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Lenders to Face Tougher Rules

Written By On 12/03/2014

One in four short term loan lenders may choose to stop lending in the payday market in the near future once new legislation is introduced according to FCA chief executive Martin Wheatley.

The Financial Conduct Authority will become the new watchdog for over fifty thousand consumer credit companies on 1st April, only a couple of weeks away. The office of Fair Trading’s duties will be passed onto them.

The FCA will be regulating approximately two hundred payday lenders which amounts to under one and a half per cent of the two hundred billion pounds UK credit sector. They promise to scrutinise the whole short term loan system as it is paramount and one of the first items on their ‘to do’ list.

They want to particularly look into the philosophy and ethos of each lender to check if the emphasis really is on the applicant.

About thirty five per cent of short term loans are not paid back in time or even satisfied. The figure in unpaid loans within the market equates to approximately three and a half million pounds per annum.

Sixty per cent of all criticism received by customers appertained to the way their debts were collected. The FCA believe that new regulations which include limiting the amount of times a customer may rollover their loan will help cut down such issues.

Mr Wheatley said:

I think our processes will probably force about a quarter of the firms out of the industry and that's a good thing because those are the firms that have poor practices. And for the rest, we want them to improve.

Consumer Finance Association chief executive Russell Hamblin-Boone says it’s members are in agreement. He added:

There are statutory rules that lenders will have to work to, and I think we will see the worst practices being driven out and only the best lenders continuing to operate.