NEWLY introduced curbs on the payday loans market have been welcomed by campaigners, who have warned the much-criticised industry to “shape up” ahead of the crackdown kicking in.
The Financial Conduct Authority (FCA) has this week promised it will keep a closer eye on the 50,000 UK lenders offering short-term loans, and impose fines on those who step out of line and prey on vulnerable, cash-strapped households.
The new, tighter rules come into effect in April.
One debt charity, StepChange, has recently revealed the number of people contacting its advisers for help after difficulties with payday loans shot up by 82 percent in 2013 from the previous year.
Leeds city bosses have also recently launched a three-year drive to rid the city of payday lenders, and research has shown that up to 60,000 people in the city have used or consulted payday lenders, with around 22,500 believed to have taken out the loans to pay their bills.
Wendy Alcock, campaigns manager at MoneySavingExpert.com, said: “The regulator has set out its rules for the payday loans market and within the next few weeks it needs to shape up or hopefully feel the FCA’s force.
“Payday lenders have got away with too much for too long and the FCA must keep its word when it comes to cracking down on this broken market.
“But this is not the end.
“We’re still waiting for the total cost cap and our call for a ban on payday loan adverts from children’s TV is yet to be answered by the Government or regulators.
She warned that until all the problems with high cost short term credit are addressed, “people need to look after their own pockets”.
“To anyone who thinks there’s no alternative to taking out a payday loan, you’re wrong,” she said. “Get a credit card, even a poor credit card at 50 per cent APR, then stick it in a bowl of water in the freezer.
“Having to crack the ice will give you food for thought about using it. If you do use it, simply pay off in full within a month, as payday loans are designed to be, and it’s interest free borrowing. Check your local credit unions too. “They can offer hope to many in dire straits.”
Financial watchdog the FSA unveiled a set of new rules to crack down on pay-day lenders last week.
This followed months of campaigning from consumer groups, who recently accused the firms of “exploiting” borrowers who default on loans with over-the-top fees that tip them further into a debt spiral.