The Financial Conduct Authority (FCA) is to conduct an in-depth review of payday lenders and other high cost short term lenders, to examine how they collect debts and manage borrowers in arrears.
This area is a priority because six out of ten complaints to the Office of Fair Trading (OFT) are about how debts are collected, and more than a third of all payday loans are repaid late or not at all - that equates to around three and half million loans each year.
The review will look at how high-cost short term lenders treat their customers when they are in difficulty. This will include how they communicate, how they propose to help people regain control of their debt, and how sympathetic they are to each borrower’s individual situation.
The FCA will also take a close look at the culture of each firm to see whether the focus is truly on the customer – as it should be - or simply oriented towards profit.
“Our new rules mean that anybody taking out a payday loan will be treated much better than before,” explained Martin Wheatley, FCA chief executive. “But that’s just part of the story; one in three loans go unpaid or are repaid late so we will be looking specifically at how firms treat customers struggling with repayments.
“These are often the people that struggle to make ends meet day to day, so we would expect them to be treated with sensitivity, yet some of the practices we have seen don’t do this," he added.
“There will be no place in an FCA-regulated consumer credit market for payday lenders that only care about making a fast buck,” he concluded.
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