Payday loan companies are still failing us
The Financial Conduct Authority (FCA) has said that customers with payday loans who are in arrears are still being failed by companies, even though new rules are supposed to fix how they're being treated. The regulator said that they've found "serious non-compliance and unfair practices" in all firms that they reviewed since they took over the regulation of the sector.
The report noted that outcomes for too many customers weren't good enough and that, in some cases, there was "serious detriment and financial loss".
The FCA said that three firms in particular, which they're not naming yet, had a large backlog of letters and documentation, including some from vulnerable customers who were behind on their repayments. This included medical evidence and letters from debt advisers which showed why some of these customers were struggling or failing to pay.
Some of these vulnerable customers were being chased by bailiffs or collection agents.
The watchdog said that firms are legally required to give customers "breathing space" from collections if they have provided evidence that they are working with a debt adviser in a bid to manage debts. Of course, the payday loan companies won't be doing that if they've got a load of unopened correspondence.
With that, the FCA found examples of companies exacerbating situations that were already stressful, including repayment plans that were quite obviously unsustainable, leaving customers having to explain their situation multiple times, thanks to loan companies keeping poor records. Where the businesses were non-compliant with new rules, the FCA intervened to get the loan companies to take measures to make sure that these failings weren't repeated.
The regulator said that they've restricted the way some payday loan companies do business until the mess gets sorted out.
Tracey McDermott, director of supervision at the FCA, said: "Our rules are designed to ensure loans are affordable; that customers who get into difficulty are treated fairly and that they are not pressurised into unaffordable and unsustainable repayment plans. 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".