New regulations for payday loan brokers
01/12/2014
The Financial Conduct Authority (FCA) has announced new regulations for payday loan middlemen, in an attempt to crackdown on unfair and extortionate fees.
The companies, who do not actually lend consumers money but refer them to actual payday loan companies while charging a fee, will be banned from removing money from customers accounts. They must also make clear contracts outlining who they are, what fee is payable, and how payment can be made. Previously, some consumers believed they were dealing with a lender directly and did not understand why they were charged fees, which came directly out of their current account.
In one of the worst cases seen by RBS, someone looking for a £100 loan ended up being charged £700 because their details were passed around 10 different middlemen.
The rules will be enforced from January 2nd.
The Financial Ombudsman Service said that it had received 13,348 complaints between April and the end of October about payday loan brokers. Last year, they received only 6,376 calls during the whole of the year.
Chief executive if the FCA, Martin Wheatley said:
“The fact that we have had to take these measures does not paint this market in a particularly good light.
“I hope that other firms will take note that, where we see evidence of customers being treated in a blatantly unfair way, we will move quickly to protect consumers from further harm.”
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