Financial watchdogs are cracking down on payday loan firms as a new regime prepares to take overregulating consumer credit laws from the Office of Fair Trading.
From April, the Financial Conduct Authority (FCA) will be responsible for supervising firms offering consumer credit – and payday loans are clearly in the organisation’s sights for tighter controls.
The FCA has posted a list of restrictions for payday lenders aimed at helping borrowers trapped in spiralling debt problems.
The changes include:
- Lenders will have to carry out affordability checks on borrowers
- The number of loan extensions will be limited to just two
- Payment agreements will also be restricted to two uses
- Advertising wording rules face harsher rules
- Misleading adverts will be banned
The rules will apply to credit card and loan companies, anyone selling goods or services on credit and debt advisers.
Martin Wheatley, the FCA’s chief executive, said: “Payday loans have their place and help many borrowers without any problem. But lenders must only lend to people who can afford to borrow and will not be allowed to drain cash from bank accounts.
“This is a warning shot. A tougher regulatory framework is coming and I expect lenders to comply and make the appropriate changes to the way they work.”
Catalyst ARM compensation
Catalyst Investment Group Limited (Catalyst) has been declared in default by the FCA to allow investors to make compensation claims from the Financial Services Compensation Scheme.
Catalyst helped IFAs promote financial products issued by Luxembourg-based ARM Asset Backed Securities (ARM).
ARM marketed bonds, but the firm collapsed leaving many investors holding worthless securities.
Warnings about bogus advisers
The FCA has also issued two warnings about bogus firms posing as regulated financial advisers:
- Bloomfield Advisory
- Qualtrum Adviser LLC
- Smith Securities Limited
- One Option Finance Ltd (Clone of FCA authorised firm)
- Pacific First Securities
Dealing with an unregulated firm
If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation.
Checking if a firm is regulated
Go to the Financial Services Register to check if a firm is regulated in the UK.
Reporting a suspected bogus adviser
Find out how to report unauthorised advisers on the FCA web site
