Payday lenders could face ad ban
Speaking at an industry summit held by the government at Whitehall earlier today FCA chief executive Martin Wheatley said a total advertising ban was one of the option it was considering.
The FCA is due to take over regulation of the industry in April 2014 and is to start a consultation exercise on tougher rules in September.
Treasury minister Sajid Javid said: “They now have to deal with a regulator with some real teeth.
“They are going to feel the hand of the regulator on their shoulder and they better get used to it.”
However there is some concern that the government and regulator have both stepped back from imposing improved affordability checks and a cap on charges.
Joanna Elson, chief executive of the Money Advice Trust, said: “The discussion highlighted some key areas of concern around the payday loans industry.
“We hope that this will provide a catalyst for more effective regulation which protects consumers from much of the detriment caused by these loans.
“We believe one of the most pressing regulatory concerns should be to ensure sufficient affordability checks are conducted prior to a loan being approved.
“The decision to lend money should be taken just as carefully as the decision to borrow. This is as true with short term loans as with a loan to buy a home or car.”
Payday lenders have been accused of a variety of poor practices, including aggressive debt collection and failing to work out whether repayments are affordable.
Elson said: “The evidence we see at National Debtline shows that far too often payday lenders do not sufficiently check whether the customer has the means to repay before advancing the loan.
“We welcome the Consumer Finance Association’s new code of practice and similar commitments from other payday and short-term lenders which pledge robust affordability checks.
“The proof of the pudding will be in the impact such pledges have on lending decisions. We urge regulators – the OFT and the FCA in due course – to pay close attention to whether those affordability checks are taking place.
“Since we help 100 people a day who are having problems paying back their payday loan we’re very happy to share our evidence base with both regulators and the industry.”