The Financial Conduct Authority (FCA) has confirmed the final rules that will govern the £200bn a year consumer credit market, which includes approximately 50,000 firms, from 1 April 2014.
The new rules will result in changes for how payday lenders and debt management companies treat their customers including mandatory affordability checks for payday borrowers and giving the FCA the power to ban any misleading adverts from payday lenders.
Martin Wheatley, the FCA’s chief executive, said:
“Millions of consumers access some form of credit each day, from paying for everyday goods by credit to taking out a payday loan. We want to be sure that the market works well when people need it – whether that’s for one day, one month or longer.
“Our new rules will help us to protect consumers and give us strong new powers to tackle any firm found to be overstepping the line.”
The FCA will take a tough approach to consumer credit with stronger powers to clamp down on poor practice than the previous Office of Fair Trading regime. Our supervision of firms will be hands on and we will closely monitor how providers treat their customers, in particular those operating in higher risk sectors such as credit cards, debt management and payday. We will respond quickly to any issues that are identified and there will be swift penalties for any firm or individual found not to be putting consumers’ interests first, including possible enforcement action and consumer redress.
The rule changes announced today will give consumers additional protection from rogue practices and put the onus on credit providers to ensure that they treat customers fairly at all times.
The biggest changes come for payday lenders and debt management companies, including:
Consumer credit providers will need to ensure that they give customers the right information to make informed choices, that their services meet consumer needs, and that people in difficulty are treated fairly. The FCA has also confirmed the following approach:
FCA regulation will apply to any firm or individual offering overdrafts, credit cards and personal loans, selling goods and services on credit, offering goods for hire, or providing debt counselling or debt adjusting services to consumers.
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