Much tougher regulation of money lending is being promised by the Financial Conduct Authority (FCA).
The FCA takes over the regulation of consumer credit on 1 April 2014 and will have much stronger powers than the old Office of Fair Trading (OFT).
The FCA’s boss, Martin Wheatley, said he would be keen to use its new rules.
“The FCA will take a tough approach to consumer credit with stronger powers to clamp down on poor practice than the previous OFT regime,” he said.
“Our supervision of firms will be hands-on and we will closely monitor how providers treat their customers, in particular, those operating in higher-risk sectors such as credit cards, debt management and payday.
“We will respond quickly to any issues that are identified and there will be swift penalties for any firm or individual found not to be putting consumers’ interests first,” Mr Wheatley added.
The FCA’s new rules give it power over 50,000 firms which lend about £200bn a year.
Specifically, it has been told by the government to impose a ceiling on the amount of interest a lender can charge.
It will also be able to enforce affordability checks for borrowers and ban misleading adverts by payday lenders.
The FCA said it would protect borrowers from rogue firms and make sure that lenders treated their customers fairly.
This would mean:
- limiting loan roll-overs to just two
- restricting to just two the number of times a firm can seek repayment using a continuous payment authority
- requiring payday lenders and debt management firms to tell customers how to get free debt advice
- and requiring debt management firms to pass on more money to creditors from the first day of a debt management plan, and to protect their clients’ money.
Russell Hamblin-Boone, of the lenders’s trade body the Consumer Finance Association, said: “Clarity and consistency are the keys to the success of this regulation; we now have some clarity for lenders and borrowers, but the rules have to be enforced consistently across all short-term lenders.”
Source: BBC News – 28 February 2014 http://www.bbc.co.uk/news/business-26382481