By Claire West
The Financial Conduct Authority (FCA) today set out its vision for the regulation of consumer credit when it takes over from the Office of Fair Trading (OFT) on 1 April 2014.
The proposed regime will allow the FCA to provide stronger protection and better outcomes for consumers than the existing OFT regime.
There will also be tougher requirements for payday lenders, including a mandatory affordability check on borrowers, limiting the number of loan roll-overs to two, and restricting (to two) the number of times a continuous payment authority (CPA) can be used.
There will also be tighter restrictions on what payday lenders can say in adverts, while the FCA will be able to ban any that are misleading.
FCA regulation will apply to any firm or individual offering credit cards and personal loans, selling goods or services on credit, offering goods for hire, or providing debt counselling or debt adjusting services to consumers.
Martin Wheatley, the FCA’s chief executive, said of the new regime:
“Our aim is to create a regime that protects consumers and allows businesses to operate. There is a balance to be struck here, and to make sure we get it right we want to hear from as many interested parties as possible.”
Commenting specifically on payday lenders, Martin Wheatley said:
“We believe that payday lending has a place; many people make use of these loans and pay off their debt without a hitch, so we don’t want to stop that happening. 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. That is why we’re imposing tighter affordability checks, and limiting the use of rollovers and continuous payment authorities.
“Today I’m putting payday lenders on notice: tougher regulation is coming and I expect them all to make changes so that consumers get a fair outcome. The clock is ticking.”