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FCA finds failings in payday loan industry


Payday loan companies have been accused of not treating customers fairly, after the Financial Conduct Authority (FCA) conducted a 12 month review of the industry.

The regulators review, which covered 60% of the payday loan market, found serious problems in all firms reviewed, including examples of non-compliance and unfair practices. This lead to serious detriment and financial loss for some customers.

Three payday loan firms had a backlog of letters and documentation, including correspondence with vulnerable customers who had fallen behind with their payments, and medical evidence providing crucial information about why some customers were failing to pay. Upon further investigation it was revealed that some of these customers were still being pursued by collection agents.

The FCA also found other examples of non-compliant behaviour, such as unsustainable repayment plans, staff failing to acknowledge complaints and firms engaging in misleading practices to convince customers in arrears to make payments. They also found systems failures resulting in incorrect balances, fees and charges erroneously added, and in some cases, duplicate payments being taken.

The FCA has intervened in the cases of non-compliance, and ensured that payday firms are taking steps to ensure the failings are not repeated in the future. Some investigations are still ongoing.

Tracey McDermott, director of supervision and authorisations at the FCA, said:
“Our rules are designed to ensure loans are affordable; that customers who get into difficulty are treated fairly and that they are not pressurised into unaffordable and unsustainable repayment plans. This segment of the industry has, for too long, been in the spotlight for the wrong reasons. It is essential that the more customer-focused approach we have started to see is maintained and embedded as we go forward.
“The real test for these lenders will be FCA authorisation where they will have to demonstrate exactly how much progress they have made if they want to remain in the market.”

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