Payday Loan Lenders Introduce New Rules
Payday lenders have moved to head off the threat of tougher regulation by launching a customer charter to increase transparency and help set the “highest” customer standards.
But consumer groups said the new charter was largely a rebrand of rules that have already been flouted and said stricter action should follow if big improvements are not seen in the next six months.
Under the good practice charter, lenders have agreed to give clear information about how a payday loan works and an example of the price for each £100 borrowed, including fees and charges.
They have also promised that customers will not be pressured into taking out a loan or rolling one over. They will freeze interest and charges if a customer is in financial difficulty and making payments under a repayment plan, or after a maximum of 60 days of non-payment.
Customers will also need to undergo affordability assessments and credit vetting to make sure they can pay the loans back.
The charter has been agreed by four trade associations representing more than 90% of the payday and short-term loan industry. It will be placed on lenders’ websites and in stores by November. Any lender who is a member of the trade associations must abide by the code or ultimately face expulsion.
Richard Lloyd, executive director of Which?, said: "If this code is to be worth the paper it’s written on, far more needs to be done to enforce the rules and protect vulnerable people who are getting caught in a downward spiral of debt. We welcome more robust credit checks but also want to see a cap on the amount that lenders can charge for defaults and an end to extortionate fees.
”Debt charity the Consumer Credit Counselling Service (CCCS) said the “significant” problem of lending to people with multiple existing payday loans still needs to be dealt with. Of the 17,414 payday loan borrowers counselled by CCCS last year, 58% had more than one payday loan and one in 10 held five or more.”
CCCS director of external affairs Delroy Corinaldi said: "The Government has done well to push the payday loan industry this far, but it needs to now keep the pressure up to ensure that this code is enforced, and that the industry’s trade associations set up adequate monitoring and compliance procedures.”
The four trade associations to make the commitment are the Consumer Finance Association, Finance and Leasing Association, British Cheque and Credit Association and the Consumer Credit Trade Association.
- Contact Information
- Kevin Walker
- Text Loans UK
- Contact via E-mail
This news content may be integrated into any legitimate news gathering and publishing effort. Linking is permitted.
News Release Distribution and Press Release Distribution Services Provided by WebWire.