FCA in consumer credit clampdown on payday lenders

The Financial Conduct Authority (FCA) has confirmed the final rules that will govern the £200bn a year consumer credit market, including tough new restrictions on payday lenders that will see loan roll-overs limited and advertisements heavily scrutinised.

The FCA said it has been given stronger powers to clamp down on poor practice than the previous Office of Fair Trading regime.

The rule changes announced today (28 February) include limiting the number of loan roll-overs to two, restricting - also to two - the number of times a firm can seek repayment using a continuous payment authority, and a requirement to provide information to customers on how to get free debt advice.

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Debt management firms will be required to pass on more money to creditors from day one of a debt management plan, and to protect client money.

Consumer credit providers will need to ensure that they give customers the right information to make informed choices, that their services meet consumer needs, and that people in difficulty are treated fairly.

The FCA has also confirmed firms that do higher risk business and pose a potentially greater risk to consumers will face an intense and hands on supervisory experience and there will be a “robust authorisation gateway” to ensure any firm or individual authorised to do consumer credit business is fit and proper, and firms have suitable and sustainable business models.

Martin Wheatley, chief executive of the FCA, said: “Millions of consumers access some form of credit each day, from paying for everyday goods by credit to taking out a payday loan.

“We want to be sure that the market works well when people need it – whether that’s for one day, one month or longer.”