On 1 April 2014 the Financial Conduct Authority (FCA) took over regulation of the payday loan industry… but what does this mean for consumers?
Here’s a summary of the changes made…
Loan rollovers are limited to two
A rollover is used to extend a loan. Whilst payday loans are typically a 30 day lending period, rollovers extend this time period.
The number of times they take money from a borrower’s bank account is restricted to two
The customer will only be allowed to roll over twice, preventing them from incurring escalating interest fees.
Lenders must only try to take the full repayment
The payday lender must only try and take the full repayment, and not small amounts of debt.
Add a ‘wealth warning’ to all payday loan advertising
The FCA has requested that lenders must now provide the following on their adverts: “Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk.”
Tell customers where they can also get free debt advice
When a loan is rolled over for the first time, the payday lender must give the customer an information sheet written by the FCA, this sheet gives the customer the debt free advice they may need.
Make sure the loan is affordable to the customer
Full, and proper affordability checks will need to be carried out by the payday lender.