FCA to go hard on payday lenders
New rules are being implemented against payday loan companies, meaning that they will no longer be allowed to roll loans over more than twice, as well as facing restrictions on how many times they can to try to take cash from a borrowers' bank accounts.
The Financial Conduct Authority (FCA) announced that they were making moves to sort these lenders out after research from the government showed that lenders weren't keeping their side of the bargain, concerning voluntary codes of conduct.
FCA chief executive, Martin Wheatley, said: "We believe that payday lending has a place; many people make use of these loans and pay off their debt without a hitch, so we don't want to stop that happening. But this type of credit must only be offered to those that can afford it and payday lenders must not be allowed to drain money from a borrower's account. That is why we're imposing tighter affordability checks, and limiting the use of rollovers and continuous payment authorities."
As it stands, some payday loan companies are going at people's accounts, multiple times, however, they'll now have to stop after two unsuccessful attempts. These companies will now need to publish risk warnings on adverts, as well as provide information on free debt advice.
So when is this going to happen? Well, the FCA say that lenders need time to implement changes, so we'll see these reforms from 1st April 2014.
The consumer minister, Jo Swinson, said: "This research shows that the industry has failed to self-regulate effectively. We warned the industry months ago that if it didn't get its house in order we would step in. Now the FCA has come out and published strong actions which will tackle the problems the market has failed to address."
"Too many people are being offered payday loans too easily and without really understanding the dangers if they can't afford to pay the money back. We want to make sure that those in financial difficulty can make the right choice for them and in many cases this will mean looking for free debt advice not more debt."