FCA payday rules “not the complete package”
Ahead of taking the reins of regulation on April 1, the FCA has announced that payday lenders will be limited to two loan roll-overs and will also be forced to signpost customers to free debt advice.
Tutton said: “While today’s announcement is a welcome step in the right direction, we have concerns that the rules are not yet the complete package that will deliver the protections that consumers so desperately need.
“We have specifically advocated limiting rollovers to one, and only in rare circumstances. Rolling over short term loans should be a clear indication to lenders that borrowers are in financial difficulty.
“By allowing two, there is a substantial risk that financially vulnerable consumers will be able to build up further unsustainable borrowing.”
The number of times lenders can use continuous payment authorities to take payments direct from a customer’s bank account will also be capped at two, with research indicating that CPAs have left customers without money for food and housing.
Restrictions on roll-overs and continuous payment authorities won’t come into effect until 1 June as the FCA is giving providers time to update their systems.
The FCA is currently consulting on what level to cap interest rates, as implementation is set for 2 January 2015.
From June the regulator will have the power to ban payday loan advertisements they consider misleading, while adverts will also have to carry risk warnings on screen.
Tutton added: “Establishing a real-time data sharing regime must be at the heart of any strategy to fix the payday lending market.
“Such a system would ensure that lenders are fully aware of existing borrowers commitments and help prevent the problems associated with multiple loans. We call on the FCA to make a clear statement on this issue by the end of June.”