Regulations for Payday lenders – what the FCA has to say

It was in January of this year that the FCA (Financial Conduct Authority) implemented the new regulations for payday lenders. After a gruelling 20 month consultation on the payday lending practices and the possible ways to give the lenders as well as the customers a fair deal, the regulations materialised.  A wide range of groups were consulted on the matter including acedemics,  industry and consumer groups and different stakeholders.

Martin Wheatley, FCA’s chief executive officer had this to say:

“I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we would risk not having a viable market, any higher and there would not be adequate protection for borrowers. For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts. For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”

Regulations for Payday lenders – Initial rules stipulated by the FCA 

The FCA published published its proposal in July of last year. A full version in PDF form can be found on the FCA website. Here are some of the regulations for payday lenders that were included in the initial proposal:

·      A general cap will be imposed on all loans of 0.8% per day. Lenders can choose to charge within this cap in any form that they choose.

·      A cap of 15 pounds on any default on payment. Lenders can charge interest of up to 0.8%

·      Total cap will be 100% of the total loan

·      The cap will cover all fees, charges, debt collection and administration, charges for credit broking, or if a broker shares revenue with the lender

·      The cap applies to every loan individually

·      Companies will have to share information and data. This will include performing credit checks. A real time date sharing data base will allow companies to ascertain how many loans a customer has.

·      Companies must be authorised by the FCA.