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You can find the current article at its original source at http://www.guardian.co.uk/money/2013/mar/06/city-watchdog-abusive-payday-loan-practices
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| Version 1 | Version 2 |
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| New City watchdog targets 'abusive' payday loan practices | New City watchdog targets 'abusive' payday loan practices |
| (about 2 months later) | |
| The City watchdog taking over from the Financial Services Authority (FSA) says it will be clamping down hard on "abusive practices" in the payday loans sector, and has suggested the current regime is not giving consumers enough protection. Pawnbrokers and debt collectors also face close scrutiny. | The City watchdog taking over from the Financial Services Authority (FSA) says it will be clamping down hard on "abusive practices" in the payday loans sector, and has suggested the current regime is not giving consumers enough protection. Pawnbrokers and debt collectors also face close scrutiny. |
| Martin Wheatley, incoming chief executive of the Financial Conduct Authority (FCA), which will replace the FSA and take over regulation of the credit market from the Office of Fair Trading (OFT), told the Guardian there were growing concerns about the way some payday lenders were behaving, and that it would be adopting a "much more active supervision approach". | Martin Wheatley, incoming chief executive of the Financial Conduct Authority (FCA), which will replace the FSA and take over regulation of the credit market from the Office of Fair Trading (OFT), told the Guardian there were growing concerns about the way some payday lenders were behaving, and that it would be adopting a "much more active supervision approach". |
| The FCA will be able to impose unlimited fines, can ban firms and individuals, and will have the power to order companies to compensate consumers who have lost out financially as a result of being badly treated. | The FCA will be able to impose unlimited fines, can ban firms and individuals, and will have the power to order companies to compensate consumers who have lost out financially as a result of being badly treated. |
| Wheatley said: "There is obviously growing concern [about payday lenders] ... there are quite a lot of abusive practices." The regulator is particularly keen to look at the automatic "rollover" of overdue loans, which are supposedly designed to be short-term products; the use of so-called continuous payment authorities, which allow lenders to keep trying to collect missed repayments from a borrower's debit card; and problems with upfront credit checks. | Wheatley said: "There is obviously growing concern [about payday lenders] ... there are quite a lot of abusive practices." The regulator is particularly keen to look at the automatic "rollover" of overdue loans, which are supposedly designed to be short-term products; the use of so-called continuous payment authorities, which allow lenders to keep trying to collect missed repayments from a borrower's debit card; and problems with upfront credit checks. |
| At the moment, businesses that lend money or offer goods or services on credit have to be registered with the OFT, which is able to revoke a firm's licence if it is considered unfit to hold one. However, it has been confirmed that responsibility for regulating consumer credit will be switched from the OFT to the FCA by April 2014. | At the moment, businesses that lend money or offer goods or services on credit have to be registered with the OFT, which is able to revoke a firm's licence if it is considered unfit to hold one. However, it has been confirmed that responsibility for regulating consumer credit will be switched from the OFT to the FCA by April 2014. |
| The FSA has published a consultation setting out how the new body will police the sector, and said: "The framework will enable the FCA to deliver better outcomes for consumers than the existing regime." | The FSA has published a consultation setting out how the new body will police the sector, and said: "The framework will enable the FCA to deliver better outcomes for consumers than the existing regime." |
| The regulator said there would be "more scrutiny of higher risk firms before they are allowed to operate in the market, and significantly more scrutiny of the integrity and competence of the individuals in key positions in all firms". Higher risk firms include payday lenders, pawnbrokers, credit reference agencies and debt collectors. | The regulator said there would be "more scrutiny of higher risk firms before they are allowed to operate in the market, and significantly more scrutiny of the integrity and competence of the individuals in key positions in all firms". Higher risk firms include payday lenders, pawnbrokers, credit reference agencies and debt collectors. |
| Lower risk firms, including not-for-profit debt counselling organisations and businesses providing lending as a side activity, such as sports clubs that allow their members to pay in instalments, will not have to meet such onerous standards and will pay lower fees. | Lower risk firms, including not-for-profit debt counselling organisations and businesses providing lending as a side activity, such as sports clubs that allow their members to pay in instalments, will not have to meet such onerous standards and will pay lower fees. |
| The FCA will also have the power to set an interest rate cap on payday loans and restrict their duration and the amount of times they can be rolled over. However, a decision on whether this power will be invoked will not be made until 2014 at the earliest. | The FCA will also have the power to set an interest rate cap on payday loans and restrict their duration and the amount of times they can be rolled over. However, a decision on whether this power will be invoked will not be made until 2014 at the earliest. |
| Wheatley described the consumer credit market as a very broad sector, "and many of the firms perform very valid functions". There were an estimated 50,000 firms currently active in the credit and loans sector, of which "a few hundred" were payday lenders. | Wheatley described the consumer credit market as a very broad sector, "and many of the firms perform very valid functions". There were an estimated 50,000 firms currently active in the credit and loans sector, of which "a few hundred" were payday lenders. |
| As part of the transition from OFT to FCA, from Autumn 2013 existing OFT licence holders will need to apply for interim permission so they can continue to operate. Existing licences will lapse on 31 March 2014 and FCA interim permissions will begin from 1 April 2014. | As part of the transition from OFT to FCA, from Autumn 2013 existing OFT licence holders will need to apply for interim permission so they can continue to operate. Existing licences will lapse on 31 March 2014 and FCA interim permissions will begin from 1 April 2014. |