FCA: Payday Lenders Unfair to Customers
The Financial Conduct Authority have reported that payday lending companies are still failing to offer their customers fair deals. They revealed that all of the institutions they evaluated demonstrated both ìserious non-compliance and unfair practices.î
Moreover, the FCA demonstrated that a number of borrowers were being targeted and harassed by collectors in a clear violation of the rules introduced by the regulator.
In a detailed examination of their failures, the FCA identified a number of violations of their authority and responsibility. Firstly, they were not acknowledging the financial difficulty many consumers were in. Additionally, they were not adequately exploring complaints from their customers or offering them free debt consultation and advice.
Furthermore, these payday lenders were charging customers penalties in an improper way and also using deceptive tactics in order to get money from their customers.
Three specific lending organizations were identified as not responding to the fact that some customers had given medical proof as evidence for not being able to pay them. A consequence of this behaviour was ìserious detriment and financial lossî for those customers in need of help.
Tracey McDermott, who works at the FCA as director of supervision and authorisations, stated: ìOur rules are designed to ensure loans are affordable; that customers who get into difficulty are treated fairly and that they are not pressurised into unaffordable and unsustainable repayment plans. This segment of the industry has, for too long, been in the spotlight for the wrong reasons. It is essential that the more customer-focused approach we have started to see is maintained and embedded as we go forward.î
However, the FCA did report that many of the payday lending companies had improved their behaviour since their last investigation. Moreover, the industry itself went on the defensive. The chief executive at the Consumer Finance Association, Russell Hamblin-Boon commented on the report: ìShort-term lenders are on a clear path of improvement, with the worst lenders leaving the market.î
Tracey McDermott went on to caution payday lenders that the real evaluation of whether they are doing a fair and decent job will come when the FCA decide who to give full authorisation to. This will be based on who has abided by the alterations in regulations that came in at the beginning of this year. It will give those lenders who are approved the ability to continue their practice over the upcoming months.
As part of the new regulations, the loan rates for payday deal are limited to 0.8% each day and it is against the regulations that anyone is charged over twice the original amount they took.
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