From the 1st of April, the Financial Conduct Authority (FCA) will be taking over control of consumer credit regulation from the Office of Fair Trading (OFT). The new authority aims to impose new regulations in consumer lending, specifically targeted at payday loan companies. The bottom line is that other payday loan companies are considering backing out of the industry in the face of these new moral directives.
Chief executive of the FCA, Martin Wheatley, predicts that tougher new regulations will “force about a quarter of the firms out of the industry”. But he’s stated that the firms forced out of business will be the ones guilty of poor conduct, and those firms which are currently operating responsibly will be put under pressure to further improve – and we totally agree. As a payday loan broker with the customer’s interests at heart, we fully understand the need to cleanse the industry of morally questionable enterprises. Under these new regulations, there’ll only be room in the market for payday loans companies who understand that the customer comes first – and Instant Lolly definitely fits this particular bill.
There are numerous areas the FCA plan to target with new rules. Lending to consumers who are obviously unable to meet repayment is a major concern and can lead to more consumers falling into the dreaded debt spiral. Poor conduct has led to companies profiting from people in vulnerable situations. According to the FCA, it’s imperative that there is a shift from profit culture to customer care. The FCA will also be imposing caps on the amount of interest which can be charged on short-term loans.
All of these new lending rules aim to reduce irresponsible lending to consumers in vulnerable financial situations. Lenders will be required to carry out more stringent checks, such as cash flow and income, when assessing whether or not customers will be able to repay a loan – and therefore impacting loan approval rates. At Instant Lolly, we’re already well and truly on this. Our next site update features a kind of ‘affordability gate’, ensuring that no borrower is ever entitled to a loan they cannot comfortably repay. Innovations like this are what set us apart from other, less customer-conscious businesses in this space.
The payday loans industry certainly gets a lot of press backlash. To some extent, the FCA could be accused of using the sector as a scapegoat for consumer debt issues due to this negative press coverage – on what is actually a relatively small financial sector. Payday lenders in the UK only make up 1.5% of the £200 billion consumer credit market in the UK. Debt charity, the Money Advice Trust, say that complaints regarding payday loans only make up 1 in 10 of the calls they receive. In actual fact, catalogue debt and credit cards still account for the vast majority of consumer credit problems.
At Instant Lolly, we’ve got a lending conscience, offering total transparency with regards to our interest rates and processes. We’re with the FCA on this one – we believe in making it clear to consumers exactly how much money they’ll be required to pay back, when this payment will be due and what the consequences of non-repayment are. We also provide clear information for our customers to consider before taking out a payday loan, helping them make a responsible decision as to whether or not a payday loan from Instant Lolly is the solution they need.