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FCA warns they will “take out” payday lenders


The Financial Conduct Authority (FCA) is to take over regulation of credit providers for debt management firms, credit cards, hire purchase, debt management firms and debt advisers.

Until now the Office of Fair trading was the regulatory body for these industries. However the FCA has tougher powers such as unlimited fines, ordering refunds and banning misleading advertisements.

The regulator subsequently warned payday lenders that over a quarter of them could be forced out of the industry, making it clear that they will need to follow their new rules.

Martin Wheatley, chief executive of the FCA said that "Our processes will probably force about a quarter of the firms out of the industry, and that's a good thing, as those are the ones that have poor practices."

Key issues the FCA will target include lenders charging extortionate fees which result in borrowers being forced into debt.

Mr Wheatley said: "What we are concerned about are the people who frankly shouldn't be lent to, who can't afford the loans and who then get rolled over and get pushed ever further into a debt cycle."

Forcing change

Mr Wheatley said that the first steps for the FCA will be to force rogue firms to change their practices.

"If we don't like the practices in a firm, the first instance is to get them to change it." He then continued to say that "If they won't change it, then we take away their permission to operate."

‘Good for business’

However, Russell Hamblin-Boone of the Consumer Finance Association, the trade body for payday loan firms denied the new rules would have a negative effect on the industry.

He claimed "With all the scrutiny the industry has been under for 18 months people are continuing to take out these loans and pay them back and not have a problem.”

He continued to say: "If we continue to drive up standards this can only be good for business."

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