On the 1st of April the Financial Conduct Authority (FCA) began to manage the regulation of the consumer credit industry, but why has this happened and what does it mean for Provident customers?
The Payday Lending Review
Provident is not a payday lender, but we do lend money to customers who may find getting credit elsewhere difficult.
After the 2008 banking crisis, the financial industry, including the consumer credit sector and particularly the short term loan industry, has faced a lot of scrutiny. Due to concerns about how the industry was regulated, it was decided that the FCA should take over from the Office of Fair Trading to police this more closely. One of the FCA’s first tasks is to conduct an more in-depth review of the payday lending sector, building on work done by the OFT.
The OFT review was started because of growing concerns about payday lenders and the way customers who use them could be treated. These concerns included:
- Companies giving loans without properly checking that the borrower can afford to repay them.
- Companies advertising unsuitable or unaffordable loans.
- Companies rolling over loans so that charges increase and the loans become unaffordable.
- Companies treating borrowers that struggle to make repayments unfairly.
The FCA is tasked to protect customers and monitor the credit industry to ensure businesses within it offer a transparent service to customers. If not, the FCA is there to investigate and take action against businesses.
The regulations which came into effect from the 1st April include:
- Limiting roll overs to just two. Read more here
- Limiting the amount of times companies can access your bank account using Continuous Payment Authority to twice. Read more here
- Payday lenders and debt management firms must tell customers where to get debt advice- (you can read our articles on managing debt here, here and here, whilst we also partner with StepChange, sign posting customers to use their service.)
- Debt management companies now must pass more money to creditors from the first day of a debt management plan in order to protect customers’ money.
- Companies must remove products which are not deemed to be in the best interest of customers
What Does This Mean For Customers?
Whilst the FCA has said it doesn’t want people to stop using payday lenders, it is placing more and more restrictions on the industry to offer a better service to customers.
For customers, it means they are better protected against bad practices and receive a quicker response to complaints. Comparing financial products such as loans is also much easier, empowering you to make more informed decisions.