The most recent comments by the FCA and government reveal that those entities operating in the ‘high-cost short-term’ loan market, primarily so called ‘payday lenders’, will become increasingly regulated as their consumer credit activities are restricted and greater supervision put in place. In particular it is intended for the following measures to be imposed:
- Total Cost Cap – The total cost paid by a consumer in respect of a ‘high-cost short-term’ loan will be capped by statute, restricting lenders from imposing fees and charging interest in excess of this cap. The cap will be determined by the FCA, with the obligation to set it being incorporated into statute.
- Rollover Cap – The FCA wil lrestrict lenders from rolling over loans more than twice due to concerns about the financial stability of consumers affected by such rollovers. Firms will no longer be able to continuously rollover an individual loan, and will instead be required to seek alternative means of resolving a consumer’s financial difficulties.
- Continuous Payment Authority (“CPAs”) Cap – The FCA will restrict the number of times a lender may use a CPA, preventing them from continuously attempting to obtain money from a defaulting consumer’s account. Again it is hoped this measure will force a lender to seek alternative means of resolving a consumer’s financial difficulties.
We have updated our previous article to take account of recent developments - click here to read the updated report on "Payday lending compliance review – an end to “instant credit”?".