Life gets harder for UK’s loan sharks
Years of political pressure against payday lenders has finally resulted in the publication of new rules tackling the loan sharks charging extortionate interest rates.
The proposed regime controlling payday lenders has been published by the Financial Conduct Authority (FCA), which insists there is a place in the market for payday lending.
"Many people make use of these loans and pay off their debt without a hitch, so we don't want to stop that happening," the watchdog's chief executive Martin Wheatley said.
"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."
The FCA's proposed regime means lenders must go further to check that those requesting the loan can afford it. Rollovers of loans are being limited and misleading adverts will be banned.
Labour MP Stella Creasy has led the campaign against payday lenders in parliament. She called for more action, telling the Today programme: "I think we have to look at how we make sure people access affordable credit.
"If we don't act now to change this, I'm convinced this is going to be the next PPI scandal."
Government research released today shows nearly 25% of over 4,000 consumers surveyed came under pressure from lenders to extend their loan.
"This research shows that the industry has failed to self-regulate effectively," Liberal Democrat minister Jo Swinson said.
"We warned the industry months ago that if it didn't get its house in order we would step in."
An ongoing probe by the Competition Commission, expected to report next year, is investigating concerns from the Office of Fair Trading that many lenders are "skimping" on affordability checks.
The FCA's draft rule book publication was welcomed as an "important milestone" by Russell Hamblin-Boone, chief executive of the Consumer Finance Association.
He said it represented "an opportunity to set a bar over which irresponsible lenders will struggle to jump".
The Archbishop of Canterbury declared war on mainstream payday lenders like Wonga in the summer.
He declared the Church of England would seek to establish its own alternative which would "compete" the market leader out of business.
Justin Welby's announcement came days after the very first UK ban on payday loan advertising was initiated in Plymouth, which has prohibited all such advertising from bus shelters, billboards and publicly available computers in the city.