advertising."

He added: "I'm concerned that the Government has not adopted a real-time database of lending, which could be vital in stopping multiple lending that pushes people into spiralling debt."

The FCA said there were obstacles to real-time data-sharing that it is discussing with the industry. "We will conclude these discussions in the summer," it said.

Peter Tutton head of policy at debt charity StepChange, said: "The introduction of a real-time data-sharing regime should be an essential part of the FCA's strategy."

Stella Creasy, Labour's Shadow Minister for Competition and Consumer Affairs, criticised the Government for not introducing a cap on the cost of credit quickly enough. It plans to introduce one next January. "The cap should be brought forward to 2014," she demanded.

Richard Lloyd, executive director of Which?, also called for faster action. "With millions increasingly reliant on payday loans and other high-cost credit, the FCA should act swiftly to ban excessive fees and charges," he said.

Gillian Guy, chief executive of Citizens Advice, criticised the FCA for not considering proposals to force lenders to give notice before using a continuing payment authority. "The misuse of these is one of the most damaging factors in payday lending," she said.