Payday lenders are once again the subject of calls from influential external stakeholders to clean up their act and reduce their excessive rates.
Debt campaigners, MPs and consumer groups are backing calls for a regulatory crackdown by putting their considerable clout behind a new campaign, which urges consumers to sign the Charter to Stop the Payday Loan Rip-Off.
The aim of the charter is to increase pressure on the government, with many influential bodies, including the National Union of Students, supporting calls for the Financial Conduct Authority (FCA) to adopt a tougher stance.
Outlines for change
The industry, which is made up of an increasing number of providers, including household names such as Wonga and QuickQuid, is worth £2bn and rising; however, the annual interest rates, which can be in excess of 5000 per cent, are the reason the Financial Conduct Authority has finally decided to step in. The industry will be regulated as of April 2014, with new rules already outlined, which will limit both the number of payment extensions allowed on a loan and the number of times a lender can attempt to recover their charges from a consumer’s account.
Despite the announcement of regulatory controls, campaigners are calling for more. They want the FCA to take further steps to protect what are often vulnerable borrowers who find themselves with little choice other than to approach a payday lender.
Too little, too late?
Affordability checks are one move campaigners are pushing for, along with a crackdown on advertising, which would restrict when marketing messages from payday lenders can be shown. There are also calls for real-time information to be made available, allowing lenders to see whether a borrower already has other short term loans in place. Along with restrictions on the total amount lenders can charge, these moves will help to put an end to loans which can spiral out of all control and leave borrowers with nowhere to turn other than further sources of short term credit to bridge the gap.
Paul Blomfield, one of the MPs who has been working to push the bill through parliament, said: “The FCA’s proposals for regulation are a step in the right direction, but they don’t go far enough. We want members of the public, councils, MPs and charities to back the charter and join the call for tougher regulation and enforcement”.
The time is now
Mr Blomfield went on to describe the opportunity to introduce more stringent regulation as a “once in a generation opportunity”, which he felt would be unforgivable to miss, given the exploitation many people are currently subject to.
With support across the political spectrum, the Charter is expected to face little opposition as it passes through Parliament.
A spokesperson for the leading debt charity, Step Change, said: “We have seen a significant rise in the number of people contacting us for help with payday loans in 2013. Over 30,000 people have requested help in the first half of 2013 alone, nearly the same as for the whole of 2012. This shows the situation is getting worse and regulation is long overdue."
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